When it comes to protecting and growing your wealth by structuring companies in the most efficient way possible from a tax and legal viewpoint, then it pays to approach the problem globally and think outside the box.
That doesn’t mean you must come up with a radical new approach. No, just as in the original meaning of the now well-worn cliche, it means thinking above your official pay grade.
It’s about realising that plenty of people are leveraging the possibilities of offshore company incorporation to legally avoid taxes. In most cases, they do it from the familiar surroundings of their home country.
Though there are pitfalls, opening an overseas company is usually less complicated, less expensive and less stressful than people imagine. That’s in spite of the bureaucrats at the Organisation for Economic Cooperation and Development (OECD) who want to increase taxes on companies with earnings in low-tax jurisdictions.
Despite being pressured to conform, some countries have chosen to incur the wrath of the OECD by refusing to fall in line with the global minimum corporate tax rate of 15%. As a result, most no- and low-tax countries are viewed as stubborn outliers and have been blacklisted or greylisted by the international community.
The issue for the OECD is that there is little else it can do to prevent these so-called ‘havens’ from retaining their tax-fee status. The benefits outweigh the disadvantages for these small islands, whether in the Caribbean or closer to Europe. They use corporate tax incentives to appeal to businesses, pull in capital, create jobs and attract investment.
Regardless of whether we think they should exist, they do, and in these jurisdictions, corporations can still pay little or no tax. The following places, however, are not for people who seek the lifestyle benefits of advanced industrialised legacy countries like Switzerland, Germany and the United States. In most cases, these tax-free nations are blacklisted or greylisted in the West and come with varying degrees of reputational risk.
It all comes down to the fact that for company owners, their corporate tax situation is linked to their personal tax situation. If the goal is to reduce taxes, you cannot personally live anywhere.
When it comes to internationalising your business and life, nothing stands alone. Nomad Capitalist is the only firm that combines tax, immigration, asset protection and investment strategy, all under one roof, to create a plan as unique as you are.
In most cases, incorporating companies in tax-favourable jurisdictions goes hand-in-hand with appropriately structuring your personal tax situation. So, if someone from Canada establishes a company in the Cayman Islands, it will still be taxed in Canada.
It’s the same in most high-tax countries, like those in Europe, which have strict rules on opening companies in blacklisted tax havens. You will likely end up paying higher taxes in the European Union (EU) than you would if you have a local company.
For example, in Portugal, a local company is taxed at 28%, but one discovered to have been started in a blacklisted country would be taxed at 35%.
For that reason, the following jurisdictions will work for company incorporation for people who want to live anywhere in the world but not in places like Canada, Europe, Australia, the UK or the US. It’s what we call ‘going where you are treated best’.
You don’t even have to visit these jurisdictions to register your company since you can do it remotely. However, you can generally only open a business bank account if you have substance there – a residence, office or employees on the ground.
9 Best Global Jurisdictions for Company Incorporation
1. The British Virgin Islands
The British Virgin Islands (BVI) is a British overseas territory in the Caribbean, east of Puerto Rico. Made up of numerous small, uninhabited islands and four main ones, BVI is part of an island chain known as the Virgin Islands.
A popular tourist destination known for its reef-lined beaches, yachting, and pleasant tropical climate, BVI is also English-speaking, which is a bonus if you plan to manage your company from afar.
If you live in Asia, Latin America or a zero-tax jurisdiction, the British Virgin Islands can work perfectly as a location to register your company in. It’s a tax haven that does not impose any tax on corporations.
Setting up a company there is relatively straightforward. There are no audit requirements, which makes maintaining it relatively simple. The tax benefit applies if you do not conduct business on the island by having clients there. In this video, Nomad Capitalist founder, Andrew Henderson, shows you how to create a perfect offshore company structure.
2. Hong Kong
In recent years, Hong Kong has emerged as Asia’s premier international business hub. Rated by the World Economic Forum as having one of the world’s top financial systems, Hong Kong is uniquely situated between mainland China and the broader world, bridging the gap between East and West.
Those wishing to incorporate in Hong Kong will benefit from its strong reputation, low taxes, low compliance costs and lack of trade barriers.
Hong Kong is not exactly tax-free as it has corporate tax from 8% to 16.5%. But it also has the Hong Kong Tax Exemption Claim that offers a territorial source principle of taxation on offshore profits.
If you satisfy the requirements and don’t have any clients in Hong Kong, you can pay zero corporate tax on offshore business activity.
Be aware that Hong Kong has a Foreign-Sourced Income Exemption (FSIE) regime. This prevents the establishment of shell companies in Hong Kong for the express purpose of filing offshore tax claims for passive income. All companies must show evidence of a ‘substantial economic presence’ in Hong Kong to benefit from preferential tax treatment.
With the Hong Kong Tax Exemption Claim, your company will be audited every year and you can only personally spend up to 30 days a year there. You won’t be allowed to have a Hong Kong residence, a Hong Kong company director or a bank account there. A bit of effort is required to qualify for the offshore profits claim, but if you can, you will pay zero on the corporate side.
