Are you trying to reduce your company’s tax burden? Are you searching for jurisdictions with favorable tax environments and low taxation? If yes, you are at the right place.
Many businesses are considering tax-friendly options to boost profitability and simplify operations. However, understanding these opportunities can be complex and challenging.
This article explores a list of countries with low taxation where you can incorporate your company and benefit from authentic tax havens.
TaxMove helps you choose the most suitable jurisdiction for your corporation. Our experts specialize in assisting businesses to identify and establish operations in the most beneficial jurisdictions, ensuring you select the best strategy for your company’s needs.
Cyprus
Cyprus is known for its attractive corporate income tax rate of 12.5%, one of the lowest in the European Union. This low tax rate makes Cyprus a popular destination for companies looking to reduce their tax obligations, particularly those involved in international business.
The combination of a company in Cyprus and Non-Dom status for individuals could be an excellent choice from a tax perspective.
Cyprus also offers an Intellectual Property (IP) Box regime, allowing companies to benefit from an effective tax rate as low as 2.5% on income derived from IP assets. This regime is especially advantageous for tech companies, pharmaceutical firms, and other businesses that rely heavily on intellectual property.
Cyprus does not impose withholding tax on dividends paid to non-residents. This means that profits can be distributed to shareholders or parent companies abroad without incurring additional tax, making Cyprus an attractive location for holding companies.
Cyprus has signed over 60 Double Tax Treaties, helping prevent double taxation and providing clarity on tax obligations for companies operating internationally.
Malta
Malta’s standard corporate income tax rate is 35%, but through a tax refund system, the effective tax rate can be reduced significantly. Companies can claim a refund of up to 30%, bringing the effective CIT rate down to 5%. This structure is particularly beneficial for holding companies and businesses with international operations.
Malta allows companies within the same group to consolidate their tax positions. This, combined with the refund system, enables businesses to achieve an effective tax rate as low as 5% without being taxed abroad.
Malta does not impose withholding tax on dividends paid to non-residents, further enhancing its appeal for international companies looking to optimize their tax strategies.
This country has signed over 70 Double Tax Treaties, ensuring that companies operating internationally can avoid double taxation.
Dubai and the United Arab Emirates (UAE)
Dubai and the UAE have introduced a federal corporate tax rate of 9% applicable for taxable profits from AED 375,000 (circa USD 100,000), but many Free Zones still offer companies the opportunity to benefit from a 0% tax rate if these entities are carrying out qualifying activities.
These Free Zones are particularly attractive for holding companies and businesses involved in international trade.
To the extent holding shares in other entities is a qualifying activity, the UAE’s numerous Free Zones provide a tax-efficient environment for holding companies, with guarantees of tax exemption for several years. This makes the UAE a preferred destination for businesses looking to establish regional headquarters or holding structures.
The UAE does not impose WHT on dividends, allowing companies to repatriate profits without additional tax burdens.
This country has signed over 110 Double Tax Treaties, offering protection against double taxation and ensuring that companies can operate internationally without facing excessive tax challenges.
Panama
Panama operates a territorial tax system, meaning that only income earned within Panama is subject to taxation. Foreign income, regardless of its origin, is not taxed in Panama, making it an ideal jurisdiction for companies with substantial foreign income.
Panama does not impose withholding tax on dividends paid to non-residents. This allows companies to repatriate profits without incurring additional tax liabilities.
Currently, Panama is on the European Union’s blacklist of jurisdictions. Therefore, it is crucial to consult with an expert to confirm the legal structure before establishing a business entity in Panama. This is important as it could lead to potential withholding taxes and delays in bank transfers to this country.
This country has signed over 20 Double Tax Treaties, primarily with countries in Europe, Asia, and Latin America, providing additional protection against double taxation.
Costa Rica
Like Panama, Costa Rica operates a territorial tax system, where only income generated within the country is subject to taxation. Foreign income is not taxed, making Costa Rica an attractive location for companies with substantial international income.
