Ask HN: How to maximize net income in EU? | Hacker News Reader

Ask HN: How to maximize net income in EU?

19 pointsmathverse25 comments

Earning €80k/pa gets me just about 49k of net income per year under austrian taxes.

I cant imagine this is significantly different in other Western European countries. What is the optimal way to dramatically increase net income for a SWE in Europe?

I am not asking about tax avoidance but about optimal ways to significantly increase that number.

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you really can't, if you want to live in western europe and don't want to do shady stuff, you have to accept the social solidarity system we live in here.

I'm not a lawyer or accountant, and I cant give business or legal advice and the following is "sarcasm" etc etc...

in theory, slovakia, dividend tax for residents is 7%, you don't have to pay social or health deductions when taking out dividends from the company you own. you can employ yourself in said company with base salary and pay minimal deductions from that, the rest you can take out as dividend. your home residence still matters, this means you would also have to live there for majority of the year. otherwise you would have to pay additional deductions and tax in country of your residence austria. this is still somehow considered legal and "perfectly ok" thing to do, i bet they will change that in couple of years due to pressure from the EU. you might be able to effectively pay only up to 20% of your gross this way + you get to business expense.

really, just move to switzerland, at least that's my plan a few years down the road.

Doesn't the company have to pax tax though on earnings before that 7% rate?

Yes, you have to pay 15% tax first (if turnover is < 49 790 €) or 21%. Then you pay 7% dividend tax

yes, however the effective overall tax (21% + 7%) on dividend and the social and health care deductions - 0%, is much smaller than similar scenario in austria

I am not sure "home residence" matters. It's the tax residence that's matters AFAIK.

It's difficult to have tax residence in the place you don't live at without committing fraud, typically tax residence is linked to the place where you spend most of the year or which is the center of your personal life (e.g. where your family lives) if you move around a lot.

It's not difficult it's just not used for tax fraud/avoidance. The way it typically works in Europe is with double taxation agreements. You can earn & get taxed in Austria and live in Czech Republic.

this works only for permanent employees, it goes out of the window if you are sole proprietor or managing director, in this case the residence matters a lot and you will be taxed additionally in country u reside in

If we're only talking about income, your only option is contracting (or maybe starting a successful business...). If you are willing to work on your expenses, then a lot of other avenues open up to you; you can make significant savings by moving to a country with lower taxes and/or cost of living (for example Romania). Keep in mind that coming from Austria, you may experience some culture shock.

Here are some quick back of the napkin calculations:

Austria

Gross: 80K

Net: 49K

After rent: 41K

Romania

Gross: 80K

Net: ~71K*

After rent: 66K

* Micro-company at 1-3% tax on revenue, 5% dividend tax, ~€2000/year social contributions (once you cross a certain limit), €500/year accountant. I am not a lawyer or accountant so please check with one before making any decisions ;)

Prerequisite: you need to be good and be able to sell yourself as such Options:

* Work for FAANG in London, Switzerland or even Amsterdam [1].

* Tough one: reskill and work in HFT, base seems to be 60K, the bonus that you get after having proven yourself is sizeable and can be a multiple of your salary (if I have to believe teamblind.com, can't find the source anymore). The hours are more brutal though.

* I've met a freelancer doing this, it's on the gray area of shady (depending on where you land with valuing hours worked versus output delivered): get a cushy 80K job for which 2 hours of work per day is enough. Work like 10 to 20 hours per week, track the 2 hour units of commits into an Excel sheet and commit each day appropriately. For each day when you don't need to stack commits, enjoy your free time! Then, if you want to make more money, get another job or freelance thing and do that after your normal work hours (for legal reasons). It's a variation on the 4 hour work week I guess? I've seen a guy do this, he had no issues with it. He even was called employee of the year, so I guess the 2 hours he put was comparable or even better than the 8 hours of another person. Some people think it's shady since you're not working in the spirit of your contract (doing less hours than promised). Other's think it's fine since you're delivering the output that was implied with the contract.

[1] https://blog.pragmaticengineer.com/

If maximizing the current income is your goal you should consider contracting over FTE. As for the optimal ways - every country has its set of "vehicles" to minimize taxes which usually boil down to establishing LLC type company that pays low CIT instead of high PIT and making use of the capital earned by that company. The question is how deep down that rabbit hole you wanna go and how much time to spend on that. Very often it's not worth the effort and your brain cycles may be better spent for learning new skills or trying to find a higher paying job :)

Edit: typo

Good starting point would be "Der große Konz" aka "1000 ganz legale Steuertricks", which is for German tax law, but some suggestions might carry over to Austria.

Another idea might be to look at your university degree: if you did a master's degree iirc you can claim expenses for your degree as loss and carry them forward for some years. YMMV.

[1] https://www.hugendubel.de/de/taschenbuch/franz_konz-konz_202...

Poland has just lowered its income tax rate for IT consultants to 12% (effective 2022). You could move there and do remote contracting for a Western Europe company. After taxes and living expenses, it's not hard to save 100k euros per year.

In the UK, you can put up to £40k /year into a private pension tax free. If you are a higher rate tax payer, you get a cash refund.

Whilst it wouldn't give you a higher current net income, it would be beneficial in the long run. There might be similar schemes in Austria.

If you are PAYE through your employer, there is little you can do really. If you can contract under a legal entity, that nunber might go up, but in the UK, you'd have to earn £100k+ for it to be worthwhile imo.

For context, I am a UK accountant.

I havent investigated deeper, but afaik in Austria you can invest tax free into stock packages managed and offered by certain banks, up to 10% of gross income, iirc return on this is very low and needs to be held for 4 years before sale.

its nowhere near whats possible in the UK... as I said before, accept the social solidarity or move to different country.

I agree. Also, I believe that stautory leave in Austria is like 40 days, compared to 28 in UK.

UK has some tax free investments, but wouldn't boost net income.

40 days maybe if you count in bank holidays, otherwise its not that high really

Higher than UK! 20 + 8 bank hols. Esp given that I would imagine Austria salaries are comparable to UK.

Off-topic, but I think in your particular circumstances, easiest would be to just move across the border to Switzerland.

... plus many "work" in Switzerland to earn high salary but live somewhere across the border

If I were to move somewhere it would be the USA or Canada. Not really looking to move to Switzerland.

But moving out is not an option..sadly.

Setting up a business and getting paid through that, and/or relocating to a country where taxes are much lower (for example, Estonia, Ukraine, Romania).

Or you can relocate / get a job in a country where the gross income is much much higher, and live frugally, for example Switzerland

Either move to a cheaper country with lower taxes like Romania, Albania, Bulgaria, Poland etc. Or move to USA and get that fat salary+equity. Or combine them both and do it remotely (very hard to get $200K+ remotely).

Even in NYC I pay roughly 50% of my income in taxes. Ce la vie

PS: nothing wrong in discussing tax avoidance as well.

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