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Considering moving from US to EU in the next 5 years, what are the fiscal and other considerations?
Thread poster: Robert Long

Robert Long  Identity Verified
United States
Local time: 00:17
Member (2012)
Spanish to English
+ ...
Dec 20, 2012

Hello everyone,

I'm a freelance translator residing here in Houston, TX, where I've lived for about 6 years now. I'm currently saving money and growing my business, and I've been thinking a lot about pursuing my dream to move to Europe where, after having travelled there on several occasions, I feel I'd be quite happy with the quality of life it would offer. And yes, I'm aware its quite expensive, especially in the big cities.

My question is twofold. For one, as a US citizen but self-employed individual what sort of consideration would need to be taken in regards to immigration/dual citizenship. I imagine the work/residence permit/visa situation would be different since I would not require a company to sponsor me (as I'd essentially be sponsoring myself). The second question is in regards to taxes. I currently set aside about 25% of my income for taxes and after any appropriate business deductions and what not this gets the job done. Obviously EU taxes are higher than those here in the US, so any ideas about where would be the most desirable?

Another factor has come to mind, and that is the currency issue. With the pound and euro stronger than the dollar, I frequently make more money per word from jobs coming from the EU than I do in jobs paid in dollars. If I move to the EU, I will of course experience the reverse of this, with all my US work providing less relative weight once converted to EUROS.

The countries I'm contemplating are:

Portugal
Spain
Catalunya
France (though I'm aware they have quite high taxes)
Germany
The Netherlands
Italy
Austria

Any advice on any of the above questions would be greatly appreciated.

Thank yoU!


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Giuseppina Gatta, MA (Hons)
Member (2005)
English to Italian
+ ...
Not a very good idea, IMHO Dec 20, 2012

I can talk specifically about Germany and Italy, where I have lived (first one for 3 years, second one for most of my life, since I am Italian) and I would never suggest you to relocate in Italy as a translator. You would have to pay about 27% for social security and a total of about 50-60% of taxes on your income. Plus they have VAT which is 22% and a very complicated fiscal system, where you are pretty
much compelled to hire a CPA and spend a lot of money for their services. The quality of life is subjective, but in my opinion is getting worse in Italy. Especially with the rates you are mentioning in your profile, you'd never make it.

I worked in Germany as a translator too, but a long time ago. They are better than Italy for sure but not light in taxes either, and VAT is there too. I remember that a long time ago I had to pay the equivalent of 300$ per month in health insurance.

I also know a little about Spain which has a similar system like Italy, as far as translators are concerned, even if a little bit better. In Spain, for instance, you have to pay about $300 per month of health insurance, no matter how much money you make (even if you don't make any money at all, just for being self-employed). In Spain you also need a CPA since fiscal requirements are not as simple as in the U.S.

The visa thing does not work like in the U.S. and I am not sure of what you mean when you say "sponsoring yourself". I know that Italy was offering a program for translators a few years ago, but again, living in Italy is a tax nightmare right now.

You have to be more specific about the country you are choosing but if I were you, I'd never relocate to any of the ones you mentioned. I can relate since I lived the last 6 years of my life in the U.S. and it was a big relief for me, fiscally speaking (and also the cost of life was much lower than in Italy, now U.S. is catching up with it but still very much cheaper than Italy, except for cellphone services).

[Modificato alle 2012-12-20 22:04 GMT]


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Alan Furth
Local time: 04:17
Spanish to English
+ ...
Very different purchasing power from country to country... Dec 20, 2012

If you move to Spain or Greece for instance, you will surely feel much less purchasing power loss than if you move to Germany or France.

Actually, in either Spain or Greece you might as well feel that your dollars purchase more than in the US even after converting them into Euros, simply because these countries have much lower prices than the US, and now they're going through severe economic slowdowns that should deflate them even more.

That said, Spain has recently increased taxes in order to compensate for falling tax revenues during the crisis. On the other hand, they are apparently planning to offer residency to foreigners who purchase houses valued at more than 160,000 Euros.

But even if you don't intend to purchase real estate in Spain, their immigration laws are fairly lenient towards US citizens -- at least that's what I remember from a couple of years ago when I used to live there.

