In which country to open a company?
Jurisdictions and their differences
Jurisdiction means the spread of tax laws. In order for a business to fall under the jurisdiction of a certain country, it is necessary either to carry out commercial activities in it or to have a registered legal entity here.
You are the founder, and you decide where your offspring will exist: in conditions of European stability, in a low-tax zone or offshore?
Differences between the indicated jurisdictions:
- European company: UK, Ireland, Latvia, Poland, Estonia, Hungary
- high tax level;
- widest possible use (building holdings, participating in agency schemes);
- info open;
- business in low tax jurisdictions: UAE, Canada, Hong Kong, Singapore, Georgia
- not offshore, but can be used as tax free/low tax zones;
- it is important to comply with the conditions: keep records, submit reports, undergo an audit;
- info available;
- offshore company: Panama, Seychelles
- exempt from taxes;
- reported but not provided;
- Confidential information.
What business researchers advise
The World Bank published a study of 130,000 organizations worldwide in 2020 on 150 pages. In addition to many different factors, countries were evaluated in terms of the complexity of registering a legal entity, tax business models, openness of trade borders, degree of investment protection.
According to the results, an entrepreneur has the highest quality of life in New Zealand, but a foreigner will have to invest about $70 thousand in business. The amount will decrease for enterprises that will be engaged in scientific development, IT technologies, high-tech production. Local law may prohibit the conduct of any type of activity in a particular place.
Singapore is in second place. The application for opening a company is confirmed in a day, but the applicant must plan to move to Singapore and open jobs. Attracts low taxation. You can get a grant for a startup.
Then Hong Kong. You can open a company remotely in a few days and $200. The tax on income received directly in Hong Kong is 16.5%. Otherwise, it is not charged.
Ukraine, unfortunately, is still 64th.
We dreamed – back to the choice.
Knowing about the possibility of a tax-free offshore, most business founders would stop at it. However, behind similar regulation in each of the offshore countries lies details that are unique to it and can influence the goals set. For example, it may matter which countries the company interacts with, where it is managed from, through which banks settlements are made.
To determine the jurisdiction, it is important to analyze the following components:
- Type of economic activity and functions of the company (operating, agency, holding).
- Business Kudos.
Companies with a positive offshore image are not eligible. You should choose from rated European countries;
- Terms and cost of registration and maintenance.
For offshore, this is easy, short and inexpensive. It is enough to pay an annual fee, a legal address, services of a registered agent and a nominee shareholder, a director, if needed.
If you need a full-fledged accounting, the financial statements will change dramatically. Often the cost of accounting services depends on the number of transactions.
When a company operates in the country of incorporation, office rent, employee salaries, taxes and local payments will be added to the existing amount.
- Jurisdiction transparency.
This refers to the level of confidentiality of data about the director, founder, owner. It ranges from completely closed information to open access to it on the network.
Obligations for the mutual exchange of tax information. More than 100 countries have signed the ICAA Multilateral Agreement and exchange information on the financial component automatically. Tax information may be made available upon request. There are other multilateral and bilateral agreements on this matter.
- Opening a bank account.
Few banks are ready to cooperate with shell companies and other offshore businesses.
- Tax model.
You should pay attention to the presence / absence of taxes for a particular type of activity, the amount of tax rates, the availability of benefits, special regimes. European states tax income from 12.5% to 35%. The difference is significant.
- Jurisdiction restrictions.
Many countries have “blacklists” of countries with an “offshore image” and apply some restrictions to the jurisdictions that fall into them.
- Possibility of double taxation.
Can be avoided if double taxation avoidance agreements are signed between countries
To avoid some of the inconvenience and reap the many benefits, it may be appropriate to set up not one but several companies in different jurisdictions for different purposes or even for different projects.
Without experience and knowledge in this area, it will be difficult to figure it out.
Company registration using “Lawrange”
Lawrange law firm works to reduce risks and increase business profits. More than 10 years of experience in registering and servicing foreign companies in different jurisdictions around the world.
Together with experience, a specific algorithm of actions has been developed:
- First, we will select the best country for company registration, taking into account the type of business activity and the client’s wishes.
- Then we will decide on the legal form of doing business, and together we will build a tax model for international business.
- Then we will offer an option to choose from:
- carrying out the registration procedure on a turnkey basis, with minimal involvement of the customer. You will only need notarized copies of the international passport and national passport, a power of attorney for our representative, as well as options for the name of the future company;
- or a basic package for registering a company and obtaining documents for it.
- After opening, by agreement, comprehensive legal and accounting services are possible.
The decision to start a business in another country is difficult. Even harder to get started. However, in order to enjoy the benefits in the future: new markets, advanced technologies, lower costs, it must be done now.
By analyzing and risking on your own, or by contacting specialists for help in registering. And to do what you want – to expand your business.
I want to register a startup. Where are small businesses more loyal?
Latvia provides many advantages for small businesses: preferential terms of business, remote government services, access to European markets and the CIS.
Where is the best taxation in Europe?
Compared to most other countries in the European region, one of the most loyal indicators for foreign business in Serbia:
- 15% income tax (lower than in other European countries);
- 20% tax on dividends;
- 20% VAT if the company’s annual turnover exceeds RSD 4 million.
In addition, here the minimum authorized capital is 1 euro