Registering as a Self-Employed Professional in the EU

Until recently, most UI/UX designers, developers, and other IT specialists preferred working as freelancers. Others were employed by large companies offering software development services.

However, this trend is changing. More and more IT professionals are now choosing to start their own businesses by registering as individual entrepreneurs.

Which European jurisdiction is the most convenient and profitable for this? What benefits can you gain from registering as an individual entrepreneur for IT in the EU? Discover the answers to these and other essential questions in our article.

Why Register as a Self-Employed Individual

If you’re still posting ads on freelance platforms or working for a local IT monopoly, losing out on potential earnings, it’s time to take a bold step in your career. The first step in this direction is to alter your employment status by registering as a sole trader.

Here’s a brief overview of the opportunities that this move can unlock:

• Flexibility and Full Autonomy. By registering as an individual entrepreneur, you gain the ability to set your own schedule, make collaboration decisions, and control your earnings.
• Tax Benefits. Some countries offer adaptable tax systems for self-employed individuals, enabling you to conserve funds and start your business with a minimal investment.
• Unlimited Earning Potential. You can continuously enhance your skills and take on ambitious projects to increase your earnings, providing you with more opportunities than a salaried position.
• Scaling Opportunities. Owning your own company allows you to expand your services, implement new technologies, and adjust your workload by hiring staff.
• Brand Promotion. Officially registering your business gives you the right to create and promote your own brand. Launch effective marketing campaigns to attract potential clients and boost your profits.

If you decide to register as a self-employed individual, the European Union offers excellent options. In the following section, we’ll discuss which jurisdictions provide a simple registration process and favorable conditions.

Top European Countries for IT Sole Trader Registration

Each EU country has its own requirements for individuals wishing to register as a sole trader for IT. To select the country that best suits your needs and the demands of your business, it’s advisable to consult with a legal expert. Here, we offer an overview of European countries that are particularly favorable to self-employed individuals.

Poland

Establishing a business in Poland is a favored choice among IT professionals. Forming a sole proprietorship, known as jednoosobowa działalność gospodarcza (JDG), is favored because of the simple online registration process, the confidence Polish banks have in foreign clients, and the minimal regulatory scrutiny.

Requirements for Doing Business in Poland

• Confirm the legality of your stay in the country. You might hold a permanent residence permit (either in Poland or another EU country), a temporary residence permit, or a Polish Card, which verifies your Polish heritage.
• Acquire a PESEL or NIP number. The PESEL, a personal identification number, is accessible to foreigners only if they hold resident status or a permanent residence permit. The latter, a taxpayer identification number, is required for all non-residents wishing to register a JDG for tax purposes.
• Choose the correct business activity code (PKD). The most common PKDs for the IT sector include:
  • 62.01.Z – software development;
  • 62/02/Z – IT consulting;
  • 62/03/Z – IT systems management.
• Register your business in the CEIDG registry. To enter your personal details into the CEIDG, you must provide your passport, identification number, business address in Poland, and PKD codes. Additional documents, such as proof of residence, may be required.
• Register as a VAT payer. This requirement applies to all entrepreneurs whose annual income exceeds 200,000 PLN or whose activities involve cross-border operations.

Tax System

• Personal Income Tax (PIT). Sole traders can choose from three income tax payment options:
  1. Progressive Rate. If your income does not exceed 120,000 PLN, the tax rate is 17%. If it exceeds this amount, the rate increases to 32%.
  2. Flat-Rate Tax. This option offers a fixed tax rate of 19% regardless of income. However, it excludes eligibility for tax deductions.
  3. Lump-Sum on Registered Income. This option is available to small businesses with an annual income of up to 2 million PLN. The tax rate for the IT sector is 8.5%. To qualify for this tax model, the business must meet certain criteria.

• Value Added Tax (VAT). The standard VAT rate in Poland is 23%.
• Social Insurance Contributions. Even with low income, sole traders in Poland must make minimum contributions to social security and health insurance. However, JDGs can benefit from tax breaks, including exemptions from certain contributions like social security, the Labor Fund, and the Solidarity Fund, for the first two years of operation.

Slovakia

Another great choice for IT professionals is to establish a company in Slovakia. This country is also favorable to small businesses, offering tax breaks and minimal requirements for applicants.

Conditions for Registering as a Sole Trader

• Submit the complete document package. This includes a foreign passport or Slovak residence permit card and a criminal record certificate. You will also need a residence permit or visa that permits you to live and work in Slovakia.
• Choose a business activity classification code (SK NACE). The main codes for IT include:
  • 62.01 – software development;
  • 62.02 – IT consulting;
  • 62.03 – data processing.

