In which countries is it profitable to register IT companies in 2019?
IT business remains a high margin area, far ahead of production and some other types of services. By creating an application, game or service, you can work not only in local but also in international markets, offering services to millions of potential customers.
However, when it comes to conducting international business, any IT specialist understands that a company in Russia and the CIS loses in many respects to its foreign colleagues. Even large holdings, which work primarily on the domestic market, often carry part of the capacity outside the country.
The same applies to smaller companies, but the decision to move a company abroad becomes doubly relevant when customers are located all over the world.
I have compiled a list of countries where in 2019 it is interesting and profitable to register companies for conducting IT-business. The only caveat - the peculiarities of registering Fintech startups that need to obtain a license to issue electronic money or conduct banking activities did not slip through.
When choosing a country for registration of a company operating in the international market, several factors must be taken into account.
Alphabet can have offices in classic offshore companies, at least due to a hired army of lawyers and consultants who will explain why this is necessary. A company that is just starting its journey and entering new markets, does not need extra expenses for lawyers and attempts to prove to officials that your structure is not for tax evasion.
Therefore, it is important that your company immediately register in a country with an adequate reputation. Partly because of this point, one has to leave Russia and the CIS - they are not always trusted in the world market and are often asked to organize an additional company in Cyprus or in another familiar jurisdiction.
High-speed Internet, powerful servers, mobile communications, simply the ability of users to use smartphones and computers - the presence of these structural elements is extremely important for the IT business.
In addition, the infrastructure can be considered the availability of convenient services for working with the state, flexible legislation that allows you to customize the company to your needs, access to incubators, loans, professional staff and the like.
Ability to provide Substance . This moment has become relevant in recent years. If earlier it was possible to register a company somewhere in the Seychelles, but at the same time not to open an office there and keep all employees, as well as the main activity, in their native Kaluga, now such a maneuver will not work.
Substance is a real business presence in one place or another in the world, usually at the place of registration. In today's world, you need to prove that you have a substance. To whom? Banks and tax authorities.
Substance is an active site, office, employees, etc.
Without a real presence, you can lose tax benefits under agreements to avoid double taxation, and get a bank refusal to provide services. Therefore, often the choice of place of registration of a company is determined by the costs of maintaining the company.
When choosing the right place and form of company registration, you can officially reduce tax deductions. The most interesting thing is that even without offshore companies it is quite possible to achieve adequate taxation.
In addition, when choosing a country, you need to look at double taxation treaties: some countries have created favorable conditions that will allow you to pay a rate much lower than officially written in the laws.
And finally, it’s worth mentioning bank accounts. To quote my colleague, Natalie Revenko, a senior project consultant. It helps customers find a bank account.
Banks have a huge number of requirements. Local and international laws, sanctions, anti-money laundering legislation - all this or that affects the activities of a financial institution.
In order to protect themselves from losing a license, new customers are studied very closely and any trifles can serve as a reason for refusal: a typo in the questionnaire, an incomprehensible business structure, risky activities, an owner of a company from the black / gray list country.
Therefore, you need to understand: you can try to open an account for a company in the country of registration of the company or in third countries. It’s easier if you open an account right on the spot, but sometimes it’s more profitable, faster and even cheaper to open an account somewhere else.
Now let's examine the list of countries that are interesting for registering an IT company.
All the companies listed below can be registered remotely without a personal visit to the country. The set of documents may vary, but a certified copy of the owner’s passport will be required everywhere, as well as proof of the address of residence (utility bill, registration, etc.).
All IT specialists go to the USA, no doubt. It is the US market that offers the highest profitability, and even competition does not prevent more and more new startups from storming the local Olympus.
The USA shows an example to all the world with the help of the largest corporations such as Apple, Microsoft, Amazon. At the same time, the States offer developed infrastructure in terms of legislation, IT and financing.
And besides, an American company can open an account almost anywhere.
After the Trump reform, taxes in the United States became lower, which increased the country's attractiveness for investors.
At the same time, the cost of entering the American market can be high. In addition, if you plan to test your business model in other regions, you can register a company outside the United States, and then, when necessary, go back.
Another extremely popular market for IT startups. Fintech projects felt especially good here. This was facilitated by legislation, access to the EU market and the English-speaking market, a reliable legal system and the protection of intellectual rights.
