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| ▲ | embedding-shape 4 hours ago | parent [-] | | I mean if you now live in Spain, then you need to pay taxes in Spain, because that's where you live. This makes sense, does it not? Or is the expectation that you shouldn't pay taxes where you live, only where your company that you work for/in is based? FWIW, I also live in Spain, and also pay "high taxes" as I'm in the highest income bracket, and it sucks to see large parts of your income and capital gains disappear. But then I've also experienced the health care here, and see everyone being taken care of, and I sleep well again :) | | |
| ▲ | alibarber 4 hours ago | parent | next [-] | | I think they mean that the Estonian company they run now has to file tax returns and pay taxes not only to Estonia but also Spain. The company lives in Estonia. Yeah if they are taking income personally locally then that should go to the country of residence, as is normal. But then if what Estonia considers acceptable standards for tax reporting differs from what Spain considers acceptable, or what they consider 'profit' etc, well good luck! | | |
| ▲ | tga an hour ago | parent | next [-] | | Indeed, the current state of affairs is rather sad. To employ a regular (non-management) employee in Spain (and it applies anywhere else in Europe), an Estonian company would to at least have a local address, then register and maintain regular contact with several authorities there (chamber of commerce, social administration, tax office). The bureaucratic overhead makes it practically impossible to have employees across several countries (definitely as a small company), the only practical option is to pay an employer of record ~600 EUR/month extra (significant salary difference) only for the joy of maintaining the employment paperwork. The really fun part happens if a managing director moves. Then the company is considered to have a permanent establishment in Spain, needs now to maintain ALL administration like a Spanish company, and to comply with Spanish corporate law, in parallel to what it was already doing at home. Both countries' laws apply, both expect taxes, and it is not even clear cut how much of the company activity and profits should be taxed by the company's home country and how much by the director's country! And having multiple managing directors in several countries is probably an exercise in frustration. Then, if the director has enough and moves somewhere else, it all starts again in the new country (and you also have the headache, costs, and risks of closing the Spanish entity). The EU may have free travel, but you can basically forget actually freely moving around as a small business owner, the company administration is prohibitively complicated. | | |
| ▲ | embedding-shape 41 minutes ago | parent | next [-] | | > the only practical option The actual practical option people end up using in practice (speaking as someone who've moved around in Europe, working for various other European companies) is that you ask them to self-employ in the country they live, then you treat them as contractors, offset any extra costs that'd come with compared to full-time, and do the best you can with that. It's not ideal, and not a real solution by wide margin, and there is plenty of stuff that can get better, but I think it's the most "practical" and pragmatic option you can make use of today. | |
| ▲ | Kim_Bruning 21 minutes ago | parent | prev [-] | | Now move to an actual border area. Thanks to Schengen you can travel freely back and forth, sure, but your headaches compound. |
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| ▲ | embedding-shape 3 hours ago | parent | prev [-] | | > the Estonian company they run now has to file tax returns and pay taxes not only to Estonia but also Spain. Yes, this again makes sense to me. You have a company in Estonia, so that pays taxes in Estonia. You work for this company from Spain, so you pay taxes in Spain. Doesn't it work the same elsewhere? What other ways could it work, assuming we want taxes somewhere? > But then if what Estonia considers acceptable standards for tax reporting differs from what Spain considers acceptable Yes, that also makes sense, different countries have different systems? Again, if you open a company in Estonia, the ground assumption has to be that you're up for understanding Estonian tax laws. If you're living in Spain while working for that company, the ground assumption is that you're up for understanding both Spanish and Estonian tax laws, because they should of course get their taxes. As long as I don't get taxed on the same money in both countries (which there are a lot of bi-lateral agreements solving that), I don't see the issue here. | | |
| ▲ | smhg 25 minutes ago | parent | next [-] | | > As long as I don't get taxed on the same money in both countries, I don't see the issue here. That's exactly one of the current issues. The general rule is something like 'taxation happens where the company creates value'. Registration in Estonia just means taxation starts in Estonia. But at any point can Spain say 'we consider this a Spanish company'. After Spain taxes too, you can request a tax refund in Estonia. That's assuming they agree. Both countries will only communicate with the company, not with each other. So while double taxation treaties are great, they are not doing much upfront in this respect. The above is about company taxation, not personal taxes. For SMB that line is often confusing. | |
| ▲ | alibarber 3 hours ago | parent | prev [-] | | The Estonian company pays the Spanish resident money to them personally. Indeed it is normal that the Spanish resident has to deal with the Spanish taxes on this money only. If the Estonian company is supposed to be considered a separate legal person based in Estonia, it shouldn't have to deal with anything Spanish. | | |
| ▲ | an hour ago | parent | next [-] | | [deleted] | |
| ▲ | embedding-shape 3 hours ago | parent | prev [-] | | > If the Estonian company is supposed to be considered a separate legal person based in Estonia, it shouldn't have to deal with anything Spanish. If the Estonian company has employed a person located in Spain, shouldn't the laws of both countries apply to this employment then? The employee lives in Spain, so obviously Spanish labor laws should be followed, and the company is in Estonia, so obviously Estonian law should apply. I'm not sure why the Estonian company wouldn't have to follow Spanish law if they've decided to employ a Spanish person? What laws should cover the person living in Spain, Estonian laws, although they don't live there? | | |
| ▲ | alibarber 3 hours ago | parent [-] | | For labour - the laws of where that labour is actually being conducted are the ones that are followed. Spanish prosecutors can for sure bring a case against an Estonian company if they are not. In theory at least. But for company tax law, that company is a tax resident in Estonia, not Spain. Also, we harmonise laws such as traffic laws (for example, in Finland, all solid yellow central lines were painted white) so that people have the chance to work across the whole union as transport operators, why not do the same for entrepreneurs? | | |
| ▲ | 2 hours ago | parent | next [-] | | [deleted] | |
| ▲ | embedding-shape 2 hours ago | parent | prev [-] | | > where that labour is actually being conducted are the ones that are followed. So in that particular case, would be in both Estonia and Spain, just so we're on the same side? > But for company tax law, that company is a tax resident in Estonia, not Spain. Indeed, and I don't think the Estonian company would pay Spanish taxes, correct? Unless they have a presence (subsidiary for example) in Spain, then they would have to pay Spanish taxes. But if not, it's only the employee who pay Spanish tax. Or did I understand incorrectly? > why not do the same for entrepreneurs? I think this is exactly what we're doing right now :) Small steps, but EU-INC seems to be one of those steps in that direction. | | |
| ▲ | alibarber 2 hours ago | parent [-] | | > So in that particular case, would be in both Estonia and Spain, just so we're on the same side? It sounds like we are. If labour is being conducted in both of those countries then yes. And the same anywhere else where someone might join the party. And on the tax thing - yes again, but what I see happening now in European countries, is that, if a person of significant control resides in another country, then that other country considers the company a tax resident of that country too. E.g: I live in Finland. If I were to open an Estonian company and have it literally do nothing all year, not only would I have to file a company report in Estonia, (fine, that's why I chose to start a company there, perhaps it's really easy) but also file a company report in Finland as if the company were a Finnish company. I think this is an overreach of bureaucracy and adds a friction to entrepreneurship. Others might think differently - which I completely accept. Unfortunately for me, I do not think that this initiative here will change this, much. Perhaps I am mistaken. Either way, it is in the right direction and I support it. |
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| ▲ | 4 hours ago | parent | prev [-] | | [deleted] |
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