Business abroad: tax aspects and advice

Now many people want or are forced to start a new life abroad, and start by starting their own business. This requires an understanding of foreign tax rules and laws. Therefore, the Antwort Law team has prepared a useful article for entrepreneurs just starting their journey abroad.

We compared tax rates, registration procedures and other aspects of business activity in six countries popular for emigration in 2024: Georgia, Estonia, Spain, Germany, Poland and Portugal.

Georgia

Georgia allows you to create different types of business, classified according to income level: “Microbusiness”, “Small business” and “Business”.

When registering as a private entrepreneur, individuals are exempt from large income taxes on their activities if their annual turnover does not exceed certain limits. The income tax for entrepreneurs can range from 1% to 20% depending on the annual income and the nature of the activity.

There are six main taxes levied in Georgia:

• Value added tax (VAT) is 18%. Paid if income is 100,000+ GEL per year.
• Personal income tax of 20%. Both non-residents receiving income from a source in Georgia and tax residents pay. If a person works for a company, an additional pension contribution of 2% is charged.
• Corporate tax. Georgia has adopted the “Estonian model” of taxation. According to it, only the distributed profit of the company is taxed. The rate is 15%. Preferential conditions are provided for companies registered in a special economic zone (special industrial zone), as well as with international status. The tax rate for them is 0% and 5% respectively.
• Tax on property owned by companies. The standard rate is 1%.
• Import tax. 0%, 5% or 12% depending on the type of product. The tariff applied to a particular product is determined by its HS code. The latter can be checked on the IRS website.
• Excise tax The tax is levied on a limited number of regulated goods, such as tobacco products, alcohol and petroleum products (gasoline, diesel fuel, etc.).

Estonia

The most common forms of business activity include entrepreneurial account, individual entrepreneur (FIE), limited liability company (OÜ) and joint stock company (AS).

Tax obligations of individual entrepreneurs:

• Social tax: One of the main tax obligations is the payment of social tax, levied on income received as a result of labor and business activities. Its main goal is to finance the pension and state health insurance systems. According to current legislation, the rate of this tax is 33% of the taxable amount.
• Income Tax Another important aspect is paying income tax. In 2024, the tax rate is 20% for income up to €25,000 and 40% for income between €25,000 and €40,000. It must also be taken into account that if the annual turnover exceeds 40,000 euros, this becomes the basis for mandatory registration for VAT (VAT).
• Mandatory funded pension (II pension degree): In case of joining the mandatory funded pension program (II pension degree), the entrepreneur is obliged to pay a payment according to the established rate of 2%. The amount of this payment is calculated based on taxable income from business activities.
• Unemployment Insurance: If a business owner is an employer and pays wages to his employees, he is required to make unemployment insurance payments. These payments are considered business expenses and amount to 1.6% and 0.8% of the employee's gross wages, paid by the employee and the employer, respectively.

Spain

Let's look at the detailed steps of registering as an individual entrepreneur (empresa individual), which is one of the main ways of doing business in Spain, based on the specified requirements.

• Consultation and preparation of documents: The provision of services for the preparation of the necessary documentation for obtaining an activity permit is available at the business service point (Punto de Atención al Emprendedor, PAE).
• Drawing up constituent documents: Notarization of all necessary documents and execution of the Certificate of Registration is an important stage of the procedure.
• Opening a bank account: This step is mandatory and involves opening a bank account for further financial transactions.
• Registration with the tax authorities: Each taxpayer must obtain a personal identification number NIE (Número de Identidad de Extranjero) and NIF (Número de identificación fiscal) in accordance with the requirements of the Agencia Tributaria tax office.
• Registration with the Provincial Business Registry: To legally conduct business, you must register your company with the Provincial Business Registry.
• Obtaining a municipal permit: This stage involves obtaining a municipal permit depending on the activity that is planned to be carried out.
• Social Security Registration: Social Security registration is mandatory for those planning to hire workers.

Types of taxes for private entrepreneurs:

• Income tax (Impuesto sobre Sociedades). The general tax rate is 25% of the amount of income received (for entrepreneurs during the first two years of activity - 15%).
• Value added tax: (Impuesto sobre el Valor Añadido, IVA). Accounts for 4–21% of the cost of goods sold.
• Personal Income Tax (Impost sobre la Renta de las Personas Físicas, IRPF). Paid by individuals on their personal income from various sources: salaries, interest, dividends, etc. Tax rate – 19-45% depending on income.
• Social contributions (Cotizaciones a la Seguridad Social). They are mandatory for entrepreneurs hiring workers. In particular, 23.6% - in case of temporary disability, 5.5% - in case of unemployment.
• Local taxes and fees (Imposts y tasas locales). Municipalities can set their own taxes and fees at the local government level.