It is possible to open an account for an English company in the UK itself, even if non-resident owners are more often asked additional questions. Opening an account outside the country is also possible.
The uncertainty in 2019 is due to the fact that the UK is saying goodbye to the EU, while many agreements have not been reached. Legislation requiring reporting from companies is also being tightened.
At the same time, there is already a clear demand for Substance software. During the banking crisis in Latvia, during which the legislation changed, more than half of the companies that lost their accounts were just UK companies. They were considered dummy companies.
Facebook, Apple, and dozens of other IT industry giants have opened European offices in Ireland. Thanks to this, billions were saved in taxes. The EU was trying to demand from IT giants to pay taxes, to recognize transactions between Ireland and companies illegal, but it turned out to be crumpled.
Despite this, Ireland is attracting more and more new players. This is due to legislation that protects the interests of business and intellectual property, practically the lowest corporate tax in Europe, and proven infrastructure for IT businesses.
And against the backdrop of Brexit, Ireland is becoming a potential substitute for British companies that risk losing access to EU markets.
The presence of an office, employees in the country is recommended, as elsewhere. Open an account is possible.
Canada is home to many large gaming companies, including Ubisoft, Rockstar divisions. Many IT projects and online businesses also choose a country as their home.
Canada has a large domestic market, close ties with the United States, and a clear reputation in the international market. The infrastructure is developed and is constantly being improved. There is a supply of personnel that is studying at local universities.
Of particular interest are Canadian limited partnerships - this is the form of companies that allows you to reduce corporate income tax to 0%, provided that all income is received outside the country. The dividend tax is paid by partners at personal income tax rates in the country where they are tax residents (in Russia this is 13%).
Perhaps this form is not suitable for the corporation of the Apple level, but for the start it is an extremely successful option.
In addition, the Canadian partnership can open a bank account in Canada (under certain conditions) or practical in any other country in the world. If you need an account in Canada, then Substance will have to be approached extremely responsibly. For example, one of the directors of the company must live in Canada. Opening an account abroad Canada will be a little easier.
Malta is also considered a bidder to replace the UK. But even if this does not happen, Malta has already won and continues to increase its IT market share.
Jurisdiction is especially popular with projects related to bets, online casinos, cryptocurrencies, but they require licensing. The conditions for the rest of the IT business are also pleasant.
Malta is part of the Eurozone, offers a corporate tax of 35%, but with the ability to reduce the effective rate to 5%. Dividend tax - 0%. For IT professionals, the procedure for obtaining work permits is simplified.
Malta has its own banks, plus it is allowed to open an account in other countries, including opening a bank account in Europe.
Given the above selection, this member of the list will seem unexpected. However, new names and rising stars appear on the international corporate services market.
Even Zuckerberg was once not a very popular student, let alone jurisdictions.
Armenia is primarily interested in the tax regime for IT businesses. Having received a certificate of IT-activity (approximately a month of waiting after the registration of the company), you receive 0% income tax, 5% dividend tax, which can be returned, there are no strict requirements for the local office and employees, and the account is opened directly in the country.
The authorized capital of such a company can be from 1 euro - ideal starting conditions for a startup.
Update: While preparing the material for publication, there have been changes in Armenia. Now, if the shareholder of the company is a non-resident of Armenia, then the rate of non-refundable tax on dividends is 10%.
Switzerland is not the first country that comes to mind when it comes to IT. However, this omission is worth fixing. The fact is that in Switzerland, projects with large budgets feel comfortable, whether it is IT development in the field of medicine or the basis for creating and maintaining a large cryptocurrency.
Switzerland's infrastructure is so rapidly developing that bitcoins in some cantons are accepted as payment for public services.
In addition to fintech, Switzerland is interested in cyber security, medicine, science and industry. If your project solves problems in these areas, the choice of Federation may become an additional incentive for you.
In addition, Switzerland is a banking country, which means there will be plenty to choose from a financial institution.
Opening a company in China is not easy. But in Hong Kong - please. If you want to bite a bite from the Chinese games market, then Hong Kong will give you a chance to jump into this niche.
In addition, Hong Kong offers territorial taxation, which can be very profitable for an IT business that makes profit outside the country. There are various incentives for companies, including tax incentives: a 50% discount on the first 2 million Hong Kong dollars in profits, deductions for R&D, etc.
