Keywords: tax residence, controlled foreign company.

To be more specific, such structure would not be illegal, but you would have to deal with double the amount of bureaucracy and you would pay the same taxes.

You are working in country which as to pay for things like roads, military, firemen, police, health services, schools, pensions using taxes from companies and citizens living there and this country is not seeing a single euro from you (which are taking advantage of the infrastructure paid by those taxes).

How would you expect this to be remotely legal ?

Sure, there are plenty of people doing that, just as there are companies registered in the Cayman or Gibraltar, or people having secret Swiss bank accounts.

> How would you expect this to be remotely legal ?

The company is a separate legal entity.

The company pays corporation tax in the country where the company is registered, you pay income tax in the country you live, and then there is also vat.

> How would you expect this to be remotely legal ?

If you pay taxes (in Italy, say) on the income from your company, wherever it happens to be.

I get the impression that it's all something of a legal gray area. It'd be a lot simpler if people could easily have companies in their own countries.

I'm all for paying one's fair share of taxes on income in the country you live in. What I intensely dislike about the laws in Italy surrounding companies is that there are all kinds of expenses that have to be paid even if you are losing money.

Cross country working like this is tricky in the EU and its still a grey area legaly speaking

Its mainly about which country's employment laws apply.

IANAL but the EU is supposed to be a common market. One (slowely integrating) community.

Common market but different fiscal regimes. It seems absurd but it makes sense when you think that each country is jealous of its fiscal incomes because they are what keep them running. In no way an Italy would let an Ireland grab its share of taxes only because Italian companies prefer to incorporate in Ireland because of lower taxation. Only a common EU fiscal regime will solve that, but think about the impacts on those countries that are spending too much and will have to change their speding patterns (from no more useless expenses to laying out public workers).