Hire my sister to decrese the TMI's tax?

sabrina_fi · Post by **sabrina_fi** » Thu Jan 17, 2013 1:09 pm

My brother is unemployed for half a year.
I was told before I can hire him if I want get the deduction or at lease decrease my TMI's incoming tax.

But today after discussing with my bookkeeper, I found it is difficult.
For example, if I set his salary as 1500 euro, I need to pay 30% in total for tax (20%), insurance (7%), pension (18%) and 2% sth. else. At meanwhile, my brother needs to pay tax, pension.... from his side.
While the TMi's incoming tax is around 30% if my profit reachs 40,000 a year.

Shall I hire him or not? Is there some way to deduct TMI's tax? I know in UK, the tax is deductable if they donate.....

**Sponsor:**

Pursuivant · Post by **Pursuivant** » Thu Jan 17, 2013 3:31 pm

Is there some way to deduct TMI's tax?

You buy stuff on company account, which you use for "business". Then again if you get tax audited, tough luck trying to convince the 52" plasma screen is just a monitor...

Rosamunda · Post by **Rosamunda** » Thu Jan 17, 2013 3:42 pm

If your turnover is really that big you should seriously consider moving to an Oy. Your bookkeeper should be able to help you on that. There is no magic number but I have heard more than one bookkeeper say that the threshold for tax optimisation (TMI versus Oy) is around 35k€. It depends on lots of things - and I have no idea what kind of business you are in - but basically, as a TMI, you are taxed in more or less the same way as a salaried private person. So yes, once the money starts coming in the (progressive) tax burden gets heavier. Company tax is a flat rate.

sabrina_fi · Post by **sabrina_fi** » Thu Jan 17, 2013 5:03 pm

Thanks Rosamunda,
2 months ago, I have discussed with my bookkepper about the oy thing. I had thought is quite easy to *move TMI to Oy*, but it seems not. Bookkeeper said I have to close my TMI first and open a new OY.
Of course I can keep the TMI alive and run the business under Oy.

Thanks for telling me that 35k is the threshold. Is 35k the turn over or it is after all the tax(including the coming tax?)

What about Ky? Is Ky as easy to open as TMI but have the same tax rate as the Oy?

Mook · Post by **Mook** » Thu Jan 17, 2013 5:22 pm

Can't the OY (or KY or AY) just hire the TMI to do the work?

Upphew · Post by **Upphew** » Thu Jan 17, 2013 6:11 pm

Mook wrote:Can't the OY (or KY or AY) just hire the TMI to do the work?

Yes, but if the tmi has only one client the taxman will say: "no company, job"

Pursuivant · Post by **Pursuivant** » Thu Jan 17, 2013 7:24 pm

I had thought is quite easy to *move TMI to Oy*, but it seems not. Bookkeeper said I have to close my TMI first and open a new OY.

Well, that *is* easy. What you do is establish an OY, then employ yourself in the OY (you now know your expenses) and put the TMI out to dry. If your financial year is a calendar year you'll have to run 2 businesses for 2013, but its not that big a deal. KY or AY require more or less the same process. AY is stupid, because you are personally liable for everything like with a TMI, so Oy. Or if you're really creative, get an Estonian Ou

cors187 · Post by **cors187** » Fri Jan 18, 2013 12:55 am

sabrina_fi wrote:My brother is unemployed for half a year.
I was told before I can hire him if I want get the deduction or at lease decrease my TMI's incoming tax.

In most cases employees make money for you , so this case your brother makes you more money, end result is more profits to be taxed.

Tax is tax , rich people pay more tax even after they try to put money back into their business.you need a tax guy , not a book keeper, a tax guy can come up with all sorts of transactions and ways to spend money.
If you tell us you general business framework , i am sure you get a few good ideas about this area.
You just have to remember that if your being taxed on 50,000 profit , then buy spending a fast 20,000 on your business as costs , your now being taxed on 30,000 profit.

the costs just need to be legal deductions, they dont need to qualify for a good idea , or good business expenditure , just legally acceptable ,which means you do have some options.I cases like this your tax guy might show you some formulas that has a certain % of you 50,000 profit,in both formulas this certain % numbers can either be paid to the taxman or be spent on your business , the outcome profit that you take in your pocket is almost identical.So it makes sense to spend that % on your business.

cors187 · Post by **cors187** » Fri Jan 18, 2013 12:57 am

Upphew wrote:
Mook wrote:Can't the OY (or KY or AY) just hire the TMI to do the work?
Yes, but if the tmi has only one client the taxman will say: "no company, job"

can you expound this sentence further into a working example?

rinso · Post by **rinso** » Fri Jan 18, 2013 7:53 am

You just have to remember that if your being taxed on 50,000 profit , then buy spending a fast 20,000 on your business as costs , your now being taxed on 30,000 profit.

