Business in the field of information technology can be “crowded” in one country, at a certain stage of development there is a need to enter the international level, in particular, by registering a new company in another jurisdiction. And at this moment the question arises: in which countries is it profitable to register IT companies?

 

The USA, Singapore, Hong Kong, the United Arab Emirates and several European countries come into view. What are these countries? This will be discussed in the review from experts in the field of legal support for international business JSC Lawrange.

 

 

What does the concept of “the best jurisdictions for IT business” imply?

 

As a business area, information technology (Information Technology, IT) combines a lot of activities, including software development, e-commerce, games and entertainment, cybersecurity, online financial services, database work, and so on.

 

Accordingly, the criteria for choosing a jurisdiction for a cryptocurrency exchange and for a startup in the field of software development will differ. True, as an option, you can consider the possibility of opening general IT, that is, a company focused on several areas of activity and for different target audiences of customers.

 

Note! In this review, we decided not to bring to attention offshore jurisdictions (although they do not lose their relevance even now when solving certain problems). If the foundation for the company’s prestige and reputation is important to you, take a closer look at the EU countries – this condition will be provided there.

 

When choosing a jurisdiction option for an IT project, consider the following wishes:

  • the  taxes are lower, and the taxation system is transparent and understandable;
  • the state itself is interested in the development of the IT industry;
  • the cost of company registration and further maintenance is affordable;
  • that intellectual property rights are reliably protected;
  • the  provision of  access to infrastructure and such a service as opening a bank account.

 

 

In which countries can you open an IT company?

 

Any jurisdiction of the European Union may be suitable for registering an IT company. However, first you need to answer the question: do you expect to find clients in this country? If yes, then other questions will follow. How competitive will our service be in this market? What taxes are subject to profits received as a result of the provision of services within the country?

 

Important! Before entering the European market in a particular country, you should study competitors and conduct a preliminary search for sources of financing. It is important to determine whether it will be possible to find an investor or use the services of an incubator or accelerator, if we are talking about a startup. In a similar way, you can narrow your search.

 

In order not to waste time, you can take advantage of ready-made solutions and advice from Lawrange lawyers. We constantly keep abreast of business in Europe, so at any time we can offer the TOP of the best options. In our opinion, in 2022 the best conditions for opening an IT company are offered in the UK, Poland, Ireland and Estonia.

 

 

Why open a company in the UK?

 

Pros Minuses
  • Status of Information Technology Development Center in Europe
  • The country enjoys confidence among investors
  • Do business remotely
  • Shareholders and director of the company may be non-residents
  • This is the most expensive jurisdiction in Europe
  • Requires a physical office
  • Income tax from April 1, 2023 will be 25% (now – 19%)
  • Hiring qualified staff is expensive

 

If you are puzzled by the question of where to open an IT company in Europe, then the United Kingdom is suitable when your business is already firmly on its feet, you have ready-made products and a customer base. In all respects, this is a good option for the relocation of a successful project. However, for a startup that is just planning its first steps in the market, you can choose jurisdictions that require less costs.

 

Note! The advantages of the UK include a simple procedure for registering legal entities. Registering a company in England, along with opening an account in 3 payment systems with the support of JSC Lawrange, takes an average of 2 to 4 business days. There are no requirements for the minimum amount of authorized capital, that is, when opening a company, you can deposit only, for example, 100 pounds in a bank.

 

In the UK, IT business is supported by both a stable legal system (common law) and targeted government support in the form of grants and tax incentives. In particular, the government initiated the foundation of the IT ecosystem Tech City (Silicon Roundabout) in the east part of London.

 

 

Why is it worth opening a company in Poland?

 

Pros Minuses
  • Adequate tax burden for a young enterprise
  • The company can be registered remotely
  • There are many investment funds in the country
  • The founder can be a non-resident
  • Unable to open a corporate account remotely
  • Excessive bureaucracy in some matters
  • There are requirements for the minimum amount of authorized capital – for an LLC about 1200 euros

 

If the UK is a good option for an established business, then Poland is suitable for beginners. At moderate costs, by registering a company in this country, you can access the EU markets and solvent customers around the world. Since Poland is a “white” jurisdiction, it can become a platform for establishing contacts with counterparties in the most prestigious countries in terms of business, in particular, in the USA and Great Britain.

 

Note! To open a company in Poland with the support of JSC Lawrange, you only need to collect a minimum package of documentation. Representatives of our lawyer association will take care of everything else.

 

In the future, you can count on working in a stable and understandable legal environment, state support and high chances of attracting investors. The business owner gets a simplified opportunity to become a citizen of the European Union.

 

 

Why open a company in Ireland?

