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Ask HN: How do remote workers deal with taxes?
34 points by galfarragem on June 26, 2018 | hide | past | favorite | 25 comments
The question is simple - probably the answer is not: How do remote workers deal with taxes when working for a foreign company?

a) Do you pay taxes in your country or in the company's country?

b) Do you pay taxes as freelancer, 'LLC' or as dependent worker? In my country (Portugal) being a freelancer means paying an huge amount of taxes (~50%) when making more than 25K/y.

(updated)




a) I pay taxes in the country I reside in.

b) I have set up a LLC. Of course I have to pay a lot of tax. If I want to have 100 dollars deposited to my account I have to charge my client 250 dollars. Still there are several benefits to having an LLC. It enables me to optimise how much I pay in tax, usually I can go from 60% tax to somewhere around 50%. I buy everything related to my business via the business. Conference trips, computers, headsets, screens, books. That way I can spend money "pre-tax", before I lose the 50% by paying it from the LLC as salary. Essentially I get those items for 50% off compared to if I had bought them with my own money. I can also get the VAT back.

When you have an LLC the contract between you and the client will actually be between the LLC and the client. That means you are not personally liable for any damages, for example if you get sick and can't deliver the client can't go after you personally. Also should you for some reason go bankrupt you are (typically) not personally liable.

Note that this is how it works in Sweden, but some of it might be applicable in Portugal.


60% tax, how absurd. I cringe at my US based 24% (+ 10% self employment) bracket. By the way, love Sweden (summers) though. Been to Stockholm a few times, the first for nearly 3 months.


It's 24% + 10% self employment + (NY? CA?) 9% state tax + Obamacare (often around 5% or more).

And if you have kids, you are paying a lot more stuff that is included as part of the deal in Sweden (and most other European countries).

And when your kids were born, you would have received 12 months paid maternity leave in Sweden (which can be divided among mom and dad).

If we are twenty, have no kids, no medical issues, and on an academic scholarship, the US taxes seem very low. In almost any other situation, they are comparable, even though they look much lower.

And especially at the top bracket, e.g. in NYC you have 39% federal + 13.5% state/local + health care ... which is almost the same 60%, except you get to pay $100K-$200K tuition for yourself or kids, and stuff like that.


Scandinavia is known for high benefits supported by high taxes. The real problem is when you have low benefits and high taxes. In my country, an high income freelancer (paying ~50% taxes) will hardly ever get unemployment, sick leave or child care benefits.


It's the same in the Netherlands. I pay upwards of 50% taxes, but don't get any unemployment, pension or other benefits/insurance. It's ridiculous in my book.


Ask him how much he pays for health/car/home insurance as well :D


Don’t own a car, and obviously I don’t need health insurance ;). I do spend 15$ per month on home insurance.

Joking aside, I’ve heard several opinions that Sweden is a good country to start a startup in. Since there is a safety net to catch you in case things go sideways you can focus a lot more on the startup without worrying.


The 60% rate is, if I understand correctly, the combined affect of the LLC paying its fee and taxes and then poster paying personal income tax.


That's correct.


The 60% tax also covers costs for healthcare, college for your kids, unemployment insurance, and pension.


I am not Swedish, but I find it hard to believe this is your only option. Can't you pay yourself a smaller salary, and pay out the profits as a dividend, which is likely taxed way less? I have a (non-Swedish) LLC and it pays me dividends, not just salary.

I don't know a single company owner who pays themselves the entire company potential profit as salary like you seem to be doing, because this would just increase their tax burden.

Edit: from some quick googling, swedish corporate tax is 22% and dividend tax is 30%. So if taxation works the same as here, you'd still be effectively paying ~45% (1 - 0.78*0.7) tax. :/ Better than 60% though...


Doesn't work, dividends are typically taxed as personal income if you work for your own company in Sweden.


You get the 60% rate since you are paying the employer's taxes and your income taxes, right?

I guess if you paid yourself less (by effectively working less) that rate would come down a lot since both the employer's taxes and income taxes are rather progressive.


a) Own country. Generally most countries use residence-based taxation (where you live most of the year is where you pay your taxes), with a few very specific exceptions (the USA, ship crew, diplomats, deployed military, etc).

b) Freelancer because I'm too cheap to set up a company/hire an accountant, and it's really simple to just do my own taxes. Those extra taxes are thinks your employer now doesn't have to pay (healthcare, unemployment insurance, etc) so ask for a raise to match.


Where are you based? In the UK you can register for self assessment and file your own. You can complete self assessment yourself quite easily. If you want to contract through an LLC you'll probably want an accountant.


I don't do any international, all US based. I keep track of all my expenses (credit cards and banks accounts) and tag them using Quickbooks Self Employed. It even estimates federal quarterly taxes and allows me to make quarterly online payments using EFTPS.gov. At tax time it exports everything into TurboTax which saves a ton of time on deducations and reporting my quarterly federal tax payments.


a) Generally, you pay the taxes in the country where you reside or the country where you perform the work (if not the same country). Despite popular belief, most major countries tax individuals on their worldwide income (US, China, France, Germany, off the top of my head)...however, most of these countries exempt the first $xxx thousands of income from tax (or from certain types of taxes, like payroll taxes) or certain types of income from tax.

b) Depends on your legal risk profile. If you are a contractor, an entity may shield you legally but will incur greater tax and compliance costs.

If you are a dependent worker (i.e., an "employee"), you shouldn't need to ask these questions because your employer will take care of the tax withholding for you as generally most countries require foreign companies to register for payroll withholding once they hire employees locally.


a) Paying in my country of residence.

b) Paying as an 'independent' contractor. We have reeeeeally lax rate of 5% (not including VAT) if you earn less than $190k/year (with average salary around the country being around $4k/year).


Can I ask you which country is it? :)


Ukraine.


If you're doing work for a foreign company it's best to pay an accountant to sort out the tax for you. I know people who work in UK for foreign companies usually set up and LTD company and then pay themselves through that, through dividends etc, effectively only paying about 20% tax on everything.


As someone who contracts in the UK, I'd say it really depends on how much you're making and for what duration. If you're going to make £10,000 on a three month contract you're probably better off just registering for self assessment. I did this for a while when I was making around £28,000/annum because it was the most tax effective and easiest solution in my case. Also accountants are expensive.

If you're making £60,000+ you're probably going to want to set up an LTD company, but at that point you're really best off talking to an accountant and discussing your options.


I'm on about £28k per annum as a remote contractor -- I'd second this advice.


If you are a contractor, LTD saves you from unlimited liabilities.


What they are doing is probably tax evasion, unless they are only resident for a very short time or are running a business which is not a thin shell around an employment arrangement.




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