Whether you start an online business or your business exists for some time, you probably want to know what is the best jurisdiction for incorporation of digital business. However, there is no universal answer for each and every one.
Firstly, you need to remember that we live in the digital era. Your online business does not require an office or even a warehouse to stock goods. This is the reason why a lot of entrepreneurs live in one country while doing business in other and having clients from different locations. You no longer need to be limited by one particular country.
Secondly, some business owners think that the best jurisdictions are those that provide low or zero tax regimes. Though the tax rate really matters, in certain cases there are other criteria to consider for choosing jurisdiction for online business.
The above sounds amazing, but does not make things easier. With all these different options, you can ask yourself what goals you want to achieve with your online business apart from deriving a profit. Ask yourself:
- Do you want to change your lifestyle and get a citizenship/residency for you and your family in another country?
- Do you operate in innovative sphere and you want to establish your online business in stable jurisdiction with positive legal environment?
- Do you care about the reputation of the jurisdiction in which you want to set up your company?
- Is it only taxes that matter you right now?
Below we collected a few frequently asked questions. And we give you our answers.
What if I want to get a citizenship or residency together with relocating my online business?
If you want your business to bring some lifestyle benefits for you and your family, you can consider particular countries that grant citizenship or residency for businessmen. The citizenship or residency in return of investment is called in some jurisdictions as golden visa. Such countries as Andorra, Spain, Cyprus, the UK to name a few attract business owners to establish their companies and make investments. Once the amount of investment goals is hit, business owners and their family members are granted with passports or residency permits of this country.
What is the Estonian e-residency and how does it work for online business?
Recently, Estonian government has introduced e-residency for digital nomads wishing to access advanced digital infrastructure and excellent public services offered by this country without physical relocation. This is not an option for those who plans to move to Estonia or other EU member country. E-residents are not granted with the right to live there.
Still, the e-residency is an excellent opportunity for establishing an online business in Estonia while operating inside and outside of the EU.
What if I operate an online business in innovative technological sphere?
There are countries that respond quickly to new technological challenges by establishing legislation changes or adopting new laws that are legally friendly to innovation. For example: Gibraltar, Luxembourg, Switzerland and certain other countries are legally positive towards blockchain technologies, crypto companies and those operating with matters not yet known to most of the public.
Some countries have gained a reputation of having a stable and solid legal system. Setting up a company in such jurisdiction means that you can highly expect that your interest will be protected.
Which jurisdiction should I choose if my customers and partners care about the reputation of my company?
For a lot of entrepreneurs, the idea of setting up a company in an offshore jurisdiction sounds negatively. Traditionally, offshore jurisdictions are associated with all things related to tax avoidance, money laundering, etc. Of course, it does not mean that all offshore companies have negative reputation. Still, it is much easier to gain goodwill with business in stable and “white” jurisdictions.
When choosing a jurisdiction with positive legal environment, try to avoid jurisdictions that avoid cooperation on tax matters. These are usually tax havens that are not committed to transparency cooperation. Online business established in tax havens may face difficulties with opening bank accounts.
What if so far I only care about taxes?
All businessmen care about taxes. The more money your business gets as a profit, the more money you can spend on growth and development of your company. That is why, this is a reasonable and important question. Taxes should be constantly considered.
If taxes are the most important for you now, then you can consider low or zero income tax jurisdictions. Among these countries are Bahamas, Bahrain, Belize, Cyprus, Hong Kong, Qatar, Singapore, Spain, Switzerland.
Besides, there are countries that designate special areas with benefits for resident companies. The countries with special economic zones provide not only tax exemption, but special regulation to support economic growth of business.