What issue? VAT is paid by the user (collected and remitted by you) and differs by country (used to be hassle, easy today), but the taxes you pay in your country for your company is the same regardless of where the users who paid you are based (assuming there isn't something country-specific about that), it's more about where your company is tax-resident.
Unless there are permanent-establishment issues, withholding taxes, or other country-specific digital tax regimes, where your users are based shouldn't affect how/what taxes you pay.
Otherwise, if you don't have any employees or presence in other EU countries and only doing digital services B2C, you shouldn't have to do anything specific about the taxes you pay.
Yes the issue is i form company in Estonia because i like their non distribution taxes. Or in czechia because i live there. Then move to spain. And they decide to tax the company in spain… with high taxes.
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 :)
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!
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.
This is why I don’t get what the EU brings to the table at all. I’ve considered starting something, never quite yet pulled the trigger, but I may as well do it in the UK because it’s extremely cheap, gives access to a great number of services, and I can do it all in English there.
It’s not like the company itself is going to be queuing at an airport or whatever.
I’ll have to file in Finland for the company anyway then, but I can skip all the stuff about starting an organisation here.
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.
Yes, but some companies need employees on paper. When they do custom based software and want to apply for a job, there is often a number of heads you need to employ.
Yeah, you should pay taxes from where the company is run. Basically if you have one person company. In a place it “does” business. But i want estonian company for the ease of doing business and for to hold profit, for reinvestment later. I dont want to deal with spanish/german authorities if i move around and want to grow business. No government competition is what they want. Because they cant win in square fight.
> 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.
> 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.
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.
> 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?
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?
> 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.
> 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.
That's not the issue. If your business is dependent on slave labor and offloading your externalities on the society to make a profit it simply means your business should not exist.
Its evident that labor cost and taxes are not excessive in EU by the reality of existence of plenty of businesses in a healthy society.
What doesn't exist in EU is the "tech" business, and the tech doesn't have margins too slim to employ people and pay taxes. On the contrary, the margins are fat. The reason that the tech sector isn't a large one in EU is that its easy to incorporate in USA and access the full EU market from there instead of incorporating in some small EU country and deal with their bureaucracy and internal border limitations. The 28th regime and the EU-INC is to address exactly that.
If the USA-EU relations deteriorate enough, it will also create instant trillion Euros market. Just look at the quarterly reports of US tech giants, they generate EU revenues that are not that behind the US revenues. For Apple thats %60 of the US revenue, or ~110B$ for the last quarter and that's happening despite Apple having a much smaller market share in EU.
A full blown conflict between US-EU will be a huge opportunity to replicate the US tech sector in EU and having an EU-INC will be the necessary facilitator that is currently missing when compared with the landscape in USA.
Cost of labour i meant work taxation. You can see the waste everywhere. We could have half income tax, half social security and half health. Instead of taking 50% you your income. We could give 25%. And have more to boost the economy or save for future. EU is in slow death. Dying out, pyramid scheme retirement system mostly.
I'm not so sure about that. Elon Musk and Trump promised something of this sort, created the DOGE department and ended up not saving anything despite claiming to uncover waste.
> Dying out, pyramid scheme retirement system mostly.
The solution to this is more creampies 20 years ago, no government action can change that. Every generation pays for the retirement of the previous one and if a generation makes less kids then they put higher burden on those kids. Before the taxes and pensions people used to look after their aging parents, today people who live in cities and pay taxes so that they can have independent lives from their parents. That's how biology works, people born procreate age and die and if you live in a society the young ones take care of the old onces until they die.
Well the slovak goverment alone stole billions of euros. Stole. Imagine if we didnt have to pay all the farm subsidies to keep 5 goats in mountains. Or to pay hungary for lookout towers in the middle of nowhere.
Well, isn’t the EU supposed to watch out for this? Taxe frauds with VAT are a big deal. And nothing gets done. But people making peanuts will get taxed to the tits…
There is no such thing as slave labor in the tech sector.
Some countries offer a lower barrier to entry than others.
The EU has a very high barrier to entry when it comes to taxation.
You can believe what you want, but I think every country's goal is to reduce taxation as much as possible for companies and for people. Unfortunately, the current in the EU is to keep raising them and give state more and more monopoly on services.
EU doesn't actually have power to tax people, each government does its own taxation. They come up with agreements like minimum tax levels to prevent things like pretending to be in Ireland to avoid taxes in France but that's about it.
Most of the Europeans trust the government more that they trust the businesses and demand some services to be provided by the government and they all collect taxes accordingly. Some countries like Bulgaria have relatively small governments and do %10 flat tax for companies and individuals and other countries like France or Germany provide robust government services and safety net and do much higher taxation.
The assumption that a company can pay US tax rates while selling into the EU is perhaps one that should be questioned, like the ability to pay Chinese tax rates while selling into the US.
I haven't come across a single list of problem from business orgs that lists EU or local taxes, even if particularly high (California, Canada?), as a problem.
Usually, high taxes go hand in hand with high quality welfare state. Contrary to popular belief, the vast majority of business ppl are educated and understand the added value of an accessible publicly funded healthcare, pension and education system.
