As the world economy grinds to a mandatory halt, much of the world is trying to figure out what’s next.
Governments right now are juggling how to respond to both an uninvited health crisis and a self-induced economic coma.
Much has been done for the former.
But what about the latter?
In the last issue, we wrote how legislatures and parliaments across the globe are pouring on the cash to, at the minimum, buy the economy time while they fight the Coronavirus.
These are massive, far-reaching efforts. Governments are desperate to keep companies funded, and people employed or at least salaried.
These are necessary and welcome measures. But are they going far enough?
If you’re a freelancer or small business owner, the answer is most likely…not really.
For all of us abroad, the available support varies. Depending on where you live and how you incorporate yourself goes a long way in determining what, if any, relief you receive.
In some cases, we’re told that we’ll get a cash allocation regardless of our status. In others, we’re informed that it’s a conditional payment, based on a set of (changing) circumstances.
Many countries are forgoing cash payments for tax relief. The idea is that by reducing or eliminating taxes, governments can get money directly in people’s pockets by not taking it in the first place.
For small business owners, the questions are even more complicated.
In addition to the whole “I need money to eat” part of living, running a business comes with the added costs of salaries, rent, and other overhead. Companies of all sizes know these costs. The big ones have some breathing room. The small ones? Not so much.
If your small business is all about operating online, you might have dodged a bullet (at least for now). Unfortunately, as the shockwave of the global economy grinding to a halt continues to ripple, businesses will stop spending.
This stoppage will eventually impact you.
Since we’re not sure when the economy will restart and how long it will take to get back up to speed, small businesses are going to need some help.
Right. That was a lot. Which makes sense, because there are a lot of things unclear right now.
What is clear is that everything surrounding freelancers and small business owners is unclear.
Here are some steps that you, as a freelancer or small business owner, can do to get through this.
Budget as if you’re going to need to pay this expense.
Yeah, this part is a bit rough, especially if your income streams are drying up. But, keep in mind that:
- We don’t know for sure what the final payout will look like
- There is no set timeline for when the funds will trickle down, even though it should start this month (April).
Tax relief will be more immediate. After all, it’s easier for governments to stop collecting than to make payments, which, come to think of it, is kind of shit. If money does start going, it will take at least a few weeks for governments to fundraise (more on that in an upcoming issue), organize and distribute.
My advice is to assume that nothing is set in stone yet. Until the laws go through and the implementation starts, operate like there is no relief. It’s hard, for sure, but it will allow you to budget should you have to pay back taxes somewhere down the line. In a way, we’re already getting used to living leaner with most places closed. Plus, we’re all becoming master chefs right now, so when the dust settled, maybe cook more at home.
On the flip side, if we do get relief, you’ll have a bunch of extra money laying around.
Cash is king during major downturns like we’re going through right now. Having more than you planned for is never a bad thing (plus hotels and resorts are going to be stupid cheap this summer. Maybe it will be an excellent time to treat yo’ self!).
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Check with your affiliated trade insurance/organizations to see what your rights are.
These organizations should be your first source for any general benefits you’re entitled to. Their whole existence is to help you (especially the trade organizations). They should be able to tell you the latest initiatives and what grants or procedures you should be exploring.
Importantly, they will lobby on your behalf. If you tell your agent your situation, they’ll use it to build a strong case in discussions with legislators. The stronger the case, the more compelling the argument they can make to help us for the better. On that, consider contacting the people who represent you in government. Their job (in theory) is to serve us. Sending them an email or even calling could help make a difference.
As a bonus, you get to say you tried, and you get to brag about it to your friends, so win-win.
Likewise, your accountant and or lawyer should be able to give you personalized advice.
Your accountant and lawyer (if you have one) will be able to give you personalized advice. He or she knows your financial and legal situation better than anyone, especially in terms of your jurisdiction.
These people should be able to guide you to the most tax-efficient way to claim relief and benefits. It is their job, after all. Further, your lawyer will know the latest developments and how you can use the law to your advantage. Again, each person has a unique need. These professionals can help you, much more so than a newsletter will (not that I don’t want to).
To all the “autonomos” in Spain: hang in there.
I’ve been reading the latest developments for autonomos and small businesses here in Spain. So far, the government is committing to delaying tax and social security contributions for up to six months. Right now, it sounds like the state will eventually ask for this money back but without interest (thanks?).
Additionally, specific freelancers whose business activities are effectively stopped by the state of alarm measures can apply for minimum wage payments. Regions are also jumping into to help, offering to pay social security fees, or even provide cash allotments. Like everything else, eligibility is conditional on various factors.
As mentioned above, your best bet is to talk to both your accountant/lawyer and your insurance (Mutua) to find out what’s the best path for you.
Keep in mind that these measures are definitely subject to change. From what I’ve read, there’s even the possibility that the current government collapses, and a new, grand-coalition emergency one emerges in its place. At this point, though, all we can do is speculate and assume that nothing will change.
As I mentioned in the first point, operate with the mindset that nothing is available; it will save you money in the long run.
That should just about do it for this edition of WTF is going on with the economy?. Of course, all of these developments are subject to change; it’s just the reality of the world right now.
In any case, if you’re a freelancer or a small business owner, it’s tough, especially since we’re primarily forgotten by politicians. But don’t give up! It will get better. It always does.
Abroaden is a company for expats, digital nomads and other world citizens looking for low-cost and transparent financial advice and investment management.
*Note that this article is for information and educational purposes only. It does not constitute financial advice.