A proper illustration is required to paint the full picture of using a service complying with EU law. For example, a German company decides to hire a freelancer from Bosnia. To legally avoid tax agent status, the German team signs a B2B service contract with the platform and sends them an amount of money. The amount includes the money to be sent to freelancers and the commission of 3-8% charged by the platform. After the freelancer completes their tasks, the platform sends money to them.
The freelancer pays income tax on their own in accordance with their local laws. At the end of a transaction, the client (i.e. the German company) receives all closing documents. Thus, the team optimizes their payroll costs, and freelancers get a chance to legally declare their income.
In the EU a unified codebase has been established to manage indirect taxation. If the mediating service is registered in the region, then its digital payment solutions help its users optimize VAT as well. This indirect tax is not incurred as payment is facilitated between the EU residents.
To summarize, utilizing a mediating platform like the ones discussed has the following peculiarities:
- Freelance workers receive money online.
- Mass payment is available which is particularly relevant for larger companies with numerous remote teams.
- To start the payment process, money needs to be added to a company’s account on the platform. From there, it will be automatically distributed across teams.
- Hiring teams doesn’t require individual contracts. A single B2B contract with the platform replaces all other contracts with freelancers.
- Closing documents are generated automatically and sent to a user’s personal account for every payment.
- Additional savings on payrolls, salaries and taxes are in place, as a team of accountants is no longer needed to manage payments.
- Currency control and exchange rates do not halt payments to freelancers outside of the EU.
- The platform accepts money top ups in multiple currencies and sends money to freelancers, free of a bank commission.
Overall, the mediating service streamlines payment processes. Remote teams receive money in full on time. This reinforces trust between the management and teams. In turn, accounting and management routines, now delegated to a service, do not distract founders from working towards their strategic business goals. https://medium.com/@easystaff/digital-solutions-to-help-it-business-optimize-taxes-93da95d2f0e0