 

Pros Minuses
  • Developed IT infrastructure: technology parks, accelerators, incubators, co-working spaces
  • Special tax treatment for partnerships (LP)
  • Acceptable level of taxes in general and their simple administration
  • Requires a physical office
  • Only EU residents can be appointed as director and company secretary (LTD)
  • Having a secretary is a must

 

The UK is more suitable for a working IT business, Poland for start-ups, but Ireland for both. This is a kind of “golden mean” for entrepreneurship. In Ireland, an economic recovery is observed precisely due to the attraction of high-tech businesses to the country. In particular, almost all American IT giants prefer the Emerald Isle to open subsidiaries in Europe.

 

Note! Registering a company in Ireland with the support of JSC Lawrange opens up access to government grants and other types of support. IT start-ups are provided with tax incentives.

 

In favor of Ireland, the minimum requirements for the size of the authorized capital also speak – from only 100 EUR. Will not represent a big burden and reporting for the company. Firstly, you can submit reports online. Secondly, you can file a tax return within 9 months after the end of the reporting period.

 

 

Why open a company in Estonia?

 

Pros Minuses
  • Quick and easy interaction with government agencies through the “electronic government” system
  • There is no requirement for a minimum authorized capital
  • The director and founder do not have to be residents
  • Tightening anti-money laundering rules, which complicates the procedure for registering a company
  • Preferably a physical office
  • Unable to open a corporate account remotely

 

Estonia has created a favorable environment for the registration of small companies and freelancers. Although medium and large enterprises will also feel comfortable. Estonia is a jurisdiction with a good reputation and great investment prospects.

 

Note! Registration of a company in Estonia with the support of JSC Lawrange can be carried out remotely, without the need to visit the country. If the documentation is prepared correctly, registration can take as little as two business days.

 

The Estonian government is committed to attracting technology businesses – if such a company is founded, non-residents can obtain a special type of visa – Startup Visa. which makes it possible to quickly obtain a residence permit in Estonia. At the same time, unlike most other EU countries, the cost of living and skilled labor is quite moderate.

 

 

Taxes on IT companies in different countries

 

If an entrepreneur believes that it is possible to save on paying taxes only offshore, then he is mistaken. You can pay moderate taxes in onshores. The main thing: a) choose the right place for registering a company under IT; b) competently structure the business. A significant factor in this is the existence of agreements on exemption from double taxation.

 

In search of an answer to the question of where to open an IT company in Europe, let’s look at taxes in the jurisdictions we have focused on.

 

 

Taxes in the UK

The corporate tax rate is currently 19%, but from 2023 it will reach 25%. The standard VAT rate is 20%. At the same time, if the company provides services outside the country, VAT is not charged. The so-called tax “at the source” Withholding Tax (on the withdrawal of capital) is 20%, on capital gains – 19%.

 

Note! Digital service tax deserves special attention – a 2% tax that is levied on digital services.

 

 

Taxes in Poland

The base corporate tax rate is 23%. However, if

the company’s income does not reach 1,200,000 euros per year, then you can pay tax at a rate of only 9%. Tax on dividends in the country – 19%, VAT – 23% (but only if the annual turnover exceeds PLN 200 thousand). Moreover, if a company supplies IT services to other countries, for example, to the USA, then the VAT rate will be 0%.

 

Note! For IT companies in Poland, tax incentives are provided. For example, B+R (ulga badawczo-rozwojowa) allows software developers to charge certain types of expenses at double the rate, which reduces the tax base.

 

 

Taxes in Ireland

From 2023, the country will increase income tax on income from 12.5% ​​to 15%. VAT is 23%, withholding tax is 25% (dividend) and 20% for royalties and interest.

 

Note! For technology startups, the country has a Knowledge and Development Box (KDB) regime. We are talking about exemption from corporate tax income received from “intellectual property assets”. A KDB compliant company may be eligible for a 50% deduction. This means that profits can be taxed at a rate of 6.25%.

 

 

Taxes in Estonia

Until the moment the company wishes to transfer profits abroad, the tax is 0%. In a similar way, the reinvestment of profits in the further development of the business is stimulated. VAT in Estonia is 20%.

 

 

Features of jurisdiction in European countries

 

Each country provides a certain range of opportunities for IT business. When deciding in which countries to open an IT company, you should clearly identify priorities. In order to successfully start with your project, you need to understand how the possibilities of a particular jurisdiction correspond to the tasks set by the entrepreneur, as well as the business plan.

 

Note! In consultations with Lawrange lawyers, among other things, the following questions are raised:

  1. Will the IT company provide services in the country in which it registers?
  2. Will an investor be needed?
  3. Where will dividends and royalties go?
  4. In which countries are the main counterparties located?
  5. Where will the money for the services come from?

 

 

Conclusions

 

If you are looking for an answer to the question in which countries to open an it company, you need to take into account a considerable list of factors. Among them are taxation and the prospects for obtaining tax benefits, the availability of a developed infrastructure for start-ups, access to opening bank accounts. Expert advice from JSC Lawrange will help to dot the “and”, and legal support for registering a company in the chosen jurisdiction will help to avoid mistakes.

 

 

 

 

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