Where to open a company to provide travel services

Tourism is one of the most profitable areas of economic activity abroad. Despite the global pandemic and other negative phenomena in the world, citizens of different countries do not lose interest in traveling and comfortable holidays. Although the travel market is dominated by low-cost airlines and various agencies selling “hot” tours, every entrepreneur with a fresh idea and new views can always succeed.

At the same time, the question of where to open a travel services company naturally arises. To do this, it is recommended that you study the degree of development of the travel services market in the jurisdictions that you are primarily interested in. And then you need to take into account a number of other factors, such as the specifics of business registration, taxation, etc. You should also take into account not only the advantages of running a travel business in a particular country, but also the main disadvantages. We’ll talk about all of this in the following.

Defining goals and business concept

One of the main tasks of the owner of a future travel company is to define the goals for which the legal entity will work. As a rule, travel agencies pursue several goals at once, which are necessary for the normal development and functioning of the business:

• Conducting a competent marketing policy to stabilize the company’s financial condition.
• Providing competitive services in the inbound and outbound tourism market.
• Forecasting the main needs of the target audience, which will allow to develop and implement the main activities.
• Maintaining a high image of the travel company.
• Creating comfortable conditions for the normal functioning of the staff of a travel organization and increasing their interest in work, etc.

The entrepreneur also needs to decide in advance on the concept of the future travel business. You have to decide whether it will be a home-based travel agency that operates remotely with clients or, for example, a tour operator that creates tours on its own. Based on the concept, you may need to establish cooperation with hotels and airlines, as well as rent an office and hire experienced employees. In any case, to develop a concept, you will need to understand current trends, study supply and demand.

When defining the scope of your company’s activities, you should not try to cover all the horizons of the tourism market at once. It is recommended that you initially focus on areas in which you have certain knowledge or skills, established partnerships and relationships. Remember that regardless of which segment of the travel business you decide to work in (for example, a travel agency or tour operator, airline or car rental company), the main thing is that you should be able to reach as many people as possible who are interested in your services. To do this, it is important to understand the needs of customers in each market segment. For example, Europeans prefer to use a full range of travel services when traveling to a country, while Americans, hoping to save money, often buy services separately. By understanding these differences, you will be able to determine the most accurate concept of your future travel agency.

Where to open a business to provide travel services: choosing the right jurisdiction

Some countries create more comfortable conditions for starting a travel business than others. When choosing a country, it is important to be guided by certain factors:

• Political situation – stability and favorable conditions for the development of the tourism market are characteristic of many European jurisdictions, as well as the United States, New Zealand, and Australia.
• The level of economic crime – the level of bribery and other economic crimes in a country affects the comfort of doing business in general. Japan and China are prime examples of the lowest levels of bribery.
• Taxation system – in many EU countries, for example, there are various tax benefits and discounts for start-up entrepreneurs, including non-residents.

In addition, when choosing a country, take into account its geographical location and the specifics of the current legislation. We also advise you to take into account the nuances of the local mentality. For example, many Eastern European countries have similar cultures, which makes it much easier to run a tourism business.

Great Britain

This country has favorable conditions for tourism development. In particular, there is not a single city located more than 120 km from the sea (i.e., 1.5 hours’ drive), and most cities are located on the coast. The UK is a leader in the world in terms of the density of its highway network. At the same time, a significant part of the population prefers to spend their vacations outside their permanent place of residence, but within the country. A significant part of the UK is occupied by national parks, which are visited by millions of tourists every year.

Advantages and disadvantages of starting a travel business

The advantages of opening a company in the UK include:

• Favorable geographical location – the proximity of Western European countries and well-established transport links with them.
• One of the most developed economies in the world – London, Liverpool, Glasgow, Oxford, Cambridge are considered global financial and scientific centers, which is highly appreciated by business and congress tourism.
• Well-developed logistics – road, rail and air connections within the country facilitate comfortable and fast movement of tourists.
• There are no strict currency controls or requirements for director’s citizenship.
• The protection of the company’s assets is ensured by the relevant UK legislation, which, by the way, is one of the most stable and well-thought-out in the world.
• Transparent tax policy and the ability to open an account in any British bank (the banking system here is incredibly stable).
• The liability of the founders depends only on the amount of their contribution to the authorized capital. In other words, personal assets are safe.

