Flat Tax - please to esplain?

[Martinus]

Yet again Marti gives us pause to take his claim to be a lawyer seriously.

I wish my personal law corporation could just buy everything I need in my personal life.  But who knows maybe that is the way things work in Poland.

I seem to recall Marty mentioning he did something with Maritime law, so everything he says about law may be true, but only at sea.  Then again, he might simply be a Sea Lawyer, which isn't really a type of lawyer. http://www.merriam-webster.com/dictionary/sea%20lawyer and thus our confusion.

I try to be nice to you but you are a retarded idiot. I never claimed any connection to maritime law.

[Martinus]

Not really. There is a host of reasons/things at work here.

You could spend company money of your 100% owned company for personal stuff (e.g. companies can buy houses, cars, food etc.) and noone can do a shit.

Self-employed people need to be as competitive as companies, and thus cannot be taxed more. So you just go into self-employment and sell services to your former employer, as opposed to be an employee - voila, you pay a corporate income tax rate!

Both of those workarounds seem like not workarounds at all, at least if my vague understanding of US corporate laws is correct.  AFAIK, you can't use corporate assets for personal use, in any guise.

I'm not a lawyer in any country, but know that in the US if you comingle personal and corporate assets you are just asking for the liability protections of the corporations to be disregarded, and that if you try to deduct personal expenses through a corporation you will end up in big trouble with the IRS if you get caught. So when Marty says "noone can do shit", noone is excluding the judicial system, the IRS, and law enforcement. But beyond those groups, I think Marty is basically correct. For example, a baker can't do anything about tax evasion or fraud without them.

Also, in the US (and I'm guessing this might be different in Poland), if you are a contractor to a company you will pay at a personal tax rate in almost every circumstance.

I am a Pole responding to a German. Why the fuck would you think my post has anything to do with US tax laws???

[Martinus]

Not really. There is a host of reasons/things at work here.

You could spend company money of your 100% owned company for personal stuff (e.g. companies can buy houses, cars, food etc.) and noone can do a shit.

Self-employed people need to be as competitive as companies, and thus cannot be taxed more. So you just go into self-employment and sell services to your former employer, as opposed to be an employee - voila, you pay a corporate income tax rate!

Both of those workarounds seem like not workarounds at all, at least if my vague understanding of US corporate laws is correct.  AFAIK, you can't use corporate assets for personal use, in any guise.

I am a Pole responding to a German. Why the fuck would you think my post has anything to do with US tax laws???

[Zanza]

I am far from an expert on tax law here (only had a single class at uni on it and beyond that only know what's necessary for a small employee with little assets) so I don't know exactly how it works, but here is how I think it works: 

We basically have two types of businesses: a) a "personal" type where you are liable with your entire assets and can use business assets for whatever you like and b) a "corporation" where you have limited liability but the money isn't yours, but belongs to the company.

Tax-wise this difference also matters. While "personal" companies are taxed with personal income tax (progressive, up to about 45%), corporations are taxed with the corporate tax rate (flat, about 17-20%). However, when you take money out of a corporation for private use, you have to pay taxes on that (flat, 25%).

The idea is that it shouldn't matter tax-wise whether you organise your business as a corporation or a personal company as both are taxed similarly.

You can't directly use a corporation to pay your house or other private consumption. That's always considered taking money out and thus you have to pay taxes on it. If you don't, that's tax evasion of course.

So I think our system is somewhat similar to the American one.

[DGuller]

Any country with developed corporate laws should be the same in that regard.  Transfer of money between limited liability corporations and individuals is a pretty fundamental issue to the whole concept of having a corporation.

[Gups]

You can't directly use a corporation to pay your house or other private consumption. That's always considered taking money out and thus you have to pay taxes on it. If you don't, that's tax evasion of course.

So I think our system is somewhat similar to the American one.

As is the UK's. I bet Poland's is as well.

It's true that people try to game the sytsem, claiming tax fares, food and petrol on expenses etc but Marti is exagerrating hugely or is talking out of his arse.

[Zanza]

So you just go into self-employment and sell services to your former employer, as opposed to be an employee - voila, you pay a corporate income tax rate!

That's not possible under our laws. If you are "pseudo self-employed" (there are several criteria to check that, e.g. >5/6 of revenue from one source), you and your de facto employer have to pay the same payroll taxes and social security contributions as for a regular employee.

And self-employed people here generally have to pay the same personal income taxes as everybody else. Why wouldn't they? It wouldn't be fair to tax employees different from self-employed people. The only type of income that is taxed differently is that from capital gains because it was taxed before (e.g. with corporate taxes or with your personal income tax when you earned the principal).

[Martinus]

Well, in Poland you cannot be "pseudo-self employed" either but this is decided not by your income structure, but rather the nature of your work. If you have to work from 9 to 5 and are supervised, this technically makes you ineligible for self-employment, but if you have a more independent position, you can.

An example in Poland is lawyers - most of my colleagues (including myself) are self employed and only have consultancy agreements with bigger lawfirms. We conduct our own accounting, formally hire secretaries, sub-lease our office space and whatnot. We also lack protections of an employment contract (for example, women who plan to have children, often stay on employment, as this gives them maternity leave rights). In return, we pay a flat 19% income tax rate (as opposed to the progressive tax rate employed people pay) and can deduct VAT, as well as consider tax-deductible costs any purchases which can be shown to relate to our work (e.g. a laptop, or a mobile phone, or a car).

