Deciding to start a business in a foreign country will have a significant impact on the finances of an investor, no matter how well-prepared he is. The competitive tax environment which is offered by more and more countries makes the decision even harder, even if at first it seems like a positive sign, because having to choose between more countries will prolong the period for the establishment of the business.
In order to make a correct decision and set up a business in a low-cost country, you should know that these countries are divided into offshore and onshore jurisdictions. This is the first thing to consider when selecting the country to start your business in. The good news is that onshore jurisdictions now offer similar tax advantages like offshore ones.
The main taxes to consider no matter the jurisdictions are the corporate and dividend levies and the value added. These are the most important taxes a company will pay no matter the country it is set up in.
Offshore low-tax jurisdictions
The difference between onshore and offshore low-tax countries is the legitimacy of business which can often be put to question in the case of the latter. Offshore countries offer a higher degree of privacy, the lowest taxes and less transparency related to the reporting and accounting requisites in your country of origin.
The offshore jurisdictions with the lowest taxes in the world are: the Cayman Islands, Guernsey, the Bahamans and the Dutch Antilles. Some of these have low to no corporate and dividend taxes. There is also the case of Belize which does not levy any corporate or other income taxes. From this point of view, it is best if you set up an offshore in Belize.
Onshore low-tax jurisdictions all over the world
If you are reluctant that these countries exist, they do. Europe, America and Asia all have countries which have low taxation rates for companies. In Europe there are Montenegro, Cyprus, Luxembourg, Bulgaria, Liechtenstein and Ireland, so plenty to choose from.
In Asia, Singapore and Hong Kong are the most known low-tax states for starting a business and the good news is that they compete to offer the most favorable conditions to foreigners who want to open companies.
South America is also home to several countries which offer low corporate taxes, among which you should consider Paraguay which has a 10% corporate tax rate.
Below we have prepared a table with the countries with the onshore jurisdictions with the lowest corporate taxes in the world:
How to choose a low-tax country to open a company in
Taxation is definitely important when starting a business, but apart from this you will also have to consider other aspects like the setup fees, the maintenance fees in terms of money spent with the business alone. The costs related to registering the company must also be taken into account. These could incur expenses like preparing the incorporation documents, opening the bank account, the registration fees and so on. Not to mention the initial share capital which must be deposited in a bank account since the beginning. From this point of view, you should seek details on how to form a company in Ireland, one of the low-tax countries in Europe.
No matter the type of jurisdiction you decide for, a solid business and financial plan will keep you away from unpleasant surprises. If combined with a thorough verification of the conditions of doing business in that country, you will definitely enjoy the benefits of starting a business in a low-tax country.