There are many places in the world where digital nomads can survive along with earning huge profits but every place has its own advantages and disadvantages. So in this article let’s discuss the best two places which are suitable for digital nomads and the available facilities of the places.
Romania can become a good choice to entrepreneurs for doing small business or setting up a company unlike with a disadvantage of high corporate tax which is 16% but it is low in comparison to the western European countries. Let’s get deeper in the matter
What is a micro company?
A micro company is a form of organisation of a juridical entity which complies with some specific conditions and criteria. A micro company must need to fulfil the following conditions:
- The subscribed capital must be needed to be owned by persons who are not the state or territorial administrative unities.
- The revenue did not exceed €1,000,000 in the fiscal year.
- It is necessary that it is not in any type of dissolution, followed by liquidation, registered in the trade registry or courts.
In the case of micro companies, if there is a condition regarding any type of subscribed capital, any new entity or organisation does not have the choice to register the regime. If you want to establish a new company and to opt for profit taxation you must have a subscribed capital of minimum 45,000 lei.
According to the new provisions stated from 2018, there are some restrictions on the type of activities and the measure of incomes from management and with this, many consultancies are eliminated.
Characteristics of a micro company
Romania is a country where micro companies have to follow many elucidations and conditions for establishing a company because of the epic change in the economic environment.
The micro-enterprises in Romania are legal entities which have to earn revenues up to €65,000 from any type of business activities like the banking sector, insurance and reinsurance domain, capital markets field, consultancy, gambling and management.
To establish a company in Romania individuals need to understand that there is a subgenre of the limited liability sector which indicates many special features like:
- To establish a company the main concerns like the origin of profits, annual income limits and the owners of share capitals are needed to keep in mind.
- The owners of the share capital which should be persons other than the state or local authorities.
- There are no limitations regarding the number of employees in a microenterprise.
The micro companies in Romania are obliged to follow the tax legislation rules. In order to settle a company, you must be aware of the taxation regime according to which a 3% income tax is needed to pay for entities which follows the micro company profile. There is a quarterly evaluation of tax every year.
Approximately, €65,000 amount of valuation for considering gains from a different source is calculated in which some exceptions are associated including costs for stock production, cost of developing services, gains obtained through tangible and intangible assets production, through operational subsidies, and by reserves and adjustments for depreciation or value loss, through reimbursement or cancellation of interests or penalties which is a non-deductible expenses.
Micro companies can be considered as the best means of investment in Romania, but it is important to understand all the characteristics which may occur several times.
There are many agencies available in Romania which helps customers who seek interests in opening a micro company. They help in setting up your company offering various strategies and approaches with the best possible alternatives available.
There are two options in regards to the taxation regime for microenterprises, which depends on the number of employees:
- 1% tax for companies with at least one employee
- 3% tax for companies with no employees
There is an exception of tax for the companies which are newly established and constituted for more than 48 months having at least one employee and whose members have no participation titles in any other juridical entities. They just have to apply 1% taxation rule for the first 24 months from the date of registration and to get the benefit from the 1%taxation it is important to hire a full-time employee within 60 days from the registration date.
The micro companies can also opt for hiring part-time employees if their fractions summed up is equal to full-time employees. If the employee is hired according to the law, in this case, the remuneration to the employee is equal to its gross salary, it can also meet the guidelines for 1% taxation regime.
If in a company the employees get replaced, the taxation procedure will remain the same, as discussed earlier, it starts quarterly from the month of employees transfer. If a company hires an employee under 1% taxation rule, and the employees’ contract expired then the taxation regime remains the same on the hiring of a new employee within the same trimester.
The companies who have no employee and wants to hire a full-time employee can also come under the same taxation regime if the employees’ contract is of at least 12 months time limit.
If the revenues of a company exceed from the time limit of €1,000,000, the company will automatically become a taxpayer which starts from the trimester in which the limit was exceeded.
The calculation of micro companies = total incomes x 1% or 3%.
This calculation is needed to be done in every three months, with this from 100 must be submitted after every three months.
Poland comprises several advantages for the individuals who want to establish their company there, it decreases corporate tax rate in some specific cases.
A new law of taxation named as new Polish tax legislation came into force from 1st of January 2019. According to this law, the rates of corporate tax reduced to 9% for taxpayers having revenues equal or less than €1,200,00.
This legislation brought many concerns which are needed to be discussed.
Misconceptions about the lowest corporate tax rate in the EU
Different companies started announcing false claiming that the Polish corporate tax of 9% is the lowest in the EU. but if we look deeper, in reality, the 9% rate is a conditional tax rate and not a standard tax rate, which means it is applied when several conditions of an individual and an organisation met. The low conditional tax rates are applied and known in the EU for a long period of time.
Incentivizing companies to reduce their revenues
It is genuine that every enterprise wants to generate more revenues with less expense in every possible way, consequently the new 9% conditional tax rates incentivize companies to keep their revenues with a limit of €1,200,000 per year. Poland adopted this strategy for restoring the economy, but many times it results adversely on the economic system of Poland.
Discriminating companies on the basis of revenues and not profits
These new tax legislation manage companies on the basis of revenues and not on their profits, like if a company have €5,000,000 revenues and €1,000,000 profit, then the 9% tax rate is not applicable for their company, on the other hand, if a company holds €1,150,000 revenues and €150,000 expenses then the 9% tax regime is applicable to them.
This is a big disadvantage for companies holding high revenues and fewer profits it is only beneficial for companies having high profits and low revenues.
It is the temporary nature of tax at the rate of 9%
The legal documentation of the low corporate tax is done in the regular income tax law and it can be changed anytime with a regular legislative procedure. According to the law, Article 217 of the Polish constitution states: “The imposition of taxes, as well as other public imposts, the specification of those subject to the tax and the rates of taxation, as well as the principles for granting tax reliefs and remissions, along with categories of taxpayers exempt from taxation, shall be by means of statute.” it is clear that the regular statute can change the tax rate.
With regards to these several countries guarantees the stability of their tax rates by adding a clause in their constitutions that they will change the rates of taxes only by special procedures.
With all this, the low tax rate of 9% can be changed anytime, this will result in huge losses to the entrepreneurs who have to leave the country immediately after the tax rate changes, and their relocation to another country will bring several expenses along with losses for them.
The rate of 9% is not applicable to all types of income
The low rate of corporate tax will not apply on all types of income earned by individuals or companies there are exceptions to this which includes:
- The low rate of taxation will not apply to dividends.
- Capitals gains are also excluded from the list.
- It is not applicable to the value of properties received as a consequence of the liquidation of the legal entity or limited joint-stock person.
- Other revenues from participation in profits of the legal persons and limited joint-stock companies.
- Revenues from proprietary rights, such as trademarks, revenue from securities, licenses, and derivative financial instruments.
- Revenues from the sales of shares in companies
- Revenues from the sale of receivables which are previously acquired by the taxpayer.
Poland always attracts foreign investors by the low rate of corporate tax. Nevertheless, this reduced tax has major disadvantages, so while shifting and setting up a company their you need to be aware and cautious with the laws and terms of Poland.
Bulgaria still has the lowest income tax rate in the EU, where the corporate and personal income tax rates amount to 10% and are applicable to all types of income. It also treats companies equal as it taxes on profits and not on revenues. Along with this, the rate of taxes in Bulgaria have not been changed for more than ten years. And there are very fewer chances that the rate of taxes will change in the near future.