Have you made up your mind to establish a business in Europe? One of the aspects that should be considered in such a case is the tax ramifications. Corporate taxation, for instance, is competitive in many countries within the European market making these countries very appealing to business owners and organizations seeking growth and change of premises.
In this blog, I am going to address ten countries in Europe that are known for being attractive low-tax jurisdictions for business activities. The Islands in Med and Eastern Bulgaria depend on these countries for a lot more including tax benefits, skilled labor, and position.
Whatever your level of entrepreneurship, it does not matter, knowing these countries’ tax systems can assist you in the aspirations that you intend to have for your business.
Now, let us explore the twelve best low-tax countries in Europe for business persons.
1. Bulgaria
Corporate Tax Rate: 10%
Bulgaria has a flat margin of corporate tax of 10%, contributing to the list of these countries, making it one of the most favorable tax regime countries on the European continent. Apart from the fact that Bulgaria has personal income tax at a very low level, it also makes the taxation of economic activities equally distortionary.
The education system in the country contributes to a domestically skilled population with regards to IT and engineering professions and low cost of operations, thus favoring both the young and older companies. The country being an EU member state, Bulgaria offers a wide range of markets as well as funds.
2. Cyprus
Corporate Tax Rate: 12.5%
The country of Cyprus has various distinct advantages: geography and a good business environment. Because of this low rate, it is one of the preferred places for establishing Headquarters for Multinational Enterprises in Europe.
Several provisions of the country’s taxation policies encourage foreign investments, including tax holidays on specific types of income and average rates on special kinds of income such as royalties. Cyprus is however preferred by business people for its geographical positioning which is a prime factor in international business.
3. Hungary
Corporate Tax Rate: 9%
Hungary proves to be the top pick for all business entities wishing to minimize their tax burden as the country has the least chargeable tax of only 9 percent to corporations in the entire European Union. It has a very friendly business environment, supplemented by many tax credits for certain areas, particularly for the encouragement of research and development initiatives thus fostering advancement. The capital- Budapest has become an active and robust center of technology with vast resources and talent available and therefore it presents very good prospects for both new and old technology companies in Hungary.
4. Ireland
Corporate Tax Rate: 12.5%
Other international companies also benefit from Irish taxation especially large tech and pharmaceutical companies as it has favorable tax codes. Ireland has been offering a corporate income tax rate of twelve point five percent which is accompanied by wide margin allowances on research and other related expenses for promotion that can reduce taxable income to quite a low level. Ireland is also getting a considerable amount of foreign investment as it has a strong legal system and proficient English manpower along with numerous tech start-up companies that help businesses to scale in Europe and other regions.
5. Lithuania
Corporate Tax Rate: 15%
Lithuania is referred to as a developing economy due to its reasonable rate of taxation which is set at fifteen percent Corporation tax. There has emerged a trend where there are more and more people venturing into the world of business in Lithuania due to these advantages. There is a growing appreciation of the talent pool, as well as the strong IT companies, which makes the country a hotbed of new ideas. Also, Lithuania offers many schemes for new and innovative businesses, such as tax breaks and subsidy programs, aimed at helping young companies to take off.
6. Malta
Corporate Tax Rate: 35% (Effective rate around 5-10% due to refunds)
The effective rate of taxation in Malta can be much lower than the nominal 35% revenue-based tax as a result of full imputation credits and tax refunds to shareholders. This is also why any international company that is seeking effective tax planning solutions would choose Malta. The country’s geography further enhances the position of the island as an offshore investment center coupled with a well-developed legislative regime and an emergent financial services industry.
7. Montenegro
Corporate tax rate: 9%.
Montenegro is geographically located at such a low rate of 9% corporate tax rate which is among the lowest in Europe and thus is ideal for local as well as international businesses. It also has a simple and clear tax system making tax compliance for businesses easy. The European orientation of Montenegro also makes it interesting particularly the fact that EU membership may improve the country’s economies further.
8. Romania
Corporate tax rate: 16%.
In the Romanian competitive environment, commercial activities are encouraged owing to the tax rate of 16 percent corporate tax which is favorable. The Romanian business environment has an educated workforce and a good business environment for different industries such as tech, manufacturing, and agriculture. Romania, like those other countries, also provides different categories of investment incentive tax relief for business activities undertaken in certain economic domains, especially the growing renewable energy and infrastructure domains.
9. Switzerland
Corporate Tax Rate: 14.6%
In Switzerland, the level of taxation is determined by the canton but considering the Federal tax purpose, it is very low at 14.6%. Switzerland is sought after by many international organizations due to its political neutrality, stable and efficient economy, and quality of living. It also helps that the company does not have to worry about security issues as the country offers conducive conditions for any company that needs to set up a European business headquarters.
10. Estonia
Corporate Tax Rate: 0% on retained earnings, 20% on distributed profits
The peculiarity of the tax system of Estonia is that it promotes the suspension of payment of corporate income taxes on retained earnings. This creative strategy is very appealing to growth-oriented and innovative businesses. Only profits that are paid out to shareholders are subject to taxation at 20%, thus leading to the growth of businesses and launching new projects. The digital society initiatives of Estonia, such as e-Residency, attract many businesspersons who wish to relocate to Europe with a preference for new technologies.
11. Czech Republic
Corporate Tax Rate: 21%
The corporate tax of the Czech Republic which is estimated at 21% is relatively strong, further complemented by a stable economy and good infrastructure making it a nest for foreign investors, equally startups. The country is also well known for its emphasis on innovation and research by way of various grants and funding plans. Being centrally located within the boundaries of Europe’s eastern and Western countries, it acts as a center for companies wishing to expand throughout Europe.
12. Portugal
Corporate Tax Rate: 21%
Regarding tax policy, Portugal has shown even greater improvement as it is now attracting businesses and therefore earning a corporate tax of 21%. As for taxation, the country has many measures, especially targeted to new companies and companies that put money into innovation. Increasing tech opportunities, especially in Lisbon and Porto, Portugal is a thriving place for various business people. Moreover, good weather, low cost of living as well as presence of a qualified workforce make the country even more attractive to foreign investors.
Conclusion
Setting up your enterprise in a low-tax jurisdiction can be very rewarding as far as financial and operational benefits are concerned. The same is true for every European country as they each have distinct benefits as well as a good taxation policy that enables your business growth.
Tax treatments vary in different countries; therefore, consulting a tax advisor (Easyfiling) before making a decision is suitable to learn the respective pros and cons of every location. If you want more specific clear guidance on how to establish your business in Europe, please contact our team.
We understand that you are not able to tread beyond what is known and we are here to help you make the right business decision for success and tap into the opportunities awaiting in these low-tax nations.
Nabin Adhikari