• Acquire a DIČ (Tax Identification Number) by visiting the Financial Administration office with your identification, proof of address, and business registration documents.
• Register with the Social Insurance Agency: This is necessary for making mandatory social security and health insurance contributions.
• Register as a VAT payer: This is a mandatory requirement for entrepreneurs whose annual turnover exceeds €49,790.

Tax System

• Personal Income Tax (PIT). The specifics of income tax payment in Slovakia are as follows:
  1. Sole traders are subject to PIT at a progressive rate. If income does not exceed €49,790, the rate is 19%. If it exceeds this amount, the rate is 25%.
  2. Business expenses can be subtracted from your total income.
  3. There is an alternative tax system with a fixed rate of 15%, but it is only applicable to companies with an annual income of up to €100,000.

• Value Added Tax (VAT). IT services in Slovakia are taxed at the standard rate of 20%.
• Social Insurance Contributions. These contributions are mandatory, and their amount depends on the declared income.

Romania

Alongside other European countries, Romania is a popular choice for programmers, designers, and testers looking to register a business.

Requirements for Registering a Sole Proprietorship

• Verify Legal Residency. You must prove your legal residency in the country, which can be done in two ways: by providing a work visa or a special residence permit for business purposes.
• Determine Business Activity Code (CAEN). The main codes for IT professionals in Romania are:
  • 6201 – software development;
  • 6202 – IT consulting;
  • 6311 – data processing.
• Register Your Business. You will need to get in touch with the National Trade Register Office (ONRC) and provide identification, proof of address, and any additional documents specific to your business type.
• Obtain a Tax Identification Number (CIF). This step is automatically completed upon registration with the ONRC.
• Register as a VAT Payer. This is mandatory for businesses with an annual turnover exceeding €88,500. Applications for a VAT number can be submitted to the National Agency for Fiscal Administration (ANAF).

Tax System

• Personal Income Tax (PIT). Key features of income tax in Romania include:
  • Self-employed individuals are subject to a flat PIT rate of 10%.
  • The tax base is calculated as total income minus allowable business expenses.
  • Microenterprises with a turnover of less than €1 million may opt for a simplified PIT system with a tax rate of 1% or 3%, depending on whether they have employees.
• Value Added Tax (VAT). IT professionals operating as sole proprietors are subject to the standard VAT rate of 19%.
• Social Insurance Contributions: Contributions for health insurance and social security are mandatory, calculated as a percentage of declared income or based on a minimum amount stipulated by law.

Note: Romania offers tax incentives to businesses participating in innovative projects. Your activities as an IT specialist might make you eligible for these benefits.

Portugal

Many IT professionals are interested in opening a company in Portugal due to its favorable tax system and minimal documentation requirements.

Requirements for Sole Proprietorship Registration in Portugal

• OObtain Residency and Work Permits. Similar to other EU countries, Portugal requires either a residence permit or a work visa.
• Determine Business Activity Code (CAE). Common CAE codes for the IT sector include:
  • 6201 – software development;
  • 6202 – IT consulting;
  • 6311 – data processing.
• Obtain a Tax Identification Number (NIF). This is necessary for all tax-related matters. To obtain it, you must present identification and proof of residence.
• Register with the Tax Office as a Self-Employed Individual. Submit your identification, proof of residence, and evidence of your qualifications and business activity to the local tax office.
• Register with Social Security. This is crucial for making contributions to pension, unemployment, and health insurance.
• Register as a VAT Payer. This is mandatory if your annual turnover exceeds €12,500.

Tax System

• Personal Income Tax (IRS).
  • If you intend to register as a sole proprietor in Portugal, be mindful of the progressive income tax rates, which range from 14.5% to 48% based on your income level.
  • The tax base is determined by subtracting business expenses from total income.
  •  If your annual turnover does not exceed €200,000, you may qualify for a simplified tax regime with a fixed rate of 15%.
• Value Added Tax (VAT). The standard VAT rate in Portugal, which applies to the IT sector, is 23%.
• Social Security Contributions. Social security and health insurance contributions are compulsory, and their amount is based on your income.

Estonia

If you are still deciding where to establish your business, consider opening a company in Estonia. The process of handling all the required formalities here is both swift and relatively simple.