You might also want to consult a good tax attorney on whether you could get any tax benefits from incorporating a company in a low-tax jurisdiction somewhere else in Europe (Jersey, Isle of Man, etc.) or even outside Europe and bill your clients from there. The potential benefits vary from country to country of course, but if I remember well, Spain doesn't require you to pay taxes on income you don't generate in the country if you are a foreigner, so in that case you would probably still have to file your taxes in the US.

Also, always be careful with exchanging your USD into Euros, as banks usually charge ridiculously high rates for this. Always use a specialized currency exchange service for this, like Xe.com.



[Edited at 2012-12-20 22:22 GMT]


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Giuseppina Gatta, MA (Hons)
Member (2005)
English to Italian
+ ...
Not sure where you got this information Dec 20, 2012

Alan Furth wrote:

If you move to Spain or Greece for instance, you will surely feel much less purchasing power loss than if you move to Germany or France.

Actually, in either Spain or Greece you might as well feel that your dollars purchase more than in the US even after converting them into Euros, simply because these countries have much lower prices than the US, and now they're going through severe economic slowdowns that should deflate them even more.

That said, Spain has recently increased taxes in order to compensate for falling tax revenues during the crisis. On the other hand, they are apparently planning to offer residency to foreigners who purchase houses valued at more than 160,000 Euros.

But even if you don't intend to purchase real estate in Spain, their immigration laws are fairly lenient towards US citizens -- at least that's what I remember from a couple of years ago when I used to live there.

You might also want to consult a good tax attorney on whether you could get any tax benefits from incorporating a company in a low-tax jurisdiction somewhere else in Europe (Jersey, Isle of Man, etc.) or even outside Europe and bill your clients from there. The potential benefits vary from country to country of course, but if I remember well, Spain doesn't require you to pay taxes on income you don't generate in the country if you are a foreigner, so in that case you would probably still have to file your taxes in the US.

Also, always be careful with exchanging your USD into Euros, as banks usually charge ridiculously high rates for this. Always use a specialized currency exchange service for this, like Xe.com.



[Edited at 2012-12-20 22:22 GMT]


Talking about Spain, by law even EU citizen have to extablish residency in Spain within 90 days and show some kind of income in order to have their residency confirmed, so I don't see how a US citizen could live there without any kind of permit. I recently lived in Spain for a couple of months and did not see how it could be cheaper than US, as a matter of fact it was not.


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Alan Furth
Local time: 04:17
Spanish to English
+ ...
Well conditions could have changed since I was there... Dec 20, 2012

Giuseppina Gatta, MA (Hons) wrote:

Talking about Spain, by law even EU citizen have to extablish residency in Spain within 90 days and show some kind of income in order to have their residency confirmed, so I don't see how a US citizen could live there without any kind of permit. I recently lived in Spain for a couple of months and did not see how it could be cheaper than US, as a matter of fact it was not.


I resided in Spain as an EU citizen for a few years, from 2000 to 2005, so conditions could have changed since then, but in any case I didn't say US citizens could live in Spain without any kind of permit; I said that Spain is relatively lenient towards US citizens obtaining residence permits when compared to other European countries, especially if you are in a position to buy real estate there as it seems they're planning to offer residency to foreigners purchasing real estate of certain value.

Regarding whether Spain can or cannot be cheaper than the US, well, I guess it depends which two cities you are comparing. I used to travel a lot to big US cities like New York or Los Angeles while living in Barcelona, and obviously Barcelona was much cheaper when compared to those American cities, especially regarding rent, groceries and other basics.

I don't know how Houston would compare to a large city in Spain though...

[Edited at 2012-12-20 23:14 GMT]

[Edited at 2012-12-20 23:16 GMT]


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Robert Long  Identity Verified
United States
Local time: 00:17
Member (2012)
Spanish to English
+ ...
TOPIC STARTER
Houston Dec 20, 2012

Well, Houston is the fourth biggest city in the US but its cost of living is SIGNIFICANTLY cheaper than the other large cities. I'd like to live ideally in a suburb of Barcelona or in Catalunya in general (as I speak Catalan as well). In the past I considered moving to the EU by having a job that would sponsor my work/resident visa.. now that I'm self-employed I have no idea what to do.... is there a special category for self-employed persons?

