IT “Hotspots” for global incorporation
Whether you want to expand your IT business globally or looking to relocate, there is a wide range of factors you need to consider before moving to an offshore jurisdiction. Different countries around the globe have different rules and regulations for setting up an IT business. Sometimes, they can be challenging to navigate by yourself, especially when different areas within those countries have distinctive rules and regulations, like the states in the USA.
In this article, we’ll discuss the concept of an offshore company, what factors you should take into account, why you should consider going offshore, and what are some of the best options for IT companies who want to relocate or expand.
Some individuals think offshore companies are only made for tax evasion or to hide money from the authorities, but it’s not true! Here is the actual definition; an offshore company is a company that is registered in a different jurisdiction than your home country. For instance, you live in Germany and branch out in Singapore because you know their tax system is favorable, so you set up an offshore company. A few years later, you opened another branch in Malaysia, so you now got two offshore companies.
It’s not a new term; corporate giants like Google, Apple, and Unilever have been branching out for years and have established several offshore companies. Companies take advantage of the favorable policies while complying with them and legally reduce their taxes significantly.
The first and most crucial factor is to look at what kind of corporate taxes will apply to your IT business. Some countries deliver a friendly environment for opening an offshore company but take ridiculously high taxes on corporate income. At the same time, some no-tax jurisdictions are starting to impose taxes on specific businesses and kinds of income. So, you should research and incorporate within the right jurisdiction with low tax rates and stable policies.
You have to look at the general corporate tax rate and the taxation at the state level to see if the jurisdiction is within reach. Some countries have different taxes for IT businesses, so make sure to do your research on that as well.
The first and most crucial factor is to look at what kind of corporate taxes will apply to your IT business. Some countries deliver a friendly environment for opening an offshore company but take ridiculously high taxes on corporate income. At the same time, some no-tax jurisdictions are starting to impose taxes on specific businesses and kinds of income. So, you should research and incorporate within the right jurisdiction with low tax rates and stable policies.
You have to look at the general corporate tax rate and the taxation at the state level to see if the jurisdiction is within reach. Some countries have different taxes for IT businesses, so make sure to do your research on that as well.
- Corruption level
- Political stability
- Trade control
- Freedom of speech
- Bureaucracy
Depending on how much capital you want to invest, each country has different requirements. You need to know how much minimum capital is required in your desired jurisdiction for opening an IT offshore company.
For example, in India, you must meet the minimum capital requirement to complete the incorporation and set up a business. But in the United Kingdom, or Bulgaria, you don’t have to commit to the minimum capital, so you can set up your business right away.
Before you start your operations, this is something that you need to look at so you don’t get into any trouble afterward.
If you go with a nation like Dubai, you will pay significant rent prices compared to India. So, it’s better to check the cost of setting up a business to get a clear picture before choosing a jurisdiction.
What are The Best Countries for IT Businesses to Relocate or Expand
Now that you know what an offshore company is and what factors you should consider, let’s look at some of the top offshore jurisdictions you should consider for your IT business.
We chose these countries based on some important factors for IT companies, including taxation, political stability, incorporation process, and annual maintenance fees.
Note: There is no perfect jurisdiction that will work for every type of IT business – you need to plan it carefully. Some of these countries might not be the absolute source of truth that all IT entrepreneurs agree on, so do your research.
For the last few years, the United Arab Emirates has been one of the most popular destinations for IT investors looking to start a new venture.
The lucrative aspect in the United Arab Emirates is that most types of offshore companies are exempted from paying any corporate taxes (or even personal taxes).
For small-medium-sized businesses, UAE is like tax haven. You don’t have to pay any taxes if you earn 375,000 UAE ($102,096) annually.
For income exceeding this amount, you shall be subject to a 9% tax rate, which is lower than in most popular countries in the world. You also don’t have to pay any tax on the import or export of goods or any capital gains.
There are free trade zones in the UAE where you can set up your IT offshore company and take advantage of more flexible terms of ownership of the investments. If you consider relocating or expanding your IT business, UAE might be for you.
is one of the members of the European Union, so opening an IT offshore company in this jurisdiction will give you access to the whole EU market. Over the past years, it has made steady GDP growth and offered various industry benefits. In Bulgaria, you will have to pay a flat corporate tax rate of 10%, one of the lowest in Europe.
You don’t have to invest in property to acquire a VAT number compared to other European countries. As soon as you set up your IT offshore company in Bulgaria, you will easily get the VAT number and bank account. There are no requirements for hiring a company secretary, and you are only required to have a share capital of €1 to form a company.
Due to tax-friendly laws and the presence of a skilled workforce, Singapore is home to various multinational IT companies, including Amazon, IBM, Google, and Oracle.
It’s known as the heart of IT and software businesses because of the low tax rates and well-organized infrastructure. Its currency (Singapore Dollar – SGD) is the 12th most traded currency globally and the 3rd highest in Asia. So, you can easily use Singapore Dollars for trading and investment.
The great part is that it only takes around one day to register your company in Singapore. This country permits a business to have full foreign ownership, and you don’t need prior approval from the local authorities.
However, it’s necessary to hire at least one local director in your company, but fret not, you will probably be amazed by the talent you can find in Singapore.
Hong Kong is a pretty famous jurisdiction when it comes to relocating and branching out for IT businesses. Due to political stability and excellent infrastructure, Hong Kong has attracted many IT businesses from all across the globe.
Offshore companies have to pay a 16.5% tax rate only on the income derived in Hong Kong. Most companies are attracted because of its fantastic location as they get easy access to Mainland China markets. By opening an IT offshore company in Hong Kong, you don’t have to worry about the political environment and take advantage of the investor-friendly legal and regulatory regime.
Thanks to tax exemptions and a flexible tax structure, The Bahamas has been a famous offshore jurisdiction for setting up an IT business. If you don’t conduct business with the local residents, you are not subjected to any exchange control laws, which can significantly increase your profits. You can set up your offshore company within seven days, but you can face some difficulties regarding the language as most residents don’t speak English.
You have to keep in mind that armed robberies and frauds are pretty common in the country. So, make sure to do your research before investing in The Bahamas.
In conclusion, if you’re looking to relocate or expand your IT business globally, setting up an offshore company can be an excellent option to reduce taxes and benefit from favorable policies. However, before making any decision, you need to consider several factors such as corporate tax rates, rules and regulations, political environment, minimum capital, cost for business setup, and local talent. Additionally, there is no one-size-fits-all solution, and it’s essential to do your research and plan carefully based on your specific type of business.
There are several countries to consider, such as the United Arab Emirates, Singapore, Hong Kong, the United Kingdom, and Bulgaria, based on factors such as taxation, political stability, incorporation process, and annual maintenance fees. However, each country has its pros and cons, and you need to research and analyze each jurisdiction before making any decision.
If you’re interested in opening an offshore company for your IT business, consult with a professional who has experience in offshore business incorporation and can guide you through the process. With careful planning, research, and guidance, you can successfully relocate or expand your IT business globally and benefit from favorable policies and tax rates.