Requirements for Registering as a Sole Trader

• Establish legal residency by providing a residence permit or visa to confirm your right to live and work in Estonia.
• Identify your business activity code (EMTAK): For the IT sector, consider the following EMTAK codes:
  • 62.01 – software development;
  • 62.02 – IT consulting;
  • 63.11 – data processing and hosting.
• Obtain a Personal Identification Code (PIC): This is required for business registration and handling various administrative matters.
• Officially register your business: This can be done online through the Company Registration Portal or in person.
• Register as a VAT payer: This is necessary if your annual turnover exceeds €40,000.
• Register with the Social Insurance Board: Once registered, you can start making the required contributions for pensions, health insurance, and unemployment insurance.

Tax System

• Personal Income Tax. Important aspects of income taxation in Estonia are:
  • A flat rate of 20%, which applies to sole traders as well.
  • When calculating the tax base, business expenses are deducted from the total income.
  • According to the dividend taxation law, a sole trader’s profit is taxed when it is withdrawn.
• Value Added Tax (VAT). The standard VAT rate in Estonia is 20%, applicable to the IT sector as well.
• Social Insurance Contributions. The social tax is 33% of your income, covering contributions for health and pension insurance. Additionally, contributions for unemployment insurance are required.

We hope this detailed guide on the conditions for registering as a sole trader for IT in the EU helps you choose the best jurisdiction for your business. Let’s explore the advantages your business can enjoy by establishing itself in a European country.

Benefits of Registering as a Self-Employed Person in the EU

By operating as a self-employed person in EU countries, you gain several advantages:

1. Access to a broad target audience: Registering a company in one of the EU member states provides access to the customer base across all EU countries.
2. Legal protection: You can rely on European regulations that ensure fairness, non-discrimination, and business protection throughout the EU.
3. Access to funding: A self-employed individual registered in the EU can apply for subsidies, grants, and funding programs to scale their business.
4. Favorable tax systems: Many European countries offer tax incentives and deductions for self-employed individuals, significantly reducing expenses.
5. Reliable social security: Mandatory contributions for health insurance and social security in EU countries guarantee robust social protection, which is beneficial for self-employed individuals.

Steps to Register as an Entrepreneur

To establish a company in EU countries, follow these steps:

Initial Consultation with Us

For a smooth and fast registration process as an individual entrepreneur in the EU, you need qualified legal assistance. By contacting the experts at Lawrange, you can expect comprehensive consultation and support in all matters related to business registration.

Selecting a Business Name

Come up with and register a unique company name that reflects the essence of your activity. In many countries, it must include the entrepreneur’s name. For example, “John Richards Development” is an acceptable name. Be sure to consult with a specialist to avoid any problems with name registration.

Preparing All Necessary Documents

You will need:

• ID;
• proof of residence;
• proof of legal residency and work authorization in the country;
• business plan and activity code;
• taxpayer identification number;
• social security number or proof of registration in the social security system;
• additional documents as required by local registration authorities.

Opening a Business Bank Account

While not legally required in the EU, it is highly recommended to open a separate business bank account for your own benefit.

It assists in keeping personal and business finances separate, streamlines accounting and tax reporting, and boosts your company’s credibility with clients.

Required documents for opening an account include:

• passport or national ID;
• proof of address;
• evidence of business activity (registration certificate, licenses, business plan, etc.);
• taxpayer identification number;
• proof of income;
• bank reference letter to confirm financial standing and banking history;
• visa or residence permit;
• other documents as required by the bank.

Opening an account in a foreign bank is easier with the assistance of Lawrange professionals — we help with document preparation and communications.

Why Choose Lawrange for Your Registration Needs

The Lawrange team is your reliable guide in the legal world. Our expertise covers various aspects of business registration, including document preparation, communication with local regulatory bodies, opening bank accounts, and more.

You can trust us because Lawrange offers:

• Extensive experience in legal practice.
• A personalized approach to each client.
• Guaranteed results.
• Support throughout the entire registration process.

Contact our specialists, and soon you’ll be legally providing IT services in the promising European market.

Conclusion

Registering as a sole trader for IT in the EU offers numerous advantages. You unlock access to a large European audience, qualify for various funding programs, and enjoy potential tax advantages, among other benefits. To turn these opportunities into reality, reach out to Lawrange. With our help, the registration process will be smooth and straightforward.

FAQ

What is the minimum age required to start a business?

In most EU countries, you must be at least 18 years old—the age of legal majority — to start a business. However, in some countries, minors can register a business with parental, guardian, or court approval.

What is My Personal Liability as a Sole Trader?

As a sole trader, you have unlimited personal liability for any debts and obligations resulting from your business activities.

Is it necessary for self-employed individuals to have a separate bank account?

Although not required, it is strongly advised to open a separate account for your sole proprietorship. It aids in distinguishing personal from business finances, streamlines accounting and tax reporting, and boosts your credibility with clients.

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