And most importantly, Hong Kong is predictable. Its legislation is fixed for 50 years. It is clear what will happen in the next couple of decades.
The only problem is the bank account. It is extremely difficult for foreigners and young companies to open an account in Hong Kong itself. It takes a lot of time and effort, and the result is not guaranteed. Therefore, it is better to open an account in other countries or look at alternatives.
Despite its modest size, Estonia has big ambitions. Perhaps, it is Estonia that offers one of the most convenient infrastructures for business, including IT, in terms of communication with the state. The electronic state is set up and works quickly and efficiently.
The stake on IT in the country was made a long time ago and we saw its fruits, for example, in the person of Microsoft's purchase of Skype creators. Despite the sad ending for the messenger itself, the price of 8.5 billion dollars shows the scope of opportunities.
For a business, in addition to infrastructure, it is useful to not pay income taxes until profits are reinvested in the company.
Lack of jurisdiction, as always, comes from banks. In order to open an account in Estonia, it is necessary that the company’s activities are connected with Estonia. This is decided by opening accounts outside the country.
Another not too obvious player, but offering a corporate tax rate of 2%. For this, special conditions must be met. The base rate is 10%, which is lower than in Ireland.
If the owner of the company becomes a tax resident of Andorra, he will be able to get rid of the tax on dividends.
An account is opened in Andorra itself or beyond at your request.
From Andorra, it is beneficial to attract not only local, but also Spanish and French infrastructure. Countries are very, very close.
Entering the international market is a well-thought-out solution. The choice of company and country of registration should be just as well thought out. Each business is individual in its own way and each one will have its own companies and their bank accounts.
A concrete choice is best done with a professional. The reason for this is simple: for example, if you want to open a company in Estonia and keep an account there, but your clients are only in Asia, then you will not receive any account. I have to think, look for alternatives. But you simply did not follow the rules and lost money and time.
However, when it comes to conducting international business, any IT specialist understands that a company in Russia and the CIS loses in many respects to its foreign colleagues. Even large holdings, which work primarily on the domestic market, often carry part of the capacity outside the country.
The same applies to smaller companies, but the decision to move a company abroad becomes doubly relevant when customers are located all over the world.
I have compiled a list of countries where in 2019 it is interesting and profitable to register companies for conducting IT-business. The only caveat - the peculiarities of registering Fintech startups that need to obtain a license to issue electronic money or conduct banking activities did not slip through.
What should be considered when choosing a country for registration of an IT company?
When choosing a country for registration of a company operating in the international market, several factors must be taken into account.
Reputation
Alphabet can have offices in classic offshore companies, at least due to a hired army of lawyers and consultants who will explain why this is necessary. A company that is just starting its journey and entering new markets, does not need extra expenses for lawyers and attempts to prove to officials that your structure is not for tax evasion.
Therefore, it is important that your company immediately register in a country with an adequate reputation. Partly because of this point, one has to leave Russia and the CIS - they are not always trusted in the world market and are often asked to organize an additional company in Cyprus or in another familiar jurisdiction.
Availability of infrastructure
High-speed Internet, powerful servers, mobile communications, simply the ability of users to use smartphones and computers - the presence of these structural elements is extremely important for the IT business.
In addition, the infrastructure can be considered the availability of convenient services for working with the state, flexible legislation that allows you to customize the company to your needs, access to incubators, loans, professional staff and the like.
Ability to provide Substance . This moment has become relevant in recent years. If earlier it was possible to register a company somewhere in the Seychelles, but at the same time not to open an office there and keep all employees, as well as the main activity, in their native Kaluga, now such a maneuver will not work.
Substance is a real business presence in one place or another in the world, usually at the place of registration. In today's world, you need to prove that you have a substance. To whom? Banks and tax authorities.
Substance is an active site, office, employees, etc.
Without a real presence, you can lose tax benefits under agreements to avoid double taxation, and get a bank refusal to provide services. Therefore, often the choice of place of registration of a company is determined by the costs of maintaining the company.
Taxes are part of business expenses.
When choosing the right place and form of company registration, you can officially reduce tax deductions. The most interesting thing is that even without offshore companies it is quite possible to achieve adequate taxation.
