In many countries where that's the case, it's fine if the company you're freelancing for is foreign (IANAL). Because as you say, there's no other simple way to do it. Though you can also use services like remote.com.
In both situations, the setup is a local company (possibly self-owned) that bills the actual company. So you're not UsCorp's employee, you're an YourOwnCorp employee, and UsCorp is YourOwnCorp's client.
This way, all taxes and related issues are handled locally. Sure, there's overhead, but from what I've seen it's worth it.
It's my understanding that, basically, if you're an "outsourced employee", you have to pay the same things as if you were an actual employee: so salary, income tax, whatever else HMRC requires, rather than milking the dividends... It doesn't seem to me that the actual setup is illegal.
[0] https://www.gov.uk/guidance/understanding-off-payroll-workin...
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edit: In France, I'm not aware of a similar law in regard to taxation. However, there's a "worker protection" law that says that if you're only working for a client, you are subordinate to them, and basically the only difference between an actual employee and you is that you're outsourced, you can then sue the company to be "promoted" to an internal employee, and you're basically guaranteed to win.
Sounds like a massive headache
Sure, there is some paperwork to set everything up. But once that's done (and you can pay someone to do it for you), it's pretty much smooth sailing.
The biggest "hassle" is closing the accounts for the year and sending them to the Administration, and those have to be signed off by an actual accountant. But this takes like 1 hour per year, it's not that bad.
Regarding health insurance, etc you can either get your own, private one or have it bought by the company. It's the same thing if you're a full-on employee: if you're not happy with the coverage the employer has, you can get your own on top of it. When you're your own boss, you can choose what you want straight away. All this may vary depending on the type of company you set up (there's no such thing as "freelance" as far as the law is concerned). This will also have an effect on pension – if you only pay yourself in dividends, there's no pension.
Sure, there are a few things to be taken care of, but if you invest a few days and do your research, it's a good tradeoff.
The other approach, as siblings said, is to use some kind of "shell company" that does this for you. But from what I've seen, their cut is ridiculous, so it's absolutely not worth it.
NB: this comes from France, but I expect the situation to be roughly similar in other countries.
Then the company you own pays all these things. Not the company that hired my own company. It's more a B2B relationship than employee mentality.
I hired another startup to do all my accounting since it's really simple.
I keep some cash inside my company to pay taxes and so on. In my jurisdiction it's even cheaper the tax you pay as company than as an individual.
I have some sort of salary because my local legislation demands, but most is taken as dividends.
The spare money due to reduced costs I can also afford extra private "unemployment" insurance. One that covers two months, not even counting my personal emergency reserve.
So yes, you need to stop living by paycheck even if it means buying less stuff on Amazon.com.
You have to ensure the rate includes a premium to pay all those costs. Otherwise it isnt worth doing.
Essentially they have companies in most countries and you pay them (deel) directly and then they payout to your staff. This also simplifies benefits for healthcare, taxes, retirement.
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The thing is that you're supposed to be tax where you live to finance the public infrastructure you use, pension schemes of locals, &c.
I know a few of wantrepreneurs who live abroad, bill under an Estonian "e company" , don't pay taxes locally and on top of that illegally get unemployment benefits from their home country
This trend has to cease and with the new "remote first" mentality I can imagine it won't stop anytime soon
I think the idea would be something along the lines of creating virtual citizens that live in the locality and meet all of the obligations of the locality, and the company just handles swapping the association of these citizens to real people when the time comes.
So then when you show up with your passport from Roamatopia all of the paperwork has been done to make sure you are pulling your weight.
Obviously this can be gamed as well but I like the idea.
States are starting to crack down on income taxes for non-residents working there. Obviously in many cases they have no way of tracking but if you're there on business (and have expenses), Concur for one offers companies an audit service. The rules vary by state but if you spend enough time in a state and pass some threshold you can be on the hook to file income taxes. (A lot of the original impetus for these sorts of laws was to tax entertainers and pro athletes.)
In my case it was a privately funded trip, nobody at my company had any clue where I was beyond the ones I told.
Where is your citizenship?
If you had young children who attended local schools (even for one month), do you think that is fair? (Assume pay low/zero tax.)
My point though is that this kind of things happens all of the time because there isn't a clean process to handle these situations. The concept of a virtual country could actually help fix this by establishing channels to compensate communities for services used by roaming visitors.
The problem exists only because the cost for most of these services is socialized via general taxes. One possible solution is to pay a flat tax for local services in the place you live for as long as you are there. The pension scheme solution is to select a pension scheme and pay there, no matter where you are located. The problem with these solutions is you cannot have a Bismark pension scheme, lime most of Europe, and the local administrations need to deal with deductions for people with low income, but it is nothing that cannot be solved.
When I've raised this previously, the point has been dismissed as "45% of lots is still lots", but if you're doing an expected returns calculation and considering other jobs (like a large well-paying org with RSUs) it becomes quite meaningful.
Unemployment benefits are paid by the state, through the taxes that are levied on those who are employed.
They can - they just have him as a contractor, not a permanent employee. Source: I'm a Polish contractor contracting for a German startup.
I'm not sure how much variability there is with this kind of setup within EU member countries.
Also let's say you have an American company with 200 german employees but no office on german soil, does that mean they don't pay any local tax because technically they don't operate their business in the country ?
The American perspective on this is that the employer pays employment taxes for their employees (but not contractors), and the employees/contractors are responsible for their own income taxes, wherever they work (US or abroad). Surely the German employees would report and pay their income tax?
Taxes are not a tithe to the Church. They are not a moral obligation. They are a payment for past, present and future government services. If you (or your family) are not receiving services from that government, then you shouldn't be obligated to pay them. Pay for the services from your own government.
It is good to question how much of the tax burden should be paid by employers vs. employees, but the idea that some tax burden is split by different parties in different nations is not a new one. For example, international trade has been occurring for as long as nations have existed. There is no shortage of precedent to draw from.
The dev can't be a freelancer because a freelancer with a full time, fixed hours, single customer is illegal in many places
This might actually be what may changes rather than the 'closing of loopholes'. From what I have understood after talking with German in-laws, these laws are nominally to prevent the abuse of workers who are denied the rights and benefits of full employment. From a workers' rights perspective, this makes sense for 20th C. laborers, but not really for 21st century knowledge workers who could be getting paid >2x working from Germany for an American company compared to what they would be able to get working domestically. So in practice, this type of law can keep wages lower and give more control to German companies at the expense of the workers, so you know who will fight the changes to the laws to preserve the status quo. But if tech/knowledge workers who wish to have better remote employment opportunities can band together to pressure their elected officials, then this could change.
I disagree. Why do you think the Italian pension system needs to adapt to you / your situtation?
How do you handle taxes ?
For example in Europe a German company can't hire a French dev if the german company doesn't have a legal entity in France, it quickly gets out of control both in term of paperwork and cost. The dev can't be a freelancer because a freelancer with a full time, fixed hours, single customer is illegal in many places
Also let's say you have an American company with 200 german employees but no office on german soil, does that mean they don't pay any local tax because technically they don't operate their business in the country ?
I feel like a lot of loopholes which were seldom used will promptly be closed once they become widely used