Among the disadvantages of running a travel business is the mandatory registration of an official office in England or Wales. In addition, this jurisdiction has a rather high income tax of 19% compared to other EU countries. In addition, maintaining a company in the UK is quite expensive, with the main costs associated with office maintenance, salaries for the secretary and director.

What documents are needed to register a business

The package of documents depends on the legal form you choose. General list:

• An application for registration of the chosen legal form.
• Business plan.
• Articles of association.
• Copies of the founders’ passports.
• Certificate of actual residence of the owner.
• Financial statements.

Peculiarities of taxation

The main revenues to the treasury come from personal income tax, social security contributions, VAT and corporate tax, which is 19% for companies. There is also stamp duty on the purchase of valuable property worth more than 125,000 pounds.

Portugal

Tourism is an important component of the Portuguese economy. It is this area that has undergone the greatest development over the past couple of decades. Portugal occupies one of the leading positions in terms of the number of tourists arriving. It attracts vacationers with clean beaches, mild climate, unique architectural monuments, and a high level of security.

Advantages and disadvantages of starting a travel business

The advantages of registering a company in Portugal include:

• Stable political and social environment. Portugal is considered one of the most peaceful and safe countries, with a very low crime rate.
• Favorable conditions for business development, ranging from the provision of various tax benefits to government programs to support entrepreneurs.
• No double taxation with a large number of countries.
• Constant growth in the number of tourists, which makes it especially profitable to invest not only in tourist services but also in entertainment complexes and the hotel and restaurant business.
• Possibility to obtain a residence permit, and after 5 years of doing business – permanent residence under one of the programs for entrepreneurs and investors.
• Low level of corruption – Portugal has a much better indicator than, for example, Italy, Israel and even China.

The disadvantages include seasonality and the exceptional conservatism of local residents who do not accept anything new, as well as rather high taxes. Although, to be fair, with regard to the latter disadvantage, it is worth noting that this factor depends on the region in which you register the company. For example, in Madeira and the Azores (free economic zone), the corporate tax rate is about 5%.

What documents are needed to register a business

• Taxpayer identification number.
• Articles of Association – a document with information about the company, the founder, the field of activity, etc.
• Copies of passports of the business founders.
• Minutes of the general council meeting.
• Certificate of ownership, etc.

Peculiarities of taxation

Compared to many EU countries, tax rates in Portugal are lower. The main taxes are presented:

• Corporate tax – 21%.
• VAT – the country has a general rate of 23%, but for some types of services it is reduced to 13% and 6%.
• Investment tax – 28%.
• Income tax – from 14.5% to 48%.
• Interest tax is 20%.

Cyprus

If you are thinking about where to register a company to provide travel services, then we recommend paying attention to another European jurisdiction – Cyprus. In this country, tourism also forms the basis of the economy, and therefore is considered a very promising investment destination. From a tourist point of view, this business is the most popular here:

• Hotel – due to the ever-increasing flow of tourists, there is a growing demand for vacation accommodation.
• Restaurant – the majority of the local population, especially visitors, likes to spend time in cafes and restaurants.
• Transportation – taxi and car rental services are underdeveloped here, so there is little competition in this segment.
• Excursion – throughout the tourist season, you will always have clients who want to get acquainted with all the natural, cultural and historical attractions.

You can also open a company in Cyprus to provide business services for tourists, for example, to offer real estate rental or event organization. To operate a travel agency, you need to obtain a special license.

Advantages and disadvantages of starting a travel business

Cyprus is a popular tourist destination, so there are truly great business opportunities here. The main advantages of registering a company in Cyprus include:

• Transparent taxation system and relatively low tax rates.
• Low operating and administrative costs.
• A large number of Russian-speaking qualified employees.
• Mild, comfortable climate for living and recreation.

The main disadvantages of Cyprus include a strong bureaucracy and poorly developed banking system.

