5 ms·

The author writes, about his purchases of computers, phones, and other hardware, “These are not recurring so I can't count them in.” Here in the U.S., many suc

by wsh 3y ago

The author writes, about his purchases of computers, phones, and other hardware, “These are not recurring so I can't count them in.” Here in the U.S., many such items would be considered capital assets, for which the cost would be recognized as an expense over time through depreciation, for both management accounting and tax purposes. It appears Romanian practice is similar; see “Depreciation” on this page: https://taxsummaries.pwc.com/romania/corporate/deductions https://taxsummaries.pwc.com/romania/corporate/deductions

tomschwiha 3y ago
Here in Germany its similar, maybe its could be worth for the author to consult a tax consultant as he may be missing out quite some money. Also a wage you pay yourself is usually better off for tax readons - that's why the maximum wage you can pay yourself as business owner is limited.
- dazhbog 3y ago
  Agree about the accountant, they are expensive in some countries, but usually worth it. Can you elaborate on your last point? For salary you still need to pay >20% income tax + social insurance, and for dividends you still need to pay >20% after you just paid your corporation tax >15%. I'm curious, why its better to pay yourself more, when your laptop, phone and even food can be covered by the company? (Assuming a single founder company, doing everything legally)
  - pard68 3y ago
    What is "social insurance"?
    - croemer 3y ago
      Literal translation from a language such as German, French or the like. The right translation would be payroll tax, all sorts of mandatory insurances like health, unemployment, retirement (continental Europe has a few more mandatory items than US)
      - deleted 3y ago
        [deleted]
      - pard68 3y ago
        Ah I see, thanks. I thought it might be the equivalent to our social security tax.
  - tomschwiha 3y ago
    It really depends on the percentages, so I can mainly speak about Germany: For example you have a revenue of 100.000. If you have a limited liability company (UG or GmbH in Germany) you pay 30% taxes on the profit, so you have 70.000 left at the end of the year. If you want to transfer it to your personal account you will need to pay additionaly taxes of 25%. So you are left with 52.500. If you directly pay yourself 100.000 as wage it is fully deductable as company expense. So you don't pay any company taxes and would only need to pay income taxes of ~25.000. So a payout as wage you have 75.000 instead of 52.500. For both values at least in Germany you would also need to pay health insurance and possible for pension. (Health insurance at least additional 8.000 - 10.000).
    - tomschwiha 3y ago
      The best would be probably to let the company cover the PC / tablet / phone costs as they are business expenses and payout yourself the remainer as long as long as you can still increase your business operations. A good tip I once got was that you should always try to get money out of your company while you can - having it on your personal bank account is better then in your companies one.
      - gruez 3y ago
        >The best would be probably to let the company cover the PC / tablet / phone costs as they are business expenses Depending on how your local tax codes are structured and how strictly your local tax authority interprets them, letting the company buy the electronics and then subsequently using it for non-business use might count as a fringe benefit and therefore be taxable. In other words, if get your company to buy you a iPhone 15 Pro Max and a 16 MBP Pro with M3 Max, but all you're doing is some light macOS app development, they might (rightly) think that those aren't really being used for business purposes and are actually a sneaky way to remunerate yourself.
  - sitharus 3y ago
    I’m always amazed at other country’s tax systems. Here in NZ if you’re a sole trader you only pay personal income tax, if you incorporate you either take the whole profit as income and pay income tax, or take a dividend which comes with tax credits so you only pay the difference between the company tax already paid and personal income tax. So just taking it all as salary is easier.
- alex_suzuki 3y ago
  Here in Switzerland, dividends are better tax-wise than wage, at least if you own a significant chunk of the company („Qualifizierte Betriligung“).
Jhsto 3y ago
Anecdotally relevant to employees too: sometimes companies (and even public organizations like universities) let you keep the hardware they buy for you after it meets the 3 years depreciation rule.
- croemer 3y ago
  Sounds like black hat tax accounting. If it's still worth something after 3 years it would be an in-kind payment which will need to be taxed.
  - TacticalCoder 3y ago
    > Sounds like black hat tax accounting. If it's still worth something after 3 years it would be an in-kind payment which will need to be taxed. Not really black hat though: it's extremely common. In many countries there are specific rules as to how much you can deduce: say 33.33% yearly and after three years it's considered to have a residual value of zero or 20% yearly and after five years it's considered 0. But then: if you play by the rule, by not deducing 100% in a year... After x years it is considered to be worth just that: zero. So even though "it's still worth something", from an accounting point of view it can be worth zero (depending on the item). So you can do whatever you want with it even if it's true value is not zero. You can burn it, stash it, give it away for free. Basically: anything you do with it except specifically sell it is easier from an accounting point of view. Things get a bit more complicated when you cannot deduce 100% over x years but only, say, 60% over x years. Then the company, logically, is supposed to sell the item (laptop, bicycle, car) for 40% of the residual value to the item. For example a friend of mine had his company buy him a 10 K EUR bicycle (no kidding) and after x years (don't remember if it was 3 or 4), he bought the bicycle for himself for 2 K EUR.
    - neop1x 3y ago
      Same in Czechia. The accounting value is 0 but you can't just sell it for free. You have to sell it for the current market value and pay taxes from this income.
    - 3y ago

by wsh 3y ago

tomschwiha 3y ago

Here in Germany its similar, maybe its could be worth for the author to consult a tax consultant as he may be missing out quite some money. Also a wage you pay yourself is usually better off for tax readons - that's why the maximum wage you can pay yourself as business owner is limited.

