Being a freelancer or self-employed
Before getting to the heart of the matter, let's go back to the definition of the term "freelance". Although it is now commonly used, it does not correspond to a legal status. A freelancer is someone who works independently. The corresponding legal status would be that of a self-employed person. The "contractor" status concerns someone who obtains a contract via an agency to carry out an assignment. This person can be legally recognized as a "self-employed", "worker" or "employee".
In France and Canada, we speak of an individual enterprise. France also recognizes the IE option of microenterprise, which is the limited liability company. On the other hand, Canada recognizes, in addition to the IE, the partnership (another form of IE) and the corporation. In the United States, self-employed people can opt for a sole proprietorship, a partnership (a partnership between two or more self-employed people), a limited liability company, etc. Choosing the proper legal form for your business is crucial, especially if you plan to be a digital nomad or move abroad permanently.
Defining your tax residence as an expat freelancer
Defining one's tax residence is essential in order to know under which system one will be taxed (in your home or host country). Moreover, it also helps to determine what type of social coverage you are entitled to. There are two options:
- You can create a company in a foreign country and live abroad. Therefore, the head office and the tax residence are in your host country.
- You can keep your fiscal residence in your home country but live abroad after creating the company in your home country (domiciliation of the company at a personal address or use of a domiciliation company). This is usually the case for digital nomads.
Even if the entrepreneur lives abroad most of the time, they will still have to pay taxes. What counts is the company's tax residence, the activity (if most of the turnover is made in the country of origin), the economic interests, and the location of the principal investments. Therefore, it is useless to hope to escape the tax authorities by moving abroad after registering the company in the country of origin.
What about social benefits for expat freelancers?
Self-employed expats are subject to the same principle as anyone who settles abroad. Many social benefits are linked to residency. Self-employed expats can no longer claim the benefits they might be used to in their home country but can, depending on their situation, benefit from those provided by the host country. Estonia, for example, has been focusing on social benefits for expatriates, especially the self-employed. The country is attracting more and more digital nomads seduced by its tax benefits and the facilities provided by e-residence (different from physical residence).
US consular services are calling on expatriates, self-employed or not, to be vigilant. During Covid, programs were set up to support self-employed people. However, these programs were ad hoc and related to the international context. The consular services can exceptionally provide urgent financial assistance but study each request carefully.
France has also set up several emergency assistance programs, including a one-time means-tested assistance. The self-employed must provide an accounting balance sheet for the years 2019 to 2021 and/or their tax notices (failing that, their invoices), invoices and account statements for 2022, as well as an attestation on honor in which they explain their activity. The government specifies that this is an exceptional aid, not motivated by the rule of law. There are other, more general forms of assistance: the SO (occasional solidarity), and the ADD (fixed-term allowance for a maximum of 6 months).
What should expat freelancers expect?
EU countries offer the European Health Insurance Card, which is free of charge, but it does not replace health insurance, nor does it offer free healthcare. Instead, it allows the expat freelancer to benefit from the same health care as a resident. To be eligible for this card, the expatriate must reside in an EU country, Switzerland, Iceland, Norway, or Liechtenstein.
In France, the self-employed can opt for the détachement (secondment) if they leave for an EU country. However, this does not work outside the EU. The expatriate must have created the company at least 2 months before leaving, for a secondment of less than 2 years, before returning to France. If the expatriate leaves the EU, they must first consult the Centre de Liaisons Européennes et Internationales de Sécurité Sociale (CLEISS) to check whether there is any bilateral agreement between France and the host country. If there is no agreement, they are subject to the laws of the host country.
From the UK perspective, a self-employed expat can remain affiliated with national insurance if they are only temporarily abroad. If they contribute to the social security in their host country, they can request to contribute to the national class 2 insurance voluntarily. Thanks to this subscription, they can receive social security benefits if they return to the UK. It also guarantees them a state pension, whether he chooses to return to the UK or to stay abroad.
In any case, it is best to check, before leaving, whether the host country has signed a bilateral agreement with the country of residence. For example, international agreements with Canada specify that self-employed persons who provide services in one or both countries will be subject only to the laws of their country of residence. To avoid making social security contributions in two countries, they will have to provide a "certificate of liability".
Additional advice for expat freelancers
It is not always easy to subscribe to private health insurance in addition to the health insurance of the host country. However, it is the best option, especially if the host country does not have a good healthcare system. Keep in mind that as an expat freelancer, you are your own boss and are responsible for everything, including your vacations, illnesses, retirement, maternity, etc. Subscribing to private insurance allows you to build up capital in these different sectors progressively. This becomes even more important since the assistance offered by your home country can be limited in time and reduced to a strict minimum.
