Top 5 Countries with Favourable Tax Policies for Investment

September 20, 2024

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Opinion piece with insights provided by Motti Gruzman and Vladislav Nemirovsky.

Last month surveys made by Excelion and MGR Capital say, that taxes are the one of the most important indicators for buying property for companies clients according to Motti Gruzman and Vladislav Nemirovsky.

In today’s interconnected world, where globalization and international trade are the norm, it’s increasingly important for entrepreneurs to carefully choose the best location to register their company. Many countries offer tax incentives and favourable rates that can significantly reduce tax obligations, boosting a company’s profitability.

In this article, we’ll explore which countries have the lowest taxes, how to select the right country based on its tax policies, and the incentives available across different regions and industries.

5 Countries with the most favourable Tax Conditions

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One common misconception is that low corporate income tax always equates to a business-friendly environment. For instance, while Hungary boasts the lowest corporate tax rate in Europe at 9%, the country also has high social contributions, particularly on employee salaries, and Europe’s highest VAT rate of 29%.

Meanwhile, Cyprus, with a slightly higher corporate tax rate of 12.5%, proves to be a more attractive option for foreign businesses, and here’s why.

These are some of the top countries offering favourable conditions:

Cyprus;
United Kingdom (England);
Estonia;
Hong Kong;
Switzerland.

1. Cyprus — Europe’s International Business Hub

Cyprus is an ideal business location within Europe, known for its low corporate tax rate of 12.5% and an array of incentives:

Income earned outside of Cyprus is not taxed.
Dividends and interest income are tax-exempt.
Personal income tax rates are highly favourable.
No taxes on the sale of shares or securities.
No taxes on property sales made abroad.

Cyprus also has an extensive network of double tax treaties, making it even more appealing to global investors. Its efficient company registration system allows businesses to set up quickly and easily.

2. UK (England) — a versatile Business Environment

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The UK offers a compelling tax structure that benefits businesses across various sectors such as consulting, trade, logistics, and online services. The standard corporate tax rate is 19%, it rose to 25% in April 2023 for companies with profits over £50,000.

England provides a wide range of benefits:

Small business rate relief. Offers up to 100% relief on property taxes for small businesses.
Research and development tax relief. Companies engaged in R&D can reduce their tax base by up to 230% of their R&D costs.
Investment tax credits. Provides tax relief of up to 130% on investments in new equipment or technologies.
Tax holidays. Available in sectors like IT and scientific research, offering temporary exemptions from corporate income taxes.

Businesses established in England can operate globally, benefiting from a well-established and reputable jurisdiction.

3. Estonia — a Startup Haven

Estonia is one of the most progressive countries when it comes to tax policies. Companies in Estonia only pay a 20% tax on distributed profits, allowing businesses to retain and reinvest their income without an immediate tax hit.

Key advantages include:

Tax holidays for startups. Newly established businesses can avoid paying income tax for up to two years, providing time to stabilize and attract investment.
Low social taxes. Estonia’s relatively low social taxes further reduce the overall tax burden, allowing businesses to retain more of their profits.

Additionally, Estonia supports startups through incubators, accelerators, and access to venture capital funding.

4. Hong Kong — a Gateway to the Asian Market

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Hong Kong is a major global business hub, renowned for its transparent and straightforward tax system. The corporate income tax rate is 16.5% but only applies to profits earned in Hong Kong. There are no taxes on foreign profits, dividends, sales, or property.

Hong Kong offers several incentives:

Tax deductions. Small businesses enjoy a 50% tax rebate on earnings up to HKD 2 million, lowering the effective tax rate to 8.25%.
Investor Benefits. Dividends received from foreign companies are exempt from tax.

These features make Hong Kong one of the most desirable locations for businesses targeting the Asian market.

5. Switzerland — Prestige for large Corporations

Switzerland is widely regarded as an excellent location for large corporations, holding companies, and investment projects, thanks to its political stability and high reliability. Although its tax system is complex and varies by canton, Switzerland offers significant advantages:

Tax holidays for startups. Some cantons grant tax holidays to newly established companies, allowing them to benefit from reduced taxes for several years.
Dividend tax exemptions. Companies can enjoy tax exemptions on dividends received from other Swiss firms.
Lump-sum taxation. Foreign taxpayers can benefit from this regime, where taxes are based on their expenses in Switzerland rather than income.

Given the variations in tax policies across different cantons, it’s important to consult professionals before registering a company in Switzerland.

Choosing the best country for company registration requires careful consideration of factors such as business type, goals, and long-term strategies. Registering a business in a foreign country can offer significant financial advantages, particularly through lower tax rates and a supportive environment for growth. Additionally, many countries offer tailored tax incentives based on the industry, helping businesses reduce their tax liabilities even further and achieve greater success.