Commonly listed (and perennial business problems) are: unstable political environment (in the sense that tax law changes every four years, complex legal system, so long term planning is impossible), corruption (meaning you have to know who to bribe to get the job done), crime rates and lack of infrastructure.
Every list of problems I see from economists of all brands explaining why e.g. the UK has such poor economic performance and such a severe cost of living crisis mention the complexity and scale of taxation in the country first as a barrier to economic growth and cause of inflation.
> majority of population of any given country doesn't emigrate ever, even inside EU where it would be extremely easy
Because unlike the US, we don't speak the same language. If there would have been a real push to have a common EU language since its inception, we would have been more mobile and more US like. But no...
Yes, they might, but in practice and with the exception of multinational corporations and some start-ups, everyone speaks their own language. And it's all fun and games that you can speak english in restaurants, cafes, train stations and the like, and then when you want to find a job in an EU country you get hit with "do you speak our language? no? ah, we're sorry then."
There's a big difference between being a tourist in Europe and actually living here.
Well, if you insist on not learning a non-English European language, last time I checked Ireland was still in the EU and they speak English.
But honestly, I'm not sure what the problem is. As previously mentioned by other people on this discussion, vast swathes of Eastern Europeans live and work in the West and have had no trouble whatsoever picking up the local language. As they say, the best way to learn a language is by immersion.
Most Europeans will have gone to a school where they typically learnt a minimum of one extra language and often two extra languages.
With the exception of Finnish, the majority of Western European languages are not that difficult. Its not like Chinese or Japanese which are simply impenetrable unless you went to school there or you are super-smart and managed to pick it up in later life through sheer brain power.
Common language works for employment and business, but then you go to government bureau (or want to fill government form) and they will insist on official language.
That is why english as secondary official language would be beneficial.
But evidence shows that they do emigrate in mass when there's a reason, it's one of the core issues of the last decade and the reason why fascists gained power all over the world. If fact its the reason why masked people in USA are hunting down immigrants.
Its also factual that there's a large scale migration intra-EU, with people from poorer countries moving to rich ones to seek jobs. Bulgaria, Romania and Poland are prime examples for that.
Its also well documented that those same people stop migrating and even coming back once their counties level up with the rest of the EU, again Poland and Bulgaria are good examples for this in the last years.
EU is trying to make sure that the poorer countries receive the help they need to catch up and it looks like its working.
> But evidence shows that they do emigrate in mass when there's a reason
If you go to the CNN website there are lots of articles on there right now (e.g. https://edition.cnn.com/travel/us-woman-moved-to-germany) about US peeps who have emigrated to Europe recently and are thoroughly enjoying their new life with no plans to return to the motherland in the foreseeable future.
California’s taxes and cost of labor combined are surely up there.
Besides a fractured market with lots of different bureaucracies to deal with, the lack of at-will employment is a big labor cost when you need to be able to quickly spin up or spin down operations.
Welfare should always be a responsibility of the government, not businesses. Let businesses business and let government redistribute wealth.
While that’s also true, the EU varies widely. The tax wedge is very low in places like Czechia or Lithuania and very high in France and Germany. If you add other European countries you get some of the lowest taxes on earth in places like the Isle of Man or Switzerland.
Having said that, the lack of proper integration is a huge problem, like imposing tarrifs of over 100% on ourselves.
Labor cost has many aspects. One big and key difference between the EU and the US is that due to socialist policies in the EU, it is much much harder to fire people when the business takes a downturn. And this is why companies are not that eager to hire as fast as needed because it is very hard for them to downsize.
In the US, this provides the companies with the levers they need to maintain a functioning business in pretty much an instant. In the EU you can't do that.
I don’t know about other countries but e.g. in germany the law all but forces you to fire higher performing people before lower performing folks, with additional protections for especially unproductive employees. And that’s for when your business is sufficiently struggling to justify layoffs under the law.
The US hire-and-fire approach is then the other extreme.
The optimal amount of worker protection is somewhere in-between.
The optimal amount of protection provided by businesses is none. Employees are like any other costs, that may need to change based on supply and demand.
The government should be providing protection, by way of providing education and welfare to support reallocation of labor, and taxing businesses to do it. Requiring each business to do it and then policing them is far less efficient for all parties.
In practice you can hire people for at least 6 months in Europe on a "fire-at-will" contract. But yes, you're probably right. Down-sizing is not a problem in Europe, but you can't easily choose which people you want to let go, which is a problem.
We had our underground parking and storage units broken into in apartment building. And we couldn't see the CCTV camera, to be on a lookout for the thief and call cops. Only cops could see it. Thieves have higher protection than your property.
There is no alternative is there. Russia bad for obvious reasons. EU rules getting more and more tight. Lets see what happens with digital euro and forced investing in EU markets. Eu is ruled by gerontocrats and detached leftists. The extreme right is not solution. Most of EU MPs from small countries are literal nobodies, just bench warmers.
Russia is bad as is. Currently, clearly worse than EU. But the problem is, the state of human rights and freedoms in the EU is deteriorating so fast, I'm not sure if it would still be better than Russia in ten years. And in 20 years, China may be the freedom benchmark for the EU.
Of course it will be worse. And EU will not have concentration camps or gulags. But boiling the frog of freedom slowly def is not best outcome. And will more people to anti eu camp. An in the end to east.
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