In addition, when choosing a country, you need to look at double taxation treaties: some countries have created favorable conditions that will allow you to pay a rate much lower than officially written in the laws.
Ability to open a bank account
And finally, it’s worth mentioning bank accounts. To quote my colleague, Natalie Revenko, a senior project consultant. It helps customers find a bank account.
In a right and logical world, a client who honestly earned money in a sweat of his face, chooses a suitable bank for himself. In our real world, unfortunately, in the case of banking for non-residents, the opposite is true. The final decision - whether or not to open an account for you, as a non-resident, is always with a foreign bank.
Banks have a huge number of requirements. Local and international laws, sanctions, anti-money laundering legislation - all this or that affects the activities of a financial institution.
In order to protect themselves from losing a license, new customers are studied very closely and any trifles can serve as a reason for refusal: a typo in the questionnaire, an incomprehensible business structure, risky activities, an owner of a company from the black / gray list country.
Therefore, you need to understand: you can try to open an account for a company in the country of registration of the company or in third countries. It’s easier if you open an account right on the spot, but sometimes it’s more profitable, faster and even cheaper to open an account somewhere else.
Now let's examine the list of countries that are interesting for registering an IT company.
Countries where it is profitable to register companies for IT business
All the companies listed below can be registered remotely without a personal visit to the country. The set of documents may vary, but a certified copy of the owner’s passport will be required everywhere, as well as proof of the address of residence (utility bill, registration, etc.).
USA
All IT specialists go to the USA, no doubt. It is the US market that offers the highest profitability, and even competition does not prevent more and more new startups from storming the local Olympus.
The USA shows an example to all the world with the help of the largest corporations such as Apple, Microsoft, Amazon. At the same time, the States offer developed infrastructure in terms of legislation, IT and financing.
And besides, an American company can open an account almost anywhere.
After the Trump reform, taxes in the United States became lower, which increased the country's attractiveness for investors.
At the same time, the cost of entering the American market can be high. In addition, if you plan to test your business model in other regions, you can register a company outside the United States, and then, when necessary, go back.
Great Britain
Another extremely popular market for IT startups. Fintech projects felt especially good here. This was facilitated by legislation, access to the EU market and the English-speaking market, a reliable legal system and the protection of intellectual rights.
It is possible to open an account for an English company in the UK itself, even if non-resident owners are more often asked additional questions. Opening an account outside the country is also possible.
The uncertainty in 2019 is due to the fact that the UK is saying goodbye to the EU, while many agreements have not been reached. Legislation requiring reporting from companies is also being tightened.
At the same time, there is already a clear demand for Substance software. During the banking crisis in Latvia, during which the legislation changed, more than half of the companies that lost their accounts were just UK companies. They were considered dummy companies.
Ireland
Facebook, Apple, and dozens of other IT industry giants have opened European offices in Ireland. Thanks to this, billions were saved in taxes. The EU was trying to demand from IT giants to pay taxes, to recognize transactions between Ireland and companies illegal, but it turned out to be crumpled.
Despite this, Ireland is attracting more and more new players. This is due to legislation that protects the interests of business and intellectual property, practically the lowest corporate tax in Europe, and proven infrastructure for IT businesses.
And against the backdrop of Brexit, Ireland is becoming a potential substitute for British companies that risk losing access to EU markets.
The presence of an office, employees in the country is recommended, as elsewhere. Open an account is possible.
Canada
Canada is home to many large gaming companies, including Ubisoft, Rockstar divisions. Many IT projects and online businesses also choose a country as their home.
Canada has a large domestic market, close ties with the United States, and a clear reputation in the international market. The infrastructure is developed and is constantly being improved. There is a supply of personnel that is studying at local universities.
Of particular interest are Canadian limited partnerships - this is the form of companies that allows you to reduce corporate income tax to 0%, provided that all income is received outside the country. The dividend tax is paid by partners at personal income tax rates in the country where they are tax residents (in Russia this is 13%).
Perhaps this form is not suitable for the corporation of the Apple level, but for the start it is an extremely successful option.
In addition, the Canadian partnership can open a bank account in Canada (under certain conditions) or practical in any other country in the world. If you need an account in Canada, then Substance will have to be approached extremely responsibly. For example, one of the directors of the company must live in Canada. Opening an account abroad Canada will be a little easier.