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David Wright  Identity Verified
Austria
Local time: 09:17
German to English
+ ...
Assuming you could get a residence permit Dec 20, 2012

which should not be too difficult if you can show that you have a regular income from freelance work - then Austria is a good place to live, in many respects. You do pay lot of your income in tax and social security, but you get pretty good health treatment free of charge, the standard of living is good, crime is relatively low, the people can be frienldy (though it helps to know the language) skiing and hiking are excellent, the standard of cultural events in Vienna at least is probably second to none. The wine and beer are good - what more do you need to know?

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Robert Long  Identity Verified
United States
Local time: 00:17
Member (2012)
Spanish to English
+ ...
TOPIC STARTER
Austria Dec 20, 2012

yea mein Deutsch is currently at intermediate level. I listen to German news daily and understand about 50-60% of German texts...in a few years should be up to par. I'm planning on waiting about 5 years before any such move regardless, so I guess a lot could change economically over there in terms of the financial markets, taxation, etc. Supposedly, and hopefully, the EU will emerge stronger after all this financial mess.

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Alan Furth
Local time: 04:17
Spanish to English
+ ...
I think that in Spain it basically boils down to paying your $300 per month... Dec 20, 2012

Robert Long wrote:

Well, Houston is the fourth biggest city in the US but its cost of living is SIGNIFICANTLY cheaper than the other large cities. I'd like to live ideally in a suburb of Barcelona or in Catalunya in general (as I speak Catalan as well). In the past I considered moving to the EU by having a job that would sponsor my work/resident visa.. now that I'm self-employed I have no idea what to do.... is there a special category for self-employed persons?


... as Giuseppina says is obligatory for the self-employed. If you can show proof of income and pay the fee that should be pretty much it.

But in any case, I say just go for it and live as a tourist for a few months while you keep billing your clients from the US. I think you can stay within the EU for about 6 months as a tourist with a US passport. That should give you some time to visit a couple of countries, feel your way around and see what you like most...


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Heinrich Pesch  Identity Verified
Finland
Local time: 10:17
Member (2003)
Finnish to German
+ ...
Family? Dec 21, 2012

One thing to consider is education. In Finland for instance education is free, so you do not have to use your savings for that. So perspective changes if you have children. And you may have heard that Finland's educational system shows the best results in the world.
Health insurance and pension savings will take about 25 % of your declared income, tax about 30. Living is cheap in Germany.


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Woodstock  Identity Verified
Germany
Local time: 09:17
German to English
+ ...
Check with the respective embassies in person and/or Dec 21, 2012

their websites. Those usually contain information about residency / immigration / citizenship requirements in their respective countries, plus there are probably websites for new (US) residents in those countries set up by expats living there. I know Germany has at least one. Dual citizenship is also quite difficult to get, and only possible under very restrictive criteria, no idea how it is in other countries.

I'm not sure how easy it is to immigrate here (Germany) these days, but it used to be quite difficult, with lots of bureaucratic hoops to jump through. I had a German spouse at the time, so there was no problem other than navigating the bureaucracy, but that was before internet was widespread, so things have gotten much easier since then in that respect, but the bureaucracy remains daunting.

A tax consultant is definitely a must, because the tax laws are a jungle and change constantly, plus the taxes being extremely high is a big deterrent. In fact, I'm looking at going the other way once Obamacare is fully in place, as the taxes are more and more onerous, health insurance covers less and less, i.e. more and more has be covered yourself, etc. etc. Things have really changed in regard to social services and the much-vaunted safety net, and not for the better, since I came here in 1985. The tax system is also not designed for freelancers in any way, shape or form, only employees or owners of SMEs. This is generally speaking, of course, others may have other experiences, but life as a freelancer here is definitely not for the faint of heart.

Frankly, I wouldn't recommend it, at least not as a permanent arrangement. And adapting to a different culture is not as easy as it might seem at first blush. I should know, I am half German and grew up in both the US and Germany, and have been completely bi-lingual since childhood, but I'm still homesick for the US. Don't underestimate the power of your roots.

Good luck.


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Woodstock  Identity Verified
Germany
Local time: 09:17
German to English
+ ...
Germany is cheap? Dec 21, 2012

Heinrich Pesch wrote:

Health insurance and pension savings will take about 25 % of your declared income, tax about 30. Living is cheap in Germany.