Not completely true. Many capital purchases cannot be deducted 100% in one year, but the deduction has to be spread over several years.

Mook · Post by **Mook** » Fri Jan 18, 2013 10:32 am

Pursuivant wrote: AY is stupid, because you are personally liable for everything like with a TMI

but there's a lot less reporting to do and a lot more flexibility.

AY is the same as KY, except that it's shared between several people. AY is good for, say, married couples..

Upphew · Post by **Upphew** » Fri Jan 18, 2013 11:21 am

cors187 wrote:
Upphew wrote:
Mook wrote:Can't the OY (or KY or AY) just hire the TMI to do the work?
Yes, but if the tmi has only one client the taxman will say: "no company, job"
can you expound this sentence further into a working example?

http://www.vero.fi/fi-FI/Syventavat_ver ... 2810126%29
So you either pay wages or pay for work. If the company has only one worker, no investments and the only client is you and you tell what to do, then the taxman can decide that the company is created only to cheat taxman -> you didn't pay for work, you paid wages, start to pay the other stuff too.

Rosamunda · Post by **Rosamunda** » Fri Jan 18, 2013 1:09 pm

The original poster did not say that he/she has only one customer... that was "assumed" by some of the other posters.

But there is some tolerance. If you have a limited company you may have multiple customers over a longer time period. Eg if you do project work such as design projects, you may have only one customer at any point in time but when one project is finished you look for a new customer.

But the rule that Upphew is referring to, does concern all businesses, not just TMIs. It was reinforced a few years ago after a lot of professionals (eg doctors, dentists) became Oy and then invoiced one customer (eg a private clinic) to avoid receiving taxable salaries.

cors187 · Post by **cors187** » Fri Jan 18, 2013 2:41 pm

Upphew wrote: http://www.vero.fi/fi-FI/Syventavat_ver ... 2810126%29
So you either pay wages or pay for work. If the company has only one worker, no investments and the only client is you and you tell what to do, then the taxman can decide that the company is created only to cheat taxman -> you didn't pay for work, you paid wages, start to pay the other stuff too.

by Rosamunda » Fri Jan 18, 2013 1:09 pm
The original poster did not say that he/she has only one customer... that was "assumed" by some of the other posters.

But there is some tolerance. If you have a limited company you may have multiple customers over a longer time period. Eg if you do project work such as design projects, you may have only one customer at any point in time but when one project is finished you look for a new customer.

But the rule that Upphew is referring to, does concern all businesses, not just TMIs. It was reinforced a few years ago after a lot of professionals (eg doctors, dentists) became Oy and then invoiced one customer (eg a private clinic) to avoid receiving taxable salaries.

I wish i could understand why someone has to even think about this, i cant understand your examples.

Am i to think that the over complex system of business rules here requires the mandatory addition of more complex checklists from the tax man.That ver link in English doesn't give the example i need to understand this strange phenomenon.

You guys use words like client and customer, both are paying for some service, thats what business is.How is this impacting on the number of clients you have.Please give the explanation some more depth.I really want to know if its a set of stupid collective rules that have been implemented by the original business rules being stupid in the first place!

cors187 · Post by **cors187** » Fri Jan 18, 2013 2:52 pm

Rosamunda wrote: to avoid receiving taxable salaries.

I cant say much about the system here.Normal business is you receive money that you provided any form of service for then its a taxable income. Regardless of who you are,child, pensioner, unemployed, company , partnership,sole trader,community group.
1 or 100 clients doesnt change the fact that the 1st clients payment is taxable income and the last is taxable income.

Im really intrigued as to why the income classification can change according to other operating circumstances.

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