Malta
Malta is also considered a bidder to replace the UK. But even if this does not happen, Malta has already won and continues to increase its IT market share.
Jurisdiction is especially popular with projects related to bets, online casinos, cryptocurrencies, but they require licensing. The conditions for the rest of the IT business are also pleasant.
Malta is part of the Eurozone, offers a corporate tax of 35%, but with the ability to reduce the effective rate to 5%. Dividend tax - 0%. For IT professionals, the procedure for obtaining work permits is simplified.
Malta has its own banks, plus it is allowed to open an account in other countries, including opening a bank account in Europe.
Armenia
Given the above selection, this member of the list will seem unexpected. However, new names and rising stars appear on the international corporate services market.
Even Zuckerberg was once not a very popular student, let alone jurisdictions.
Armenia is primarily interested in the tax regime for IT businesses. Having received a certificate of IT-activity (approximately a month of waiting after the registration of the company), you receive 0% income tax, 5% dividend tax, which can be returned, there are no strict requirements for the local office and employees, and the account is opened directly in the country.
The authorized capital of such a company can be from 1 euro - ideal starting conditions for a startup.
Update: While preparing the material for publication, there have been changes in Armenia. Now, if the shareholder of the company is a non-resident of Armenia, then the rate of non-refundable tax on dividends is 10%.
Switzerland
Switzerland is not the first country that comes to mind when it comes to IT. However, this omission is worth fixing. The fact is that in Switzerland, projects with large budgets feel comfortable, whether it is IT development in the field of medicine or the basis for creating and maintaining a large cryptocurrency.
Switzerland's infrastructure is so rapidly developing that bitcoins in some cantons are accepted as payment for public services.
In addition to fintech, Switzerland is interested in cyber security, medicine, science and industry. If your project solves problems in these areas, the choice of Federation may become an additional incentive for you.
In addition, Switzerland is a banking country, which means there will be plenty to choose from a financial institution.
Hong Kong
Opening a company in China is not easy. But in Hong Kong - please. If you want to bite a bite from the Chinese games market, then Hong Kong will give you a chance to jump into this niche.
In addition, Hong Kong offers territorial taxation, which can be very profitable for an IT business that makes profit outside the country. There are various incentives for companies, including tax incentives: a 50% discount on the first 2 million Hong Kong dollars in profits, deductions for R&D, etc.
And most importantly, Hong Kong is predictable. Its legislation is fixed for 50 years. It is clear what will happen in the next couple of decades.
The only problem is the bank account. It is extremely difficult for foreigners and young companies to open an account in Hong Kong itself. It takes a lot of time and effort, and the result is not guaranteed. Therefore, it is better to open an account in other countries or look at alternatives.
Estonia
Despite its modest size, Estonia has big ambitions. Perhaps, it is Estonia that offers one of the most convenient infrastructures for business, including IT, in terms of communication with the state. The electronic state is set up and works quickly and efficiently.
The stake on IT in the country was made a long time ago and we saw its fruits, for example, in the person of Microsoft's purchase of Skype creators. Despite the sad ending for the messenger itself, the price of 8.5 billion dollars shows the scope of opportunities.
For a business, in addition to infrastructure, it is useful to not pay income taxes until profits are reinvested in the company.
Lack of jurisdiction, as always, comes from banks. In order to open an account in Estonia, it is necessary that the company’s activities are connected with Estonia. This is decided by opening accounts outside the country.
Andorra
Another not too obvious player, but offering a corporate tax rate of 2%. For this, special conditions must be met. The base rate is 10%, which is lower than in Ireland.
If the owner of the company becomes a tax resident of Andorra, he will be able to get rid of the tax on dividends.
An account is opened in Andorra itself or beyond at your request.
From Andorra, it is beneficial to attract not only local, but also Spanish and French infrastructure. Countries are very, very close.
Instead of a resume
Entering the international market is a well-thought-out solution. The choice of company and country of registration should be just as well thought out. Each business is individual in its own way and each one will have its own companies and their bank accounts.
A concrete choice is best done with a professional. The reason for this is simple: for example, if you want to open a company in Estonia and keep an account there, but your clients are only in Asia, then you will not receive any account. I have to think, look for alternatives. But you simply did not follow the rules and lost money and time.
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