[kleinsch]

More detail with math here. Lawmakers are discussing delaying these changes for a few years and/or allowing deductions for domestic employees, but all depends on signing a budget, which is never certain.

https://blog.pragmaticengineer.com/section-174/

[User23]

So far as I can find the last time Congress bothered to pass a budget was 2016 with the prior one in 2010.

The government has been funding itself instead with “continuing resolutions” which pretty much just continue spending as the prior year modulo marginal changes. Incidentally this is why federal deficits have exploded since 2010: the financial crisis “one time” trillion dollar stimulus has been continued every year since.

[Ankaios]

> So far as I can find the last time Congress bothered to pass a budget was 2016 with the prior one in 2010.

The last time Congress passed a budget was for last fiscal year (FY 2023):

https://www.congress.gov/bill/117th-congress/house-bill/2617

It was about three months late, but they passed it. This year's is currently at least about four months late, and the federal government is currently operating under a continuing resolution that will expire in March. However, full-year continuing resolutions are rare: the budget bills are usually passed, but passed late.

[cplusplusfellow]

But it would be so draconian to not increase spending insanely every year!

[phkahler]

Don't forget the $3Trillion deficit for Covid. First done under Trump in 2020 then repeated by Biden in 2021 so it's not a partisan thing.

[osigurdson]

>> let go of 23 engineers employed in India

>> lots of devs in Switzerland starts to make a lot more sense, especially now.

This seems contradictory.

[moron4hire]

They're talking about incorporating in Switzerland, which allows 135% deduction for R&D costs. Yes, Switzerland pays you to run a startup.

[osigurdson]

If true, I would like to hire an infinite number of devs in Switzerland (provided the government pays the 135% of salary up front).

[Shaanie]

Not how deductions work. Say 20% corporate tax, a 100% deduction (which is the normal business expense) means you don't pay any tax. A 135% deduction means you'd get to expense 35% more, avoiding those 20% for a "total saving" of 7% compared to a normal expense.

[osigurdson]

Shoot. I thought I was going to be able to absorb all of the Switzerland's wealth for a moment there.

[Gormo]

> Yes, Switzerland pays you to run a startup.

It sounds like they're just taxing you less, not paying you anything.

[therealdrag0]

A tax credit gets paid out if you end in green doesn’t it?

[Gormo]

A credit does, but a deduction does not. I'm not sure where the previous commenter is getting this information from, since I can't find any documentation of a 135% tax deduction for R&D in Switzerland anywhere online, but if it is a deduction and not a credit, it means that it just offsets taxes on other income.

[oldandboring]

A refundable credit does, but not all credits are refundable.

[IndoCanada]

But it is difficult to fire them which is a big problem for tech companies where hiring and firing are common

[moron4hire]

I hear this a lot and it's difficult to reconcile with my experience. Every US company I've worked at (and that's always been in at-will states) has not made it easy to get rid of people. Even people with woefully bad records of losing money every year and having multiple harassment complaints filed against them were kept for nearly a decade. With one exception (I personally got fired from a tiny startup because I refused to commit timesheet fraud for the CEO), the stories I've heard of the lengths that European companies have to go through to fire someone sound exactly the same to the processes I've seen at all of my employers.

[refulgentis]

You describe a scenario where management didn't want to fire someone - that's why it was harder. In the U.S. only two things get in the way: A) venial corruption B) worrying about unemployment insurance (that's why HR makes you do paperwork documenting an issue).

In many European countries you have to file a ton of paperwork and justify it: ex. at Google, they're still working through _January 2023_ layoffs because you have to work with the government itself and there isn't a good* financial reason for it

* by European standards. "we need stonk to go up" doesn't fly if you're massively profitable

[steezeburger]

Ive worked at a lot of different earlier stage software companies in the US and we've always fired very quickly, especially if there was harassment, but also just for low performance. Were you working at bigger companies? (aside from the tiny startup where the ceo wanted you to commit fraud) This hasn't been my experience at all.

[jjav]

> Every US company I've worked at (and that's always been in at-will states) has not made it easy to get rid of people.

That's an internal choice they do, to avoid having a reputation of a company that fires people any second (but then you have companies like netflix which take pride in having that reputation, but make up for it by paying more).

However, it's very different from European companies where these processes are (often) driven by laws. In the US there are no employee protection laws (aside from protected classes) so even if the company has a rigorous internal process, they could at any second override it if someone high up says so and you'll be fired in the blink of an eye.

[brianwawok]

Own a small startup in US. Not hard to fire people. Can do it same day I decide to.

[bbojan]

It's very easy to fire in Switzerland. The notice periods are usually longer than in North America, but everyone having unemployment insurance where they are paid ~80% of their salary for up to 2 years makes is not such a big deal.