Germany

The most common organizational and legal forms of doing business in Germany:

• Individual entrepreneur (Einzelunternehmen);
• Representative of the liberal professions (Freiberufler);
• Entrepreneur's society (UG, haftungsbeschränkt);
• Limited liability company (GmbH);
• Joint stock company (AG);
• Simple society (GbR);
• Open Trading Society (OHG);
• Limited partnership (KG);
• LLC and limited partnership (GmbH&Co. KG).

The most common form of doing business in Germany is private enterprise (Einzelunternehmer).

To become a private entrepreneur (Einzelunternehmen) in Germany, you need:

• Notarize documents.
• Register your business. Contact the local Business Register (Gewerbeamt) and submit the necessary documents: passport, proof of address, business plan, declaration).
• Obtain a tax identification number. To do this, you need to register with the tax office.
• Open an account in a German bank.
• You will also need health insurance and, in some cases, a special business license.

A private entrepreneur must pay the following taxes:

• Income tax (Einkommensteuer). The base rate is 14%, and the maximum is 45%.
• Distribution tax (Umsatzsteuer). The standard rate is 19%. 7% - for certain types of products, mainly food; 0% - for export operations.
• Trade tax (Gewerbesteuer) Trade tax must be paid by everyone who has registered a trade. Freelancers are quitting. Trade tax is levied by the municipality where your business is located and ranges from 7 to 17 percent depending on the municipality.
• Trade tax is paid in addition to income tax or corporation tax, but may be partially credited against corporation tax.

Poland

Citizens of the European Union who plan to start a business in Poland have several options:

• Open your own business.
• Provide cross-border services.
• Establish a branch of a foreign entrepreneur in Poland if there is already a business in one of the EU member states.

Business activities can be carried out in different forms:

• Sole business activity (jednoosobowa działalność gospodarcza).
• Civil society (spółka cywilna).
• Capital companies: limited liability company and joint stock company (spółki kapitałowe: spółka z ograniczoną odpowiedzialnością and spółka akcyjna).
• General partnership, limited partnership, limited partnership, joint stock company (spółki osobowe: spółka jawna, partnerska, komandytowa, komandytowo-akcyjna).

Regarding the taxes that individual entrepreneurs in Poland must pay (jednoosobowa działalność gospodarcza):

• Income tax. If the income does not exceed PLN 120,000 per year, then the tax rate is 17%. If this amount is exceeded, a rate of 17% is applied to the first stage of income of PLN 120,000, as well as 32% to the amount exceeding this threshold.
• Value added tax (VAT or VAT). Amounts to 23%.
• Contributions to ZUS. Pension, medical and other insurance for the entrepreneur himself and his employees (if any). This expense is not technically a tax, but it should be taken into account.
• Specific taxes. Apply only to certain types of activities, such as taxes on certain types of property or specific transactions.

Portugal

To work in Portugal you must obtain the following:

• Map of residence in Portugal.
• Taxpayer number (NIF).
• Social Security Number (NISS).

The most common forms of doing business are:

• Individual entrepreneur (individual entrepreneur or freelancer, Empresario em Nome or Trabalhador Independente).
• Limited liability company with one member (Sociedade Unipessoal por Quotas).
• Individual institution with limited liability (Estabelecimento Individual de Responsabilidade Limitada).
• Limited Liability Company (Sociedade por Quotas).
• Open limited liability company (Sociedade Anomina).
• Partnership (Sociedade em Nome Colectivo).
• Cooperative (Cooperativo).

Regarding the taxes that individual entrepreneurs must pay:

• Income tax. The rate ranges from 14.5 to 48% depending on the amount of income.
• Value added tax (VAT). It is 23% (levied on income exceeding 10,000 euros).
• Contribution to social security (after 12 months of doing business). In the first 12 months of working as a freelancer in Portugal, you do not need to pay social security. According to the simplified, most common procedure, freelancers pay 21.4% of 75% of their income.

An article by our Antwort Law team made an in-depth analysis of the tax systems of six European countries, which may be useful for citizens who intend to start a business abroad. We are working hard to provide you with the information and support you need in this difficult matter. Our team is ready to help with all questions related to taxes, business registration and other legal aspects of your business activity. Contact us and we will be happy to help you!

Olena Deilid

Junior Legal Secretary