What documents are required for business registration

The standard package of documentation, regardless of the chosen legal form, consists of:

• Application for company registration.
• Application for registration of a legal address.
• Permission to register the name.
• Articles of Association, Memorandum of Association with Greek translation for limited liability companies.
• Passports of the founders and samples of their signatures.
• Receipts for payment of state duty.

When opening a bank account, in addition to the above documents, you will need to provide proof of residence in Cyprus and the legality of your income, as well as a letter of recommendation from the bank where you already have an account.

Taxation features

The income tax rate is 12.5% and there is no withholding tax on dividends. VAT in the amount of 0-19% is paid by companies whose turnover for the previous tax period exceeded 15600 euros. VAT exemption applies to companies that, among other things, provide real estate rental services. A 17% contribution to the Cyprus Defense Fund is mandatory in Cyprus, however, it may be waived if certain types of benefits are used.

Hong Kong

This jurisdiction is not only a profitable business destination, but also a tourist destination. Tourism is one of the top 3 main sectors of the Hong Kong economy. It is extremely profitable to provide services to foreign travelers and investors who need various transfer services when visiting the city. Hong Kong has the largest number of Chinese, American and Taiwanese tourists who are interested in museums, resorts and architectural monuments of this jurisdiction. The number of foreigners during the season usually exceeds 60 million people.

Advantages and disadvantages of starting a travel business

The main advantages of registering a company in Hong Kong include:

• A well-developed transportation network, in particular between Hong Kong and mainland China. This jurisdiction is also characterized by the intersection of international transportation and tourist routes.
• An open market economy with low taxes and minimal administrative requirements.
• Government assistance in business development – depending on the type of business activity, the company may be able to participate in a financing program or a preferential system.

However, high real estate prices and the need to obtain an additional license can complicate the conduct of any business activity, including tourism, in this jurisdiction.

What documents are required for business registration

To conduct tourism activities in Hong Kong, you need to obtain an appropriate license, for which you should prepare the following:

• Certificate of incorporation in Hong Kong, Memorandum of Association, Articles of Association.
• Documents confirming the presence of an office (for example, a certified copy of the lease agreement)
• A completed Application for a license.
• Proof that the key executives of your company have experience in the travel industry.
• A certified copy of the document confirming the distribution of shares.

When submitting the application, you must pay the license fee – only then will the license be considered valid. The license is valid for 12 months.

Peculiarities of taxation

The jurisdiction has a system of territorial taxation, which means that taxes are applied only to profits earned from activities in Hong Kong. The income tax rate is 8.5%-16.5%, depending on the income. Hong Kong does not tax the provision of services, there is no VAT and customs duties.

Estonia

Regardless of whether you come to Estonia for leisure or business, the state will provide everything for a comfortable stay and business activity. The tourism sector in Estonia is regulated by a law adopted in 2000, and it is quite diverse and represented by tourism:

• Ecological.
• Culinary tourism.
• Health tourism.
• Sports.
• Medical.

In this jurisdiction, there are seven types of activities in the field of tourism services. Travel agents and tour operator companies need to obtain a special license and pay a cash deposit, the amount of which depends on the company’s income. The activities of travel companies are monitored by the Tourism Division of the Estonian Consumer Protection Board.

Advantages and disadvantages of starting a travel business

Advantages of starting a company in Estonia:

• A stable and growing economy and a stable political environment, which helps to preserve all the successes of your business and increase revenues.
• Favorable geographical location – Estonia is located at the intersection of Eurasian routes, as well as those connecting to the Scandinavian countries. Due to its convenient location and small size, Estonia can significantly optimize transportation and logistics costs.
• Widespread digitalization – all sectors of the economy and spheres of life are digitized, so entrepreneurs can quickly and easily register a company, e-citizenship, keep documents in digital form, communicate with government agencies, etc. But most importantly, IT technologies have almost completely eradicated bureaucracy in Estonia.
• Tax optimization – 0% on profits, on the purchase of real estate, payment of VAT only when domestic income exceeds 40,000 euros. Also, companies in Estonia do not need to pay turnover tax on transactions within the EU.
• Possibility of obtaining a residence permit – when registering a company, a foreigner receives a one-year business visa. With the further growth of the company and reaching a capitalization level of 65,000 euros, an entrepreneur can apply for an Estonian residence permit without any obligations.

