Dateline: Istanbul, Turkey
One of the sad realities of recent years is that the West is becoming more and more hostile toward business and the free market. It’s one of the big reasons this site even exists, and probably one of the main reasons you’re here, right now, reading this article.
Over the years, we’ve discussed the loss of freedom in the West and canvassed the world in search of safe havens where capitalism and freedom are still alive and well.
In those discussions, Western Europe has often come under fire for their socialist policies, high taxes, and increasing attacks on freedom. But not all of Europe falls into these categories. In fact, many European countries don’t even fall into the category of “The West”, and certainly do not act like their western neighbors.
For instance, the West is known for its high taxes and complicated revenue systems that impose numerous tax brackets on their citizens to ensure that wealth is evenly distributed.
But not every country feels the need for complex structures and controlled social justice. While Luxembourg has a grand total of 17 different tax brackets, many Eastern European countries have chosen to go with one: the flat tax.
In the years following the fall of communism, many former Soviet countries embraced pro-business economic policies. Countries like Estonia led the way, introducing the flat tax in 1994.
This business-friendly environment is one reason why I have become more and more interested in countries in Eastern Europe, and why I made the decision to leave Southeast Asia — moving Nomad Capitalist headquarters from Malaysia to Georgia.
Countries in Eastern Europe to avoid
Still, not every Eastern European country is made alike. While Ukraine may have a flat tax, crony capitalism and mafia-run banks make the country unattractive for investment.
Croatia is another country where it is difficult to plant any business flags. The country recently kicked out a bunch of foreign investors, plus taxes are high. To be honest, it’s just not an interesting place for investment and business at the moment.
Then there are the countries like Montenegro — where it’s easy to start an offshore company and the tax rate is the lowest in al of Europe (at 9%) — but I still wouldn’t recommend it simply because the country has had its challenges and the jurisdiction is not widely accepted.
I wouldn’t recommend Cyprus, either. While they have a functioning citizenship by investment program, I’ve worked with people who’ve gone there and I really cannot suggest it as a good place for planting business flags.
And then there’s Russia. I like Russia for certain reasons, especially if you can start a business there and qualify to get a second passport, but Russia obviously has its challenges, too.
Many other Eastern European countries are just too small to handle your business needs or provide the kind of credibility your company will need to operate internationally.
There are, however, some true gems throughout Eastern Europe that I can recommend without hesitation. Here are my top five:
Five business friendly countries in Eastern Europe
Bulgaria has one of the lowest flat taxes in Europe.
5. Bulgaria
Bulgaria comes in at fifth place because, honestly, it does do better than other countries. The financial situation in Bulgaria is stable, with a debt-to-GDP ratio that is just 1/6th of US levels.
One of the biggest benefits to planting flags in Bulgaria is that it has a 10% corporate tax rate. A couple years back there was talk about changing to a progressive tax system, but it seems that the flat tax will remain for now.
Another benefit is that Bulgaria is part of the EU, which means that your Bulgarian business would provide you with access to the entire EU and the ability to open merchant accounts and bank in other EU jurisdictions, as well.
Plus, you can get residency in Bulgaria by creating jobs and making an investment in the low six figures.
Serbia is one of the best places to hire affordable, high-quality talent.
4. Serbia
I like Serbia for many of the same reasons that I like Bulgaria. While the debt-to-GDP ratio is just half of US levels, it is still a great place to run a business with a decent flat tax of 15%.
The government is more Eastern-aligned than Western-friendly (i.e. they like Russia), but it’s relatively easy to obtain a second residence there if you’re willing to start some sort of very small business on the ground.
If you take that route, Belgrade is a great city to live in — especially for single men and women — with lots of very attractive, fun people. And, for business purposes, Serbia has some of the lowest-priced, best talent out there.
Estonia is constantly innovating in the business realm of economic policy.
3. Estonia
Estonia has quite a few things going for it these days — most of them of its own making. Its debt-to-GDP ratio is less than 1/16th of US levels. And, as mentioned before, Estonia was the first country in Eastern Europe to introduce the flat tax (which is currently at 20%, or zero percent if you’re reinvesting in your company).
We’ve also discussed the pros and cons of Estonia’s innovative e-residency program. While it is not an actual residency program that will allow you to live in Estonia or travel throughout the EU, there are many benefits to the e-residency program.
If you get an actual residence permit and are willing to live in Estonia six months a year, you can get citizenship after eight years. However, you have to learn Estonian in order to qualify, so it’s not the best option for citizenship out there.
That being said, it’s probably one of the best places for business. Besides its tax policy, Estonia’s transparency is probably the best thing about the country in terms of planting business flags. Plus, as part of the EU, it provides anyone looking to do business in Europe with a business-friendly jurisdiction.