So yeah, I guess all your comments about me being a shitty lawyer can be understood as whines that you cannot pay a 19% flat tax on your income in your silly jurisdictions. 

[Martinus]

You can't directly use a corporation to pay your house or other private consumption. That's always considered taking money out and thus you have to pay taxes on it. If you don't, that's tax evasion of course.

So I think our system is somewhat similar to the American one.

As is the UK's. I bet Poland's is as well.

It's true that people try to game the sytsem, claiming tax fares, food and petrol on expenses etc but Marti is exagerrating hugely or is talking out of his arse.

Well, I exaggerated a bit, but you can for example buy a company car for the CEO - he has to then pay an income tax on its use, but this is obviously much smaller than if you just "gave" the car to him (or paid him the money to buy it). And the company can deduct the car as a cost. Likewise many companies buy real property to be used e.g. as flats for their CEOs - again he would pay tax on the "rent" value he gets that way, but it is smaller than if he just had to buy the flat out of his pocket.

It is not that hard to game the system.

[Grey Fox]

Well, in Poland you cannot be "pseudo-self employed" either but this is decided not by your income structure, but rather the nature of your work. If you have to work from 9 to 5 and are supervised, this technically makes you ineligible for self-employment, but if you have a more independent position, you can.

An example in Poland is lawyers - most of my colleagues (including myself) are self employed and only have consultancy agreements with bigger lawfirms. We conduct our own accounting, formally hire secretaries, sub-lease our office space and whatnot. We also lack protections of an employment contract (for example, women who plan to have children, often stay on employment, as this gives them maternity leave rights). In return, we pay a flat 19% income tax rate (as opposed to the progressive tax rate employed people pay) and can deduct VAT, as well as consider tax-deductible costs any purchases which can be shown to relate to our work (e.g. a laptop, or a mobile phone, or a car).

So yeah, I guess all your comments about me being a shitty lawyer can be understood as whines that you cannot pay a 19% flat tax on your income in your silly jurisdictions. 

Warren Buffet hates you & thinks you are the problem.

[MadImmortalMan]

I think uncle Warren would like to sell Marty some insurance. He needs the business now that all his banks are getting downgraded.

[Sheilbh]

Well no. A corporation is owned by people, so if you tax corporate earnings and then tax personal earnings again, you have created a disincentive to create a corporate business structure, and an incentive to remove wealth from the corporate form. Western countries typically have structures that large businesses with multiple investors can operate as so that they avoid corporate taxation.

Yeah, sorry I phrased that really badly.  It was some particular method Australians tax personal income from a business.  The way they assess tax isn't really done anywhere else in the world and theoretically leads to distortions (something to do with property I think).  The Kiwis want to get rid of it because of that, but practically speaking can't because they're so interlinked with Australia.  So they're aligning top rates to try and minimise the distortions.

[Razgovory]

I try to be nice to you but you are a retarded idiot. I never claimed any connection to maritime law.

Okay, fine.  I'll go with "not a lawyer at all".

[Ideologue]

Well, in Poland you cannot be "pseudo-self employed" either but this is decided not by your income structure, but rather the nature of your work. If you have to work from 9 to 5 and are supervised, this technically makes you ineligible for self-employment, but if you have a more independent position, you can.

An example in Poland is lawyers - most of my colleagues (including myself) are self employed and only have consultancy agreements with bigger lawfirms. We conduct our own accounting, formally hire secretaries, sub-lease our office space and whatnot. We also lack protections of an employment contract (for example, women who plan to have children, often stay on employment, as this gives them maternity leave rights). In return, we pay a flat 19% income tax rate (as opposed to the progressive tax rate employed people pay) and can deduct VAT, as well as consider tax-deductible costs any purchases which can be shown to relate to our work (e.g. a laptop, or a mobile phone, or a car).

So yeah, I guess all your comments about me being a shitty lawyer can be understood as whines that you cannot pay a 19% flat tax on your income in your silly jurisdictions. 

Warren Buffet hates you & thinks you are the problem.

No shit?  19% tax rate on an income over $100k, with deductions for his fucking computer?  Poland: hellhole.

[Martinus]

Well, in Poland you cannot be "pseudo-self employed" either but this is decided not by your income structure, but rather the nature of your work. If you have to work from 9 to 5 and are supervised, this technically makes you ineligible for self-employment, but if you have a more independent position, you can.

An example in Poland is lawyers - most of my colleagues (including myself) are self employed and only have consultancy agreements with bigger lawfirms. We conduct our own accounting, formally hire secretaries, sub-lease our office space and whatnot. We also lack protections of an employment contract (for example, women who plan to have children, often stay on employment, as this gives them maternity leave rights). In return, we pay a flat 19% income tax rate (as opposed to the progressive tax rate employed people pay) and can deduct VAT, as well as consider tax-deductible costs any purchases which can be shown to relate to our work (e.g. a laptop, or a mobile phone, or a car).

So yeah, I guess all your comments about me being a shitty lawyer can be understood as whines that you cannot pay a 19% flat tax on your income in your silly jurisdictions. 

Warren Buffet hates you & thinks you are the problem.

No shit?  19% tax rate on an income over $100k, with deductions for his fucking computer?  Poland: hellhole.

Better to rule in hell than pay high taxes in heaven.