[KittenInABox]

Can you say more about unemployment insurance? I haven't heard of this [a us worker] and honestly I also wouldn't mind being more aggressive with my career if I can guarantee ~80% of my income for 2 years should I lose a job.

[Leherenn]

You have a mandatory deduction on your salary (2.2%, a bit less effectively if you make over 150k). You need to have contributed for at least a year in the past 2 years before you're eligible.

You get 70% of your salary (or 80% if you have children under 25) for two years, capped at 70% (or 80%) of 150k.

There are a lot more exceptions, special cases and so on, but that's the gist of it.

[krab]

It's a kind of a tax - computed from your income. Similar to health insurance (in Europe). There are caveats like "you must be actively looking for a job" and "you weren't fired for an offense".

[IndoCanada]

"but everyone having unemployment insurance where they are paid ~80% of their salary for up to 2 years makes is not such a big deal."

That's a big problem for US based tech companies

[saiya-jin]

You are mixing up EU and Switzerland, employment laws are very different (and each EU state has its own, but generally much more protective of employees than Swiss ones).

One of the reasons Google has long term big center in Zurich, if grass would be greener (since cheaper it is) in say Germany or Austria they would build there

[bbojan]

> One of the reasons Google has long term big center in Zurich, if grass would be greener (since cheaper it is) in say Germany or Austria they would build there

I don't think Google has an office in Zurich because it's cheap. It's mostly due to a lot of talent available (ETHZ, EFPL, etc).

[IndoCanada]

Offshore centers are cost centers Most important projects are done at the HQ

[rafaelmn]

Use international contractors ? Or is the deduction for local devs only ?

[iancmceachern]

And it's hard and time consuming to hire in the EU also

[edgyquant]

Especially since it seems like you can spread it out over 15 years, 3 times as long, if you have overseas devs.

>These costs have to be capitalized and amortized over 5 years – or 15 if labor is done outside of the US.

I’m not an accountant so maybe I’m reading that wrong, but if so that’s insane.

[MattRix]

You MUST spread it over 15 years, which is brutal for most companies and will mean no longer hiring any foreign R&D or software development contractors.

[ckdarby]

Can't the work be done in a Canadian entity instead of labour being hired via the US entity?

This way, all the R&D expenses are happening in Canada.

[pcthrowaway]

I was trying to raise that same question here: https://news.ycombinator.com/item?id=39015849#39018565

My feeling is that an EoR (employer of record) like remote.com might be enough for everyone to be able to avoid R&D capitalization. The research happens in Canada, by a Canadian employee of a Canadian company. You pay an American company for outsourcing human resources. The American company pays the Canadian company for human resources services.

Then again, if you're paying another company for outsourced human resouces, but you have an IP assignment clause as part of that, maybe you would need to claim it as your R&D expense

[throwsec7492]

@edgyquant, not harder, more tax efficient

[edgyquant]

Why is spreading something out over 15 years harder than spreading it out over 5?

[MattRix]

So this year if I spend $150k on foreign research (which includes ANY software development), and then I also earn $150k in revenue: despite me having $0 in the bank, I will only be able to deduct 1/15 of that, or $10k. In other words, I’ll be taxed as if I made $140k of profit, despite me not having any actual money left over.

You can see how if this was 5 years, then I could deduct 1/5 and I would be taxed on $120k profit, which is still bad, but not nearly as bad.

[pcthrowaway]

I don't think it will stop foreign hiring for R&D, since the cost differential is often greater than the tax obligation would be.

E.g. if you pay $150K for local research, you expense $15K (10%) the first year (and 30K the subsequent year). You pay taxes on $135K of 'profit'. Let's say that's $45K (I have no idea what's realistic here.

Alternately you pay $130K for a dev from Canada, expense $4,333 (1/30) the first year, and pay tax on the remaining 'profit' of $125,666. Even after admin costs you're coming out ahead

[Uw7yTcf36gTc]

I thought employee wages were always deducted. Is that not the case ?

[brianwawok]

This isn’t like a loan where the longer the term the smaller the payments. It’s the reverse.

You essentially pay taxes now on income, and can’t deduct costs for 5 or 15 years. So it’s kind of like pre-paying taxes and not getting the money back for 5/15 years. Say that you need to go borrow cash to cover the shortfall. Is it cheaper to borrow money for 5 or 15 years?

[phkahler]

Hah I'm still trying to understand how software developer pay should be a deduction at all.

[dzdt]

Most small businesses exist for less than 15 years.

[moron4hire]

Of all the startups that started in the last 15 years, how many of them are still around?