Let’s say you had a business in online e-commerce or a blog/youtube based business and essentially you are an army of one with no employees (just subcontractors).
Which would be a good country to incorporate in so far as low taxes (doesn’t have to be 0% but obviously the lower the better) but also in terms of ease of doing business (in the above example)? For example, doing business through a Panamanian company it seems is quite risky in terms of transactions being flagged or blocked it seems compared to other countries.
To me one of the best places in Europe where to do business is Bulgaria.
10% tax on profits and 5% tax on dividends is more or less the best taxation that you can have (just speaking about Europe).
I would say that really depends also where you are situated, probably if you are working from Asia I would open something in HK.
(I understand that the business in only digital, but I prefer to have my company “close” to me for unexpected situations).
Thank you for your response. I heard good things about Bulgaria too. I am looking at this through the perspective of a true global citizen who doesn’t necessarily base his or herself in anyone region in the world.
The tax rates you mention applies to someone who is tax resident in Bulgaria presumably?
If you lived in another European country then presumably the local tax laws would prevail over the Bulgarian ones? For example there is no way the UK would let you get away with paying 10% corp tax to Bulgaria then just 5% to the UK. On the other hand if you lived in Georgia or Panama then 10% is all you would pay, the territorial tax jurisdiction of one of these countries would mean you would pay 0% dividend tax?
Hong Kong seems great of course but if you are not making 6 figure income then I hear getting in is very very hard not to mention the various issues HK is facing now.
Hello. I think the subject that must get more attention is why it is harder to get set up and accepted in more jurisdictions, and how long before you get penalised for your choice of jurisdiction . The issue is economic substance. It is safest to assume that any company you set up in any country will sooner or later be entirely ignored (made transparent and see through) by tax authorities if you cannot show reasonable economic substance in the place you set up your company. So for example if you live in Cypress and open a company registered in some other country but have no substance in that other country then the tax authorities will simply say your company (while registered in another country) is tax resident where you live and work. That can bring great sorrow later to people who do not plan ahead because they were thinking they were entitled to the tax benefits of the other country when in fact they were not. Naturally claiming to operate a company lawfully in another country but having no economic substance in that country will simply be seen as tax avoidance. In my view, the safest approach is to establish your self in the country where you company is registered, and satisfy the economic substance requirements of that country … and enjoy the tax benefits that your new country allows for people who are really established there.
Yeah that all makes sense. Of course if you didn’t actually want to live in that country where you incorporated you could get around the tax issue by becoming tax resident in a country with 0% foreign tax (territorial) or less than Bulgaria’s.
As @ShoariLake3 notes the company/entity itself is only part of the discussion. CFC rules in your country of residence will probably determine what is best for you in the long run. But with that said it can still be easier to choose a “higher tax” scenario for ease of doing business - I’ve met plenty of people who choose to operate through a US LLC or UK LLP for access to companies like Google and Amazon, that they otherwise wouldn’t have with a local entity (think Eastern Europe and South Asia). They pay higher taxes as a result but they earn much more, so it’s a win for them.
Sorry, I’m probably creating more questions than answers but when possible we should all try and make an informed decision.
Geomaxxer, as Jase said, the issue to consider when you incorporate in one country but are tax resident yourself in another is will your company be seen as tax resident in the country where you are resident yourself. This must be answered from 3 angles: from the perspective of the law of the country where you have your own residence, from the rules of the country where your company is registered, and finally by the rules that apply in the countries where you have customers. Its complex. If your company has no economic substance in the country where it is registered then most likely it will not be tax resident there from the perspective of one or more of those 3 angles. A company is like your citizenship. In most countries (except USA and very few others) tax is based on ‘residency’ (or past residency if the country applies exit taxes), not on your passport / citizenship. So the fact a company is registered in country x does not mean it is tax resident there. That question is for most countries determined by where its seat of management and control and economic substance is located.
Agreed, however I’d also like people to consider the “ease of doing their business” in each scenario. For example in Andorra where I live, Hong Kong sounds very similar to “money laundering”. In Singapore it sounds more like “close ties to China”.
I find indexes really helpful to filter/shortlist at a high level but encourage anyone to do further research into their specific use case.
Yeah that is the most interesting topic - ‘ease of doing business.’ I mean for the tax stuff it is obvious. Everyone knows CRS rules are such that you can’t enjoy the tax rate of a foreign company without actually living there (rather wherever you are tax resident). That is why you want to be tax resident in a country with equal or lower taxes to the country you are incorporated in.
Of course Panama being a 0% tax place (assuming you don’t live there) which taxes only foreign income is a great place to incorporate from a tax perspective but then you’d need to be tax resident in somewhere like Georgia to actually pay that 0% (because Georgia is also a territorial tax country). However, you might not want to incorporate in Panama because of the negative associations which Jase mentioned. Perhaps it could work in reverse…
Hi NomadKing
|I just started another thread with the link to a recent Forbes article:
Republic of Georgia - “Tax paradise” for Natural Person Entrepreneurs
Might be interesting for you.
Thanks for your reply! Hong Kong does indeed seem like the ideal location. It seems very mixed to me though. As has been said (and from what I read) its hard to open business accounts there unless you are high net worth individual (not me) and it is associated with money laundering which could affect business transactions negatively. And then there is the encroaching threat with China’s claim to HK which could get ugly soon.
On paper it is good though. If you had a UK LLC you could probably pay just the 19% corporation tax if you then moved to a 0% tax or territorial tax country like Georgia. Of course then you would run into the whole rat’s nest with escaping the UK tax net in order to be able to do even that. It seems like unlike Australia and Canada, it is comparatively straight forward. So if you then managed to move your LLC structure to Hong Kong (which I don’t think would be easy, cheap or tax free at all) then you would definitely pay 0% tax.
Perhaps if there was an alternative country to Hong Kong that doesn’t have the negative business ease aspects (Seychelles/Belize etc.), is low tax (Bulgaria standard) it would work? What about Estonia? If you incorporate there, you pay 0% corp tax. And then the 20% withholding tax would apply only if you are living in a country with a taxation rate equal to or higher than that? I wonder what it would be if you lived in a territorial tax country… If it is 20% regardless, better off keeping that UK LLC. Which has a world renowned reputation for business ease… But then your ‘area of activites’ would be too UK -centric for them to let you off the hook for the non-corp taxes… Its so complex…
Have you set up in HK, Kris? Banking has become much more difficult to open for non-residents, and the tax system does require more expensive auditing and offshore exemption costs than other entities.
Te UK is pretty good if you can arrange your residency and business activities accordingly so not to be impacted above the tax band thresholds… also Bulgaria is pretty good with a flat personal and corporate tax rate of 10%…
Its so complex…