The disadvantages of doing business in Estonia, especially in tourism, are represented by the weak desire of the local population to receive foreign travelers in their cities. In the case of business tourism, the main problem of this jurisdiction is the lack of decent conference halls. There are also few flights in the country.

What documents are needed to register a business

To register a company, prepare a package of documents consisting of:

• application for state registration of a legal entity;
• a decision to establish the company;
• charter;
• commercial forecast for the next 2 years;
• biographical data of the persons managing the company;
• commercial feasibility of possible relocation of a non-resident entrepreneur to the country;
• health insurance policy.

To obtain a license, the package of documents is presented:

• a copy of the state duty payment receipt;
• registration code;
• postal and legal address;
• phone number, e-mail;
• company details;
• types of activities;
• information on the place of business (e.g., Tallinn, Tartu, etc.);
• information on the security deposit – its amount, beginning and end of the security deposit period, etc.

All submitted documents must be in Estonian.

Peculiarities of taxation

Estonia has concluded a double taxation agreement with 60 countries, including Ukraine. Since 2000, the country has had a zero tax rate on retained earnings of legal entities. The need to pay income tax of 20% arises if a company distributes profits as dividends. In this case, after 3 years, the rate of such payments is reduced to 14%.

How and where to open a bank account for a company providing travel services

Every legal entity that plans to operate abroad must have its own bank account. Its availability will provide your company with the opportunity to conveniently conduct settlements with clients, partners, accumulate funds, pay taxes and make other various payments.

The specifics of opening a bank account largely depend on the jurisdiction in which you decide to conduct business. If you plan to focus on providing travel services strictly within one region, it is best to register a bank account there. The main requirements of most banks are as follows:

• Providing information about the purpose of opening an account.
• Availability of information about the company and its management, business partners.
• Providing statements from other banking institutions.
• Availability of a business development plan.

The opening procedure usually goes like this:

• Preparation of a package of documents.
• Filling out registration forms at the bank.
• Checking the client’s reliability and KYC policy.
• Completion of registration.

Depending on the country you choose, the process of opening a bank account can take about 1 month.

Obtaining licenses and permits for tourism activities

Licensing of tourism activities is an important component of the successful development of this sector. In most countries, obtaining licenses to provide tourism services is mandatory. This process is regulated by a special state body, in Estonia it is the Tourism Division of the Estonian Consumer Protection Board.

The licensing process is largely determined by the state’s policy in the tourism sector. As a rule, an entrepreneur is required to provide information about the company registered in the country, the founders and managers of the enterprise, a business plan, charter, memorandum, documents confirming the payment of state fees. You can always find out more about the peculiarities of obtaining a tourist license in a particular country by contacting Lawrange.

Assistance from Lawrange lawyers in starting a business to provide travel services

Our team of qualified specialists has extensive experience in registering travel companies and obtaining licenses in various jurisdictions. We are familiar with all the pitfalls and nuances of setting up a business abroad, we know what documents need to be prepared and how to deal with the Regulator of a particular jurisdiction. We will help you:

• Choose the most suitable country for starting a travel business.
• Fill out registration forms.
• Successfully pass a bank check when opening an account.
• Obtain a residence permit or permanent residence in the jurisdiction of interest.
• Complete the entire registration process on a turnkey basis and much more.

Contact our company if you need detailed advice or real assistance in registering a business abroad.

Conclusions

The travel services business is characterized by dynamic development even in times of crisis. The tourism industry plays an important role in the economy of many countries. And despite the fact that the tourism sector is actually quite competitive, if you have the right business concept and tactics, as well as the right jurisdiction, you can succeed! The main thing is to enlist the support of experienced lawyers and consultants who are well versed in business registration abroad and obtaining a tourist license. Among them is Lawrange, which provides a wide range of services, from comprehensive consultations to the registration and licensing of a company on a turnkey basis.

Book a consultation