Entity Setup
Structuring Entities in Other Europe: When to Form a Local Company vs Operating as a Freelancer
Should you form a local entity or stay as a freelancer? This article benchmarks the key tax, cost, and liability trade-offs in Ukraine, Albania, and Moldova.
By NomadicTax Research Team • 5-8 min read • September 2, 2026
## Local Entity vs Freelancer: Key Dimensions to Compare
| Factor | Freelancer (Independent) | Local Entity (LLC, OOO, etc.) |
|---|---|---|
| **Tax rates & contribution burden** | Often taxed on personal income rates, sometimes simpler regimes with fixed % | Corporate income tax; double compliance (corporate + dividends); ability to deduct expenses, depreciate assets |
| **Liability & contracts** | Personal liability for contracts and professional risks | Limited liability; more professional image; easier contracts with bigger clients |
| **VAT / registration thresholds** | Activity‐based thresholds; may not be required to collect VAT until crossing thresholds | Usually registered as full VAT payer; can deduct VAT on inputs |
| **Accounting & audit obligations** | Simple bookkeeping; limited reporting requirements | Full accounting, financial statements, audits depending on entity size |
## Country snapshots: Ukraine, Albania, Moldova
### Ukraine
- **Freelancers (FOPs)** can opt for simplified regimes—low fixed rates or single tax groups. But remote service sales into Ukraine by non-residents may trigger VAT registration or non-resident supplier rules. ([tax.gov.ua](https://tax.gov.ua/data/files/266142.pdf?utm_source=openai))
- Company formation allows better deductions of expenses, more ease in hiring, but more compliance overhead. Also, the **Kupina standard** from September 1, 2026 means digital tools / signatures used by your entity must be updated. ([tax.gov.ua](https://tax.gov.ua/en/mass-media/news/1045106.html?utm_source=openai))
### Albania
- Recent law amendments offer **income tax exemption** for 4–5 star hotel or resort structures with international brands for **10 years**, provided they obtained status by **Dec 2024**. This is a strong incentive for entity setup in hospitality. ([tatime.gov.al](https://www.tatime.gov.al/eng/d/8/45/0/357/announcement-on-amendments-to-the-law-on-income-tax?utm_source=openai))
- For software production entities, a fixed **5% income tax rate** now applies—which may favor forming a company over operating as freelance or subcontractor. ([tatime.gov.al](https://www.tatime.gov.al/eng/d/8/45/0/357/announcement-on-amendments-to-the-law-on-income-tax?utm_source=openai))
### Moldova
- The **entrepreneur independent regime**, in effect from Jan 1, 2026, gives simpler tax treatment under service provision category—15% rate up to MDL 1.2 million and 35% over that. No formal legal entity needed. ([sfs.md](https://www.sfs.md/ro/stiri/regimul-fiscal-al-antreprenorilor-independenti-prevederi-aplicabile-din-01-ianuarie-2026?utm_source=openai))
- Entity formation might allow you to benefit from VAT deductibles, expand employment, or handle contracts in a more structured way—though compliance and local corporate taxes must be considered. |
## Decision Tree: When to Consider Setting Up a Company
1. **Is your income consistently high** (above VAT or freelancer regime thresholds)? If yes → entity might be more efficient. |
2. **Do you need to deduct input costs** (equipment, travel, rent)? Entities usually allow more deductions. |
3. **Will you hire employees or subcontractors locally**? Entities ease hiring, payroll, compliance. |
4. **Do you want stronger legal protection** and formal contracts with larger clients? Entity structure signals stability. |
5. **Are you in sectors with incentives** (e.g. software in Albania, accommodation in Albania)? If so, forming an entity to capture incentives may be valuable. |
## Example comparison
- **Freelancer path in Moldova**: Ion works remotely providing IT support. His revenue is MDL 800,000. He registers as an independent entrepreneur, pays 15%, handles monthly payments, keeps it simple. |
- **Entity path in Albania**: Maria wants to launch a boutique resort under an internationally recognized brand. If she sets up the entity, gets the special status by Dec 2024, she can benefit from **10-year income tax exemption**. Otherwise, she loses that window. |
## Recommendation
Always run the numbers. For incomes near thresholds, small entities vs freelancers may have similar tax burdens—but entities offer growth potential. Recognize that regulatory changes (e.g., cryptographic standards, VAT rules, income tax rate changes) can swiftly alter what’s optimal. Consult local counsel to ensure tax law, incentive eligibility, and regulatory compliance.