dazhbog 3y ago
Agree about the accountant, they are expensive in some countries, but usually worth it. Can you elaborate on your last point? For salary you still need to pay >20% income tax + social insurance, and for dividends you still need to pay >20% after you just paid your corporation tax >15%. I'm curious, why its better to pay yourself more, when your laptop, phone and even food can be covered by the company? (Assuming a single founder company, doing everything legally)
- pard68 3y ago
  What is "social insurance"?
  - croemer 3y ago
    Literal translation from a language such as German, French or the like. The right translation would be payroll tax, all sorts of mandatory insurances like health, unemployment, retirement (continental Europe has a few more mandatory items than US)
    - deleted 3y ago
      [deleted]
    - pard68 3y ago
      Ah I see, thanks. I thought it might be the equivalent to our social security tax.
- tomschwiha 3y ago
  It really depends on the percentages, so I can mainly speak about Germany: For example you have a revenue of 100.000. If you have a limited liability company (UG or GmbH in Germany) you pay 30% taxes on the profit, so you have 70.000 left at the end of the year. If you want to transfer it to your personal account you will need to pay additionaly taxes of 25%. So you are left with 52.500. If you directly pay yourself 100.000 as wage it is fully deductable as company expense. So you don't pay any company taxes and would only need to pay income taxes of ~25.000. So a payout as wage you have 75.000 instead of 52.500. For both values at least in Germany you would also need to pay health insurance and possible for pension. (Health insurance at least additional 8.000 - 10.000).
  - tomschwiha 3y ago
    The best would be probably to let the company cover the PC / tablet / phone costs as they are business expenses and payout yourself the remainer as long as long as you can still increase your business operations. A good tip I once got was that you should always try to get money out of your company while you can - having it on your personal bank account is better then in your companies one.
    - gruez 3y ago
      >The best would be probably to let the company cover the PC / tablet / phone costs as they are business expenses Depending on how your local tax codes are structured and how strictly your local tax authority interprets them, letting the company buy the electronics and then subsequently using it for non-business use might count as a fringe benefit and therefore be taxable. In other words, if get your company to buy you a iPhone 15 Pro Max and a 16 MBP Pro with M3 Max, but all you're doing is some light macOS app development, they might (rightly) think that those aren't really being used for business purposes and are actually a sneaky way to remunerate yourself.
- sitharus 3y ago
  I’m always amazed at other country’s tax systems. Here in NZ if you’re a sole trader you only pay personal income tax, if you incorporate you either take the whole profit as income and pay income tax, or take a dividend which comes with tax credits so you only pay the difference between the company tax already paid and personal income tax. So just taking it all as salary is easier.
alex_suzuki 3y ago
Here in Switzerland, dividends are better tax-wise than wage, at least if you own a significant chunk of the company („Qualifizierte Betriligung“).

Jhsto 3y ago

Anecdotally relevant to employees too: sometimes companies (and even public organizations like universities) let you keep the hardware they buy for you after it meets the 3 years depreciation rule.

croemer 3y ago
Sounds like black hat tax accounting. If it's still worth something after 3 years it would be an in-kind payment which will need to be taxed.
- TacticalCoder 3y ago
  > Sounds like black hat tax accounting. If it's still worth something after 3 years it would be an in-kind payment which will need to be taxed. Not really black hat though: it's extremely common. In many countries there are specific rules as to how much you can deduce: say 33.33% yearly and after three years it's considered to have a residual value of zero or 20% yearly and after five years it's considered 0. But then: if you play by the rule, by not deducing 100% in a year... After x years it is considered to be worth just that: zero. So even though "it's still worth something", from an accounting point of view it can be worth zero (depending on the item). So you can do whatever you want with it even if it's true value is not zero. You can burn it, stash it, give it away for free. Basically: anything you do with it except specifically sell it is easier from an accounting point of view. Things get a bit more complicated when you cannot deduce 100% over x years but only, say, 60% over x years. Then the company, logically, is supposed to sell the item (laptop, bicycle, car) for 40% of the residual value to the item. For example a friend of mine had his company buy him a 10 K EUR bicycle (no kidding) and after x years (don't remember if it was 3 or 4), he bought the bicycle for himself for 2 K EUR.
  - neop1x 3y ago
    Same in Czechia. The accounting value is 0 but you can't just sell it for free. You have to sell it for the current market value and pay taxes from this income.
  - 3y ago