I have a day job and in my leisure write a book. When the book is complete, I want to sell it. Thereafter, I will write another book.

The first couple of books will, most likely, be sold at a loss.

But if I continue to write and improve myself as a writer and businessperson, it is possible that eventually one book or the other will be sold at a profit.

In the country where I live (Austria), if you engage in any sort of entrepreneurial activity, you have to

  • be a member of the chamber of commerce (this is mandatory, costs money, and you cannot opt out) and
  • pay substantical "social security" fees which are a complete waste of money, unless you either are severely sick or game the system (if you are more or less healthy, those payments don't give you anything).

For a variety of reasons (incl. aversion to this kind of socialism and instances where the authorities treated me in violation of the law) I want to avoid dealing with those government officials.

Therefore I'm looking for a way to legally

  • spend money for creation of books (e. g. editing, covers, all sorts of advertising),
  • take money from buyers (when a book is sold on Amazon or Smashwords) and other entities (e. g. if I create a video on YouTube and get paid by YouTube) via usual channels (wire transfer, PayPal etc.),
  • avoid paying taxes in a given year, if the expenses in that year are greater than the revenues (e. g. if I spend 2000 Euros for publishing a book, and sold only 1900 Euros worth of book copies),
  • avoid paying money for things I don't need (like those social security fees which force me to pay for the medical bills of people who ruin their health),
  • avoid dealing with Austrian authorities (i. e. I would pay taxes and other fees in another country, not in Austria), and
  • be able to move to another country without re-registering the business entity (i. e. the company stays where it was even if I as its owner move to a different place).

What I want is, basically, to concentrate on my writing and spend as little money, energy, nerves, and time dealing with authorities.

So far I found two options that seem to satisfy the above criteria:

  1. Estonian e-residency
  2. Irish LLC

As far as I know, in both cases I would have to pay something to Austrian authorities because both countries are considered "low tax" countries. But it may still be worthwhile because I would not have to pay the social security fees (correct me, if I'm wrong).

Are there any other options fitting my purposes that I am not aware of?

Notes: You can find plenty of offers for offshore companies. I rejected most of them for two reasons:

  1. They may look suspicious (e. g. an offshore company registered in Belize) and tax authorities may go after me just because it looks illegal (even if it isn't).
  2. The tax code of that country is as complex or more complex than the Austrian one. This applies for all types of offshore companies in the US. That is, the American IRS maybe be as evil as the Austrian authorities.

What is the optimal form of business, if you are living in Austria and want to minimize legal and tax burden?

I am not knowledgeable of Austrian law, but much of what you envision does not seem feasible. Otherwise everyone would do that. Short of relocating to a country that has a more reasonable tax system, you will need to develop expertise in fiscal engineering (or hire a subject-matter expert), and very likely act as a corporation or business (Aktiengesellschaft). The matter of how to "minimize legal burden" is too broad to be addressed in an answer.

If your expenses are greater than your revenues in a fiscal year, then in the period where you end up having profits you are allowed to subtract from your taxable income the reported losses from the "n" most recent periods. This is regardless of whether your tax regime is that of a business or as a self-employed worker.

There are limitations on (1) how much of a previous loss you can subsequently deduct or subtract from taxable profits at once, and (2) for how many years the loss is eligible for subsequent deduction/subtraction.

Another mistaken notion is that one can choose where to pay taxes regardless of the country where one operates or is registered. In reality, one has to pay taxes in the country where one's main operations take place. Even if you as an entity are registered elsewhere, Austrian tax authority would prevail if you don't meet your burden of proving that you resided/operated in that other country for most of the fiscal year. Many countries have signed tax treaties which often involve a commitment to exchange information of entities' transactions.

Lastly, apropos of offshore companies: In the case of the so-called "tax havens", some (or perhaps) all countries of the EU would require you to have resided in that country for "n" years prior to be cognizably adhered to that country's fiscal regime. In tax havens, their tax code is not necessarily more complex than others, but the accounting certainly is, lest detection (for example, by Austrian authorities) would defeat the purpose of resorting to offshore schemes.

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  • Thanks for your answer. Re one has to pay taxes in the country where one's main operations take place: Imagine that most of the revenue of a business comes from selling books in English on Amazon. What is the "main place of operations" in this case? – Franz Drollig Jun 22 '19 at 20:39
  • @FranzDrollig You would be taxed on your worldwide income regardless of whether or not it comes from online. In any case, taxation of online purchases has to do with VAT (Value Added Tax) and affects customers. VAT is independent from income tax, and you as a seller/author would be subject to income tax. – Iñaki Viggers Jun 22 '19 at 21:29

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