Self-Employed vs Company Abroad: Tax Basics for Remote Workers

As your freelance income grows, the question comes up sooner or later: should I keep working as a self-employed person (a sole trader, autónomo, freelancer) or set up a company? And if you work remotely for international clients, should that company be in your country or somewhere else?

This guide explains the tax mechanics behind each option in plain language: how profits are taxed, how you take money out, what it costs to run and the cross-border rules that decide whether a foreign company helps at all. If you are specifically considering a company in another country, read it together with should you register a company abroad as a freelancer?.

The short answer

• Self-employed: your business profit is your personal income. Simple and cheap, but taxed at your personal rates, usually progressive.
• Company: the company pays corporate tax on its profit, and you pay personal tax again when you take money out as salary or dividends. It can be more efficient at higher incomes, but it costs more to run.
• A foreign company does not escape tax in your country of residence just because it is registered elsewhere. Rules on management and control, permanent establishment and controlled foreign companies often bring the profit back into your home country’s tax net.
• The right answer depends on your income level, your country’s rates, social security rules and running costs. Model it with real numbers before deciding.

How self-employment is taxed

As a self-employed person:

• your revenue minus allowable expenses is your taxable business profit;
• that profit is taxed as your personal income, usually at progressive rates;
• you usually pay social security contributions as a self-employed person, either a fixed amount or a percentage of profit;
• you may need to make advance or quarterly payments.

Advantages: low setup and running costs, simple accounting, easy to start and stop, money in the business is already yours.

Disadvantages: high personal rates once your income grows, unlimited personal liability for business debts in most countries, and sometimes less credibility with larger clients.

How a company is taxed

With a company, there are two levels:

1. The company pays corporate income tax on its profit (revenue minus expenses, including any salary it pays you).
2. You pay personal tax on what you take out:
   • as salary: taxed as employment income, usually with employer and employee social contributions;
   • as dividends: paid from after-tax profit and taxed again at your personal dividend rates.

Profit you leave in the company is only taxed at the corporate rate until you take it out. That is where companies can be efficient: if you do not need all the income now, you can reinvest or accumulate it at a lower rate.

Worked example (illustrative rates)

Imagine a profit of 80,000 before paying yourself, and these simplified rates: personal income tax effectively 35% at this income level, corporate tax 20%, dividend tax 20%. Social security is ignored for simplicity, though in reality it can change the result a lot.

	Self-employed	Company, all profit paid as dividends	Company, half kept in the company
Corporate tax	0	16,000	16,000
Personal tax	28,000	12,800 (on 64,000 dividend)	6,400 (on 32,000 dividend)
Total tax this year	28,000	28,800	22,400
Money in your pocket	52,000	51,200	25,600 (+ 32,000 kept in company)

In this example the company is not cheaper if you take everything out, and only defers tax if you leave money inside. Add accounting costs, and the self-employed route may win at this level. With other rates, or with social security included, the result can flip. That is why you need your own numbers.

Running costs and obligations

A company usually means:

• setup costs: registration, notary or legal fees, sometimes minimum share capital;
• annual accounts and corporate tax returns, often with an accountant;
• payroll if you pay yourself a salary;
• separate bank account and stricter separation of personal and business money;
• publication duties in some countries (filing accounts publicly).

Budget realistically: for a small company, professional accounting alone often costs a significant amount each year, and that has to be covered by any tax saving.

The cross-border rules that matter

If you are thinking of a company in another country, three concepts decide whether it changes your tax at all.

1. Place of effective management

Many countries consider a company resident where it is managed and controlled. If you run your foreign company alone, from a laptop in your home country, that country may treat the company as resident there and tax its profits, regardless of where it was registered.

2. Permanent establishment

Even if the company remains resident abroad, the work you do from your country can create a permanent establishment of the company there, making the profit from that work taxable locally.

3. Controlled foreign company (CFC) rules

Many countries have CFC rules that tax residents on the profits of foreign companies they control if those profits are lightly taxed abroad. The EU requires member states to have such rules.

There is also the question of how the company is taxed in the country where it is registered. A US LLC with a single foreign owner is, by default, a “disregarded entity” for US tax, which means it is usually not taxed in the US on profits from work done outside the US, but your home country may see it as transparent or as a company, with very different results. See the IRS page on the limited liability company.

Social security: often the deciding factor

Social security contributions can be larger than income tax at moderate income levels, and they work differently for self-employed people and company directors. Within the EU, social security usually follows where you work. Check:

• what self-employed contributions you pay and what they cover (healthcare, pension, sick pay);
• how directors’ salaries are treated;
• whether lower contributions also mean lower pension and benefits later.

Questions to answer before you decide

1. What is my profit now, and what will it be in two to three years?
2. How much do I need to take out each year, and how much could stay in the business?
3. What are the personal, corporate and dividend rates in my country of residence?
4. What are social security costs in each structure, and what do I get for them?
5. What will accounting and compliance cost each year?
6. Do I need limited liability for the kind of work I do?
7. If a foreign company: where would it be managed, could it create a permanent establishment, and do CFC rules apply?

Common mistakes to avoid

• Setting up a company only because “everyone says it saves tax”.
• Choosing a foreign company to avoid home tax while living and working at home.
• Ignoring social security in the comparison.
• Mixing personal and company money, which can create tax problems and weaken liability protection.
• Forgetting the exit: closing a company has costs and tax consequences too.

Frequently asked questions

At what income does a company make sense?

There is no universal number. It depends on your country’s rates, social security and how much profit you can leave in the company. Model both options with your real figures.

Is a company always better for liability?

A company usually limits liability for business debts, but personal guarantees, director duties and mixing funds can reduce that protection. Professional liability insurance may matter more for many freelancers.

Can I run a foreign company while living in my home country?

You can, but your home country may consider the company resident there or taxable there through a permanent establishment, and CFC rules may apply. Get advice first.

Do clients prefer to work with companies?

Some larger clients prefer or require a company. Many are happy to work with self-employed contractors with proper invoices and contracts.

Final thoughts

The choice between self-employment and a company is a numbers question first and a structure question second. Start from your actual profit, include social security and running costs, and be realistic about the cross-border rules before looking abroad. With the numbers in front of you, an advisor can confirm the choice in an hour. See when to hire an international tax advisor.

This article is general information, not tax, legal or financial advice. Rates in examples are illustrative. Rules change and vary by country. Information reviewed October 23, 2026.