Re-Registering Self Employment to Another Country


#1

Hi!
I’m doing research about how I can register as a self-employed to another country, and I want to ask for some advice.

I have a Hungarian citizenship. I spent the last 4 and a half years abroad. For two years now I have a registered self-employment in Denmark. During this time I have always had an address there even though I was physically there for only half a year. My address was registered at a friend’s place. I want to get rid of my self-employment there due to the language difficulties and high taxes. And here comes the difficult part.
I don’t want to register self-employment in my home country as I’m not planning going back and I don’t feel supporting it with my taxes (I know, it’s more personal than practical). I thought about Ireland (where I lived half a year twice), but the biggest problem is the address. I don’t have plans of settling down yet, but if I don’t have an address I can’t have a self-employment. Somewhere I read that it’s an option to get a real address, then changing the business address to a mail forwarding company.

I’m looking into what opportunities I would have to register self-employment somewhere (not in my home country), and continue nomad style of moving from country to country frequently. Is there anyone who had been in a similar situation?


#2

I don’t know about the particular rules in place in Denmark or Hungary, and I’m neither a lawyer nor an accountant, so take this with a fistful of salt.

Short answer: you can’t.

Registering as self-employed follows from being liable for tax on your self-employed income, not the other way around.

That is, you’ll need to register as self-employed in order to file your taxes, but being registered as self-employed in a particular country doesn’t affect whether you are liable for taxes anywhere else. In fact, in most countries you are technically liable for tax on any self-employed income earnt while physically present there.

As a self-employed EU citizen travelling within the EU though, the general rule is that you’re ok to only pay taxes (and therefore register your self-employment) in the country where you are considered tax resident.

If you spend more than half the year in one particular country then you’ll be tax resident there, otherwise your tax residence defaults to your home country. So if you want to register as self-employed and pay tax in a new EU country, you’ll need to live there more than half the year.

In practice it’s more complicated than this, and often you’ll need to continue filing tax returns long after you stop being tax resident somewhere.

It is possible to lose your home tax residency status without becoming resident in another EU country, but this leaves you in a legally questionable situation if you are self-employed, since you will still be officially liable for tax wherever you are working, but you won’t get any ‘credit’ for already paying that tax in your country of residence.

What you might want to do instead is set up and work through a personal company rather than being self-employed. This puts you in a better legal situation, since in most countries you are not liable for tax on foreign income if you are not a tax resident there, and this usually includes wages and dividends from companies registered outside the country, but not self-employed income earnt there.

So, if you managed to lose your home tax residency and set up a company in a third country (instead of being purely self-employed), you could travel as much as you like without having register for tax in either your home country or wherever you are working from, as long as you avoid staying in any one place long enough to become tax resident there. You could then pursue residency of a country where you do want to pay tax, at which point everything would be (mostly) above board.

But the rules about this are complicated, and vary a lot from country to country, so you should really talk to a professional about it.


#3

Thanks for the answer!

Just to clarify it (because I felt in some of your sentences that I may didn’t phrase my question properly), I don’t want to avoid paying taxes. I just want to do it in another country than Denmark. When I moved there, in a few weeks I was eligible to work and pay taxes, therefore I think I was a tax resident. It is possible that it was so fast because I was enrolled in a university. But when I was in Ireland it was different. I got a tax number on the first few weeks already and my only reason to stay in the country was that I want to work.

I know my best option to achieve the lifestyle I want is by setting up the self-employment in my home country and setting an address at a family member’s place but first I want to see if I really don’t have options to do it in other countries.

I have considered setting up a personal company in Ireland, however, it still requires an address of the director to be in Ireland. As you say probably my best option is talking to a professional in both Hungary and Ireland.


#4

Of course, I understood you do want to pay taxes, just somewhere else. But the hard part is usually stopping paying taxes where you are already paying them, which is why my answer came across that way!

The difficulty with what you want to do is that as a self-employed person, you can’t really choose where to pay taxes - you pay where you are tax resident, and possibly also where you are actually working. That means in most cases you’ll need to register and file tax returns in more than one country. Whether this is enforced is a different story, but best to stay on the right side of the law if you can!

This is where incorporating a company is helpful, because if you were working through a foreign company, that would be foreign income, which is only taxable where you are tax resident, and not also where you are actually working (in most cases).

I suspect that in Denmark and Ireland you weren’t considered tax resident, at least not at first. You would have been issued a tax number right away anyway, but because you were self employed and so had a local income on which you owed tax even as a non-resident. If you then stayed for more than 6 months, you would become tax resident retroactively starting the day you arrived.

You can absolutely set up a company in Ireland (or the UK, or probably lots of other places) without a personal address there, if you are an EEA citizen. What you do need is a ‘business address’, and a ‘registered office address’ in the country, but there are a bunch of services which can provide these for a small annual fee.

Unfortunately, this doesn’t totally solve your problem, since you’ll still owe personal income taxes in your country of tax residence, which is probably Hungary unless you become resident elsewhere. But you could at least be paying a portion of your taxes in the form of corporation tax to the country of your choice, although you’d need to be careful with ‘controlled foreign company’ rules.


#5

Hello! From personal experience, I would suggest you similar way what @ unicycle already mentioned - incorporate a private limited company and manage your affairs from there.
Estonia has created so called “digital nomad” company regime which works by managing your company completely online via e-Residency portal.
This way, you could easily invoice your customers with Estonian (EU) company and you wouldn’t have to pay taxes in country where you are operating from, as long as you are not considered tax resident of the country.

Corporate tax rate in Estonia is 20%, BUT it is taxed only when you “cash out” your profit. Which means that you are able to invest in to your business development (computers, flight tickets, accommodation, etc.) and other business related expenses.

In my opinion this is one of the most competitive solutions for digital nomads at the moment and certainly worth considering, because appart from other jurisdictions, Estonia has amended their Civil Code which permits to “manage company from abroad” if you appoint local contact person in there. This can be done also for very small fee in amount up to 200 eur annually.


#6

@hello513, Bulgaria may be an option for you:
“Getting Bulgarian tax residency for digital nomads” by Coworking Bansko https://link.medium.com/wuJYVkpoVS