Absolutely right in terms of social costs and taxes, but I most definitely don't agree with your last statement - cheap relative to what? Not when compared to the US by any measure. Maybe compared to other countries in Europe, but I don't have the knowledge needed to make any statements about that.


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Tom in London
United Kingdom
Local time: 08:17
Member (2008)
Italian to English
Cultural Dec 21, 2012

Robert Long wrote:

The countries I'm contemplating are:

Portugal
Spain
Catalunya
France (though I'm aware they have quite high taxes)
Germany
The Netherlands
Italy
Austria


I presume you are completely fluent, written and spoken, in the languages of all the countries you have listed. If you're not, then you shouldn't go.

If you're looking for a country where taxes are low and yet, paradoxically, where the quality of life is high, there are no countries in Europe where that situation exists. Your taxes go to pay for things which, by and large, enhance the quality of life for everyone.

I do sympathise about Houston - friends who live there report that it's a horrible place. Have you considered just moving to somewhere nicer within the US?


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Madeleine MacRae Klintebo  Identity Verified
United Kingdom
Local time: 08:17
Swedish to English
+ ...
Hear, hear Dec 21, 2012

Tom in London wrote:

If you're looking for a country where taxes are low and yet, paradoxically, where the quality of life is high, there are no countries in Europe where that situation exists. Your taxes go to pay for things which, by and large, enhance the quality of life for everyone.




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Steven Segaert  Identity Verified
Estonia
Local time: 10:17
Member (2012)
English to Dutch
+ ...
EU is not US Dec 21, 2012

With that obvious statement, I mean that the EU is a collection of countries with a supranational structure on top. Every country still has its own tax and social tax system, and what you pay in taxes and contributions actually corresponds to what you get as a citizen. Some systems are expensive but very efficient in providing benefits. Other countries are expensive and inefficient. Others still are cheap but don't offer much in return.

In Estonia, where I live, taxes are quite low. The downside is that, relatively speaking, we don't have that many government services, and it shows in the quality of the roads or the coverage for unemployment, for example. In the countries north of us, taxes are very high. On the other hand, you get good services in return, and a very good social security system. As an aside, please note that "social security" in the EU means more than just pensions. It is also about health care, for example.

In other words, please think about where you would like to live first, and then research if that country makes sense to you personally. Also don't forget that Europe is small. For example, someone who wants to live in the north-east of France might as well pick Germany, Luxembourg, Belgium or the Netherlands.

Once you have made a (or some) choice(s), you will need to ask from the authorities of that country - or from the US embassy there - what kind of conditions you need to fulfil to enter the country. These conditions are different for every EU member state - there is no "one system". In many countries, they will accept you if you can certify that you have sufficient means to support yourself, i.e. that you won't be knocking on the door of the welfare office. Once you reside legally in one state, you can travel to the other countries without problems - but I don't think you will also automatically be permitted to work there.

You can then also check tax rates, social contributions required, what you get back for it, and how big your administrative burden would be. Here in Estonia, for example, there is very little paperwork involved with owning and running a business, and what needs to be filed can be done over the Internet. In other countries, you will have to jump a lot of administrative hurdles, at an extra cost (because you will need assistance, at least in the beginning).

In this, it makes sense to do some "shopping". Certain features of a national system will be more important to you than others. A country might have a great child benefit system, for example, which might not interest you if you don't have children yourself.

You might also want too consider asking advice from an international consultant such as pwc or the likes (http://www.pwc.es/). I have no idea what this would cost, but these people are in a good position to tell you what makes most sense in your situation. There are also networks such as http://www.internations.org/, and there is lots of information on the different websites of the EU, the World Bank and the OECD. On this site for example - http://ec.europa.eu/small-business/policy-statistics/facts/index_en.htm - there are reports on the business climate in all member states. And you can find more about the social security systems here: http://ec.europa.eu/social/main.jsp?catId=858&langId=en

Seems like you have a lot of reading up to do.

Or you can just do it like most of the foreigners I know (including me - I'm a Belgian in Estonia): travel around, find the love of your life, and settle there.

[Edited at 2012-12-21 11:51 GMT]


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Considering moving from US to EU in the next 5 years, what are the fiscal and other considerations?

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