Incorporating Your Company Abroad: Lesser-Known Countries to Consider
Are you looking to incorporate your company abroad? With so many factors to consider, it can be overwhelming to choose the perfect location. Taxes, ease of doing business, and potential for growth are just a few of the many factors to consider. In this article, we will cover four lesser-known countries that might just be the perfect place for you to incorporate your next company. We will be approaching this as a foreigner incorporating in that country abroad, and where applicable, we will use a company profit of $100,000 and $1 million as our baseline.
Table of Contents
1. Introduction
2. Incorporating in the UK
3. Incorporating in the US
4. Incorporating in Cyprus
5. Incorporating in Estonia
6. Incorporating in Georgia
7. Incorporating in the Isle of Man
8. Comparison of Costs and Tax Rates
9. Moving to the Country of Incorporation
10. FAQ
Incorporating in the UK
The UK is currently ranked 8th in the world for ease of doing business. However, from April 2023, UK corporation tax gets far less beneficial and a bit more complex. Before that, UK corporation tax was just 19%, but now, if your company makes a profit up to £50,000, it's still 19%. Profits between £50,000 and £250,000 are going to be a marginal rate of 26.5%, and if your company profits are above £250,000, you're going to pay 25% on everything. Using our standard test, a $100,000 profit would equate to a corporation tax rate of 21.82%. Company profits of $1 million would have a 25% corporation tax rate.
Incorporating in the US
The US is currently ranked 6th in the world in terms of ease of doing business. This is a touch different because US corporations will pay a federal corporation tax of 21%, always. Depending on the state they're registered within, they could also pay a state corporation tax rate on top of that. If your company is registered in a state like Wyoming, where there's no state corporation tax, then on a $100,000 profit, the overall corporate tax rate is 21%. The same applies to a $1 million profit. If you incorporate in a state like Florida, then your overall corporate tax rate is going to be 26.5%. If you incorporate in a state like Minnesota, then your overall corporate tax rate is going to be about 30.8%. The US also has a popular limited liability company or LLC. Generally, these are treated as pass-through vehicles, meaning profits of the LLC are not treated with corporation tax. They are passed to the owner as the owner's income. The owner then pays personal income tax on those profits.
Incorporating in Cyprus
Cyprus is home to the cleanest beaches in all of Europe and the world's oldest perfumes. Cyprus is currently ranked 54th in the world in terms of ease of doing business. The corporate tax rate here is a flat 12.5%, which applies to both a $100,000 and a $1 million profit per year. Cyprus does not levy a withholding tax on dividends, interests, or royalties paid to non-residents of Cyprus. The setup costs would include all of this and would cost about 1300 Euros plus that, which is 19 in Cyprus. If you need assistance in opening a bank account in Cyprus as well, that's going to have a cost of 400 euros plus that. The total incorporation cost is about 2,000 Euros, which is just under $2,200. The annual total fee for everything is about $1,900.
Incorporating in Estonia
Estonia is currently ranked 18th in the world in terms of ease of doing business. In terms of corporate tax, all undistributed profits are tax-exempt, which is 0% for all company profits kept within the company that you're not distributing to yourself. Essentially, this means you can use all of the company's money to further grow the company. Estonia is the first of two options on this list that actually uses a system whereby they postpone corporation tax until, for example, dividends are declared. Your company makes $100,000 in profit, no tax. So you've got $100,000 or $1 million in profit. However, that post-tax profit, because there is no tax, when you declare dividends to yourself or pay yourself a salary from those post-tax profits, the normal rates on these distributed profits are 20%. However, if you're making regular distributions like this, they do offer a lower 14%. If you use the 14% system, then a 7% withholding tax is levied on things like dividends unless the country you reside in has a 0% double tax treaty with Estonia, in which case that 7% would not apply, and you would pay 14% on distributed profits.
Incorporating in Georgia
Georgia is ranked seventh in the world in terms of ease of doing business. Similar to Estonia, Georgia's corporate tax rate is 0% on retained earnings. Again, similarly, there's a max rate of 20% applied to distributed profits such as salaries or dividends paid to foreigners with withholding taxes. For companies set up in a non-free industrial zone, this is going to include all of this and will cost about 900 Euros or $1,100. The annual fees are going to include this, which is going to cost about 400 Euros or $433. For those wanting Georgian accountants, accounting is going to cost about 75 Euros a month. For a non-free industrial zoning corporation, it's going to cost you about $1,100 to set up and $450 annually.
Incorporating in the Isle of Man
The Isle of Man is a self-governing British crown dependency, which technically means it's a possession of the crown rather than the UK. It's well established as an international business center due to its political stability and low taxation. The Isle of Man has a corporate tax rate of 0%, and dividends have a 0% rate of tax. There is no withholding tax on dividends. The initial set-up costs include all of this and will cost you between 3,500 and 4,000 pounds. In terms of bank account here, you have two options. You can set up an offshore bank account, which is cheaper, or you can open an Isle of Man business bank account, but this is going to cost you about 1,500 pounds. The total cost to incorporate here is going to be between about 4,000 pounds and 5,100 pounds, which is between $5,000 and $6,400.
Comparison of Costs and Tax Rates
| Country | Corporate Tax Rate | Withholding Tax on Dividends | Incorporation Cost | Annual Fees |
| --- | --- | --- | --- | --- |
| UK | 19-25% | Yes | $2,200 | $1,900 |
| US | 21% | Yes | $0-$2,000 | $0-$1,000 |
| Cyprus | 12.5% | No | $2,200 | $1,900 |
| Estonia | 0-20% | Yes | $900 | $400 |
| Georgia | 0-20% | Yes | $1,100 | $450 |
| Isle of Man | 0% | No | $5,000-$6,400 | $0-$1,500 |
Moving to the Country of Incorporation
Some people even consider moving to the country where they incorporate for other reasons. Georgia and the Isle of Man have very low personal tax rates. Residents in Georgia who have Georgian-sourced income, that's income from operations in Georgia, are going to pay a standard personal income tax rate of 20%. Residents are exempt from tax on foreign source income, which is any earnings that don't actually come from a Georgian source. Capital gains tax on foreign investments, crypto, etc., is also 0%. The Isle of Man has very low personal tax rates, with the highest personal tax rate being 20%. There's also 0% on capital gains, inheritance tax, and stamp duty.
FAQ
1. What is the best country to incorporate my company in?
- The best country to incorporate your company in depends on your specific needs and goals. Consider factors such as taxes, ease of doing business, and potential for growth.
2. What is the corporate tax rate in Cyprus?
- The corporate tax rate in Cyprus is a flat 12.5%.
3. What is the personal income tax rate in Georgia?
- Residents in Georgia who have Georgian-sourced income are going to pay a standard personal income tax rate of 20%.
4. What is the cost to incorporate in the Isle of Man?
- The cost to incorporate in the Isle of Man is between 4,000 pounds and 5,100 pounds, which is between $5,000 and $6,400.
5. What is the withholding tax on dividends in Estonia?
- The withholding tax on dividends in Estonia is 7%, unless the country you reside in has a 0% double tax treaty with Estonia, in which case that 7% would not apply, and you would pay 14% on distributed profits.
In conclusion, incorporating your company abroad can be a great way to save on taxes and grow your business. Consider the options presented in this article and consult with experts to make the best decision for your specific needs and goals.