This small Baltic country is constantly making inroads and innovating ways to make itself attractive to global investors and entrepreneurs.
The only downside is that it is one of the most expensive places to hire people. My recommendation would be to hire people from Lithuania (which, as a country, could very well tie for fifth place on this list). Lithuania is becoming more and more transparent and, if you choose to do business in the Baltics, I would recommend you do your hiring there.
Georgia is one of my favorite countries in Eastern Europe for investment and living.
2. Georgia
My personal choice for investment and living, the only reason Georgia doesn’t take the number one spot on this list is that the tax rate is 15%, as opposed to Macedonia’s 10%. The country’s debt-to-GDP ratio is 1/3rd that of US levels and the country has a lot of other good numbers when it comes to economic stability and growth.
You can read elsewhere on the blog about how Georgia is the “next America” and how it is one of the most capitalist countries in the world. It’s also a good place to invest in the tourism industry, and it’s one of the easiest places for opening a bank account or starting an offshore company.
However, there aren’t quite as many rules in terms of transfer payments, so if you’ve got businesses in different countries around the world, you may have to do a little more work to make Georgia fit into your plans.
But in general, Georgia is a great place to live, it’s affordable, it’s very friendly for planting flags in general, and the people like Americans.
Macedonia takes the number one spot for business-friendly countries in Eastern Europe.
1. Macedonia
Located to the west of Bulgaria Macedonia takes the number one spot for many of the same reasons Estonia made this list.
First and foremost, it is becoming more and more transparent. The country is also fiscally stable with a debt-to-GDP ration 1/4th that of the US. And corporate taxes are a flat 10%.
The country is very well located, which may be the one other benefit it has over Georgia since it is a bit closer to markets in which you may be doing business.
You can get a residence permit in Macedonia if you hire employees and there’s a citizenship program available.
Wherever you decide to go, countries in Eastern Europe are looking more and more attractive as the West continues to push socialist agendas and reject the free market principles that helped them rise to the top.
Andrew Henderson
Istanbul a nice city, but not for a single guy. Serbia very nice, but plagued by slow internet, not so great to be single. Russia and Ukraine better for single guys, the latter being extremely cheap , though these countries are a bit rough around the edges.
Andrew, with all due respect, the corporate sector is not only flat fees and taxes.
I live in Macedonia and we are struggling with political crisis and transition ever since our independence. I know, not the best way to promote my country by stating this….But it is definitely NOT the top spot for ‘planting a business flag’. I’d rather put it in the ‘Countries to Avoid’ category. Why?
Well, we have been victims of slavery – workers not being paid by capitalists and things like that. The investment sector lives and breathes corruption. There is none media independence at all – everything is politicized, from the national television provider to the Internet blogs and sources that were once legit. Their owners keep the dark secrets and take the government money – not to mention the constant pressure.
The population is protesting a month already and the government is in the process of re-construction. We are ahead of major financial debts and many lost generations finding their ‘luck’ in the Western countries.
I know, it’s not all sunny as it looks. And unfortunately, only the locals see this.
Let’s just hope it will be better.
Hm. Macedonia as number one, who would have thought?
And I am curious what would you say Andrew about the Visegrád countries: Hungary, Poland, the Czech and the Slovak Republics.
What about Romania guys, 3% corporate tax up to 1M per year, 5% tax on dividends
Doing business in countries like Serbia is not the smartest thing you can do. The country is not EU and if you need to import or export something, you will have a nightmare. Second, its totalitarian dictatorship regime took over everything. If you are looking for justice protection, forget it. Also, corruption is high and at all levels. The purest country in Europe where people live less than other is a result of such a system and with very bad health care system.
Belgrade is a bit better due to high centralism of economy and power, but everything else is falling apart. People can be good sometimes, but do not get carried away with that, it will cost you at the end. They do not like strangers unless you are white and as a tourist. Investments in science, education, and culture are also the lowest in Europe. All these thanks to the dictatorship regime also. Don’t be surprised if they offer you to pay for some “benefits”. Almost all small businesses outside Belgrade have an obligation to be a part of a leading party and to pay for “protection”. Otherwise, they will get an inspection after inspection.
The one who wrote this obviously does not know the real situation and giving such advises are really dangerous.
If you are looking to invest in that part of the world, look for Romania – the country with the highest BDP lately and that is for a reason. And if you like to feel like “somewhere East” but be the part of the West, then look for Slovenia. Slovenia will be on top of my list for many reasons – mentality, political, economy, safety, good medical care… and they have good people.
Hey Bane, thank you for sharing your insight and opinion with us!
Bulgaria is not friendly for business. I know veey good because i have my factory there from 2008. Corruption and lazy people. From 2015 a lot of people foing for six months to Uk to work there and return back to spend the money on alcohol. The situation is veey difficult and i am searching new country to move.