Costa Rica does not impose withholding tax on dividends paid to non-residents, allowing companies to distribute profits without additional tax burdens. New regulations have been implemented, allowing for potential withholding tax on multinational groups so you should verify your structure with an expert before incorporating an entity in Costa Rica.
This country has a limited number of Double Tax Treaties, including agreements with key partners like Spain and Germany, offering protections against double taxation.
Romania
The standard Corporate Income Tax rate in Romania is 16%. However, Romania offers a unique microenterprise tax regime, allowing small companies with annual turnovers of less than Euro 250,000 to benefit from a flat tax rate of 1% and 3% depending on the turnover:
1% Tax Rate: This applies to Micro-companies with annual turnover below EUR 60,000, excluding certain specified business activities.
3% Tax Rate: This applies to Micro-companies with annual turnover exceeding EUR 60,000 or engaged in sectors such as software development, IT services, hospitality, medical services, and others.
This regime is particularly attractive for small and medium-sized enterprises (SMEs).
Romania imposes a withholding tax on dividends paid to non-residents, with a standard rate of 5%. This is an important consideration for companies planning to distribute profits to foreign shareholders.
This country has signed over 80 Double Tax Treaties, providing broad coverage and protection against double taxation (mainly upon dividend distributions).
Hungary
Hungary stands out with an exceptionally low corporate income tax rate of 9%, one of the lowest in Europe. This makes Hungary a highly attractive jurisdiction for companies across various industries looking to minimize their tax liabilities within the European Union.
Hungary does not impose withholding tax on dividends paid to non-residents. This allows businesses to distribute profits without incurring additional tax costs, enhancing Hungary’s appeal as a base for holding companies.
This country has signed over 80 Double Tax Treaties, offering extensive protection against double taxation for companies operating internationally.
Hong Kong
Hong Kong operates a territorial tax system, where, with some nuances, only income earned within Hong Kong is subject to taxation. Foreign income is not taxed, making Hong Kong an attractive jurisdiction for companies with significant international operations. However, every person, including corporations, partnerships, and sole proprietorships, engaged in a trade, profession, or business in Hong Kong is required to pay profits tax on profits arising in or derived from Hong Kong from that trade, profession, or business.
Recent changes in Hong Kong’s tax laws have introduced Foreign-Sourced Income Exemption (FSIE) rules. These rules aim to tax passive income, such as dividends and interest, unless specific conditions are met. While Hong Kong remains a favorable tax jurisdiction, these new rules may reduce its appeal for certain companies.
Hong Kong does not impose withholding tax on dividends, allowing companies to repatriate profits without additional tax costs.
This country has signed over 40 Double Tax Treaties, providing important protections against double taxation mainly to those who want to expand their business into Asia and offering clarity on tax obligations for international businesses.
Bulgaria
Bulgaria offers one of the lowest corporate income tax rates in the European Union, set at a flat rate of 10%. This low rate is particularly attractive for companies in manufacturing, logistics, and IT services.
Unlike some other jurisdictions, Bulgaria imposes a withholding tax on dividends paid to non-residents. The standard rate is 5%, which, while relatively low, is an important consideration for companies planning to distribute profits to shareholders abroad.
Bulgaria has signed over 70 Double Tax Treaties, helping mitigate the impact of withholding taxes (mainly upon dividend distributions) and providing clarity on tax obligations for international businesses.
How Can We Help You?
Choosing the right jurisdiction is important for companies looking to optimize their tax strategies. Countries like Cyprus, Malta, the UAE, and Hong Kong offer favorable corporate income tax rates, along with additional benefits such as territorial tax systems and the absence of withholding taxes on dividends.
By carefully evaluating these options, companies can significantly enhance their profitability while ensuring compliance with international tax laws.
The tax experts at TaxMove can help you to choose the best jurisdiction for establishing your companies.
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