If you are self-employed and moving abroad because your husband, wife or partner has a new job, or if you are moving for family or lifestyle reasons then you need to understand what is required when running a business in your new country of residence.
If you are moving as a permanent arrangement or at least for a period of a year or more, then it will be much cleaner cut than if you are not planning to be a permanent resident. Once you have arranged your moving date and are planning on being in the new country for at least a period of one full tax year, then you need to get in touch with your relevant tax department and inform them of the change. They will likely want to see proof, so that know that you will be paying your taxes in your new country.
Once you arrive in your new home, you will need to inform the authorities that you are now living and working there as a permanent resident and ensure that you have the relevant visa allowing you to work and live in that country.
First and foremost you need to understand when self-employed and moving abroad is the tax rules of the new country including your tax obligations, how the tax year works, how to submit your tax return and how much should you be paying? You will also need to decide if you are going to continue to pay your national insurance for your country of origin (you may if you plan to return one day) or whether you will pay into the scheme in your new country.
Whether a company employs you, are retired or self-employed and moving abroad. There are tax advisors that specialise in expatriation that will be able to offer you advice if you would like advice more specific to your individual circumstances rather that what you find for online but there are lots of sources of information if you search for the tax rules in the country you are moving to. Don’t just look at income tax – look at social contributions, VAT rules and other taxes, for example, those imposed by local authorities.
For certain countries, as well as taxes, there are other costs to pay. In Spain they have something called an autonomo – the name comes from the Spanish for Independent professionals (profesionales autonomos). Upon arrival in Spain you will be required to declare and categorise your profession. Most professionals pay through a retention system, the amount is reduced for new businesses for the first 3 years. It works by customers keeping back a percentage of the invoice to pay to the tax department for you. You are also expected to make payments to the Social Security Department. Again a professional adviser will be able to help you and may even be able to save you money if you get a reputable one.
In countries like the UK you only have to register and pay VAT once you reach a certain turnover. Each country is different though, and there are countries like Spain where you have to pay VAT of 21% on everything regardless of how much you turnover except on exempt goods and services. This doesn’t apply if you are dealing with clients in certain countries within the EU so again it is something that requires research.
While everywhere you go you will be subject to some level of tax there are countries where it is a great advantage to be self-employed. In Romania, for example, new businesses pay as little as 3% tax with little social contributions and a low cost of living. If you are moving to Cyprus (a very popular ex-pat destination) on the first £20k you pay NO tax with the highest level of tax being 35% on £50k earnings! The Czech Republic is another country where tax rates are low – in fact they are 15%.
As well as the long-term costs of running a business – tax, social contributions, VAT etc. you will also need to consider the short term implications. Where are your clients based and are they transferable? If you are a freelancer working from a laptop, it may be that you can conduct your business from anywhere in the world. If your clients visit your business and you have a client base that you have to leave behind you will obviously need to build up a new client base in your new home. If you have a partner that can support you financially and have the luxury of time, then this won’t be a problem. However, if this is not the case, then you will need to make the necessary financial arrangements to ensure you have enough to live on while you establish your business in your new home. Will you need to find premises, market your business to the new community and sort out the logistics of operating your business? All of these things take time and you will need to have a robust plan in place.
With a different language, a different currency and a different culture you need to consider if your business is viable in your new country or whether you will be better looking for alternative employment or a new business idea. If you are committed to transferring your business abroad, then make sure you carry out the necessary research and are armed with all of the facts before you proceed.