3. United Arab Emirates
The United Arab Emirates (UAE) is one of the world’s fastest-growing destinations for business. The UAE’s approach to making business easy to conduct, its low-tax status, world-class infrastructure, strong government support and strategic location all attract entrepreneurs from across the globe.
The UAE may no longer be a zero-tax regime, but it’s still one of the best options for foreign incorporation, as we explain in our deep-dive video, Six Benefits of Incorporating in Dubai.
As of June 2023, corporate tax here stood at 9% unless you’re incorporating a holding company or have a company that falls under the qualifying income list.
The UAE has free zones that generally provide the same tax benefits but the fees, maintenance costs and paperwork requirements can differ between these free zones. Depending on the activity and industry your company is involved in, you may be asked to provide further data and compliance information.
4. The Cayman Islands
The Cayman Islands is another British Overseas Territory in the Caribbean that enjoys stunning weather, an accessible location and a ready-made set-up to register your company in.
The Caymans is a 0% tax jurisdiction. However, Cayman Islands companies are some of the most expensive to set up. There are a couple of different regimes. You can establish an exempt company if:
- You intend to refrain from engaging in business on the island
- You work with international clients
- You’re personally not physically located on the island.
Establishing a special economic zone company is also possible, which is particularly attractive if you have crypto assets. However, Cayman companies are expensive to maintain and, depending on the industry, you might need a licence which is an additional cost.
The difficulty is that you can only bank in the Cayman Islands if you’re a resident. Therefore, applying for residency, living there and having your company there can be excellent options for paying no personal or corporate tax.
5. Panama
Known for its strategic location, Panama offers firms access to different locations across North and South America. Its favourable tax environment and ease of doing business have arguably made Panama Central America’s most vital economic and commercial hub.
Even though Panama doesn’t have a 0% corporate tax, it makes the list because it has a territorial tax regime. This means you can pay 0% on foreign-sourced income but income sourced there is levied at a flat corporate tax rate of 25%. If you properly structure your business, you can still enjoy 0% corporate tax in Panama.
Best Jurisdictions for Company Incorporation in Europe
If you want to live in Europe, the countries listed above won’t work to establish a company because most of them are blacklisted jurisdictions.
While not zero-tax countries, the following are the best options for paying lower corporate tax if you live or want to establish a base in the EU.
6. Malta
Malta is renowned as an attractive, tax-friendly location to register your company. The corporate tax rate is at a flat 35% but foreign-owned Maltese companies can claim tax refunds that result in an effective rate as low as 5% – the lowest in Europe. If a company owner is not considered a tax resident in Malta, they can reclaim 30% of the corporate tax.
If you want to incorporate there, foreign-owned Maltese holding companies are entirely tax-exempt. Incorporation fees in Malta are relatively low and there are also generous reliefs, incentives and grants for research and development companies.
7. Cyprus
Cyprus sits at the crossroads of Africa, Asia and Europe, making it an excellent location for global business. It offers modern infrastructure, a highly-skilled, English-speaking workforce and an extensive network of double taxation treaties.
Cyprus’s corporate tax rate is one of the lowest in Europe at 12.5% and, as a European Union jurisdiction, Cyprus is not blacklisted. In Cyprus, further corporate tax incentives are available, with 0% tax on any revenues from trading in securities such as shares and a mere 2.5% tax on intellectual property rights.
8. Ireland
Ireland has bowed to international pressure to endorse a global minimum rate of 15%, which came into force at the start of 2024.
The good news is that it will only apply to certain companies, with many will be able to retain or secure the lower 12.5% rate. The country remains hospitable to those who want to establish corporations, particularly research and development start-ups. These can avail of a tax credit worth 25% of qualifying expenditure, in addition to the corporation tax trading deduction available for related spending.
9. Bulgaria
With a flat rate of 10%, Bulgaria has the EU’s lowest corporate tax rate. It also has a low rate of 5% withholding tax on dividends, which can benefit companies that pay dividends to their shareholders. The government has focused on building a favourable business climate for foreign investors. With fast and easy procedures for incorporation, a new company can be registered here in just a few days.
Bulgaria is also a low-cost country for doing business and is significantly lower cost than the rest of the EU. Incorporating in Bulgaria will save on office rent, utilities and labour costs. It’s rated as one of the best destinations in Europe to develop outsourcing activities.
Create New Wealth Faster
Many entrepreneurs are beginning to realise that they can run a business from anywhere in the world. Depending on their personal tax situation, they can incorporate in tax-friendly jurisdictions where they can pay low or no corporate tax. It does require proper planning, though.
That’s where Nomad Capitalist comes in. We help seven- and eight-figure entrepreneurs and investors create a bespoke strategy using our uniquely successful methods. You’ll keep more of your own money, create new wealth faster and be protected from whatever happens in just three steps. Discover how we do things here.
