Register a company with the lowest taxes in Europe

Choosing a country for registering a company abroad is an important step in developing a business strategy. This choice can significantly affect a company's operating costs, its competitiveness in the international market, and its ability to attract investors.

A well-chosen jurisdiction can provide a company with strategic advantages, such as preferential taxation, simplified administrative procedures and access to new markets. Many countries today are actively working to create a business infrastructure to support entrepreneurial activity and attract foreign investment.

Government bodies understand the importance of creating comfortable conditions for entrepreneurship, which contributes to economic development and an increase in the number of jobs. They implement measures to simplify administrative procedures, reduce the tax burden and ensure legal protection for entrepreneurs. Registering a company in European countries can help optimize taxation, which, in turn, is key to financial planning and ensuring sustainable business development.

In this article we will talk about where in Europe the most favorable taxation is.

How to choose a country for company registration?

The choice of jurisdiction for company registration depends on the specifics of the industry in which the company operates, the strategy for international expansion, and the long-term goals of the enterprise. Different jurisdictions offer different tax regimes, legal structures, and market conditions that can significantly affect operating costs, access to financing, and the overall growth strategy of the enterprise.

Registering a company in Europe attracts many participants in the international business community. The region is known for its vast market, developed banking sector, highly qualified professionals and well-established logistics. Europe is characterized by a stable legal system and transparency of business processes, which can contribute to effective management and sustainable growth of the company.

Governments create favorable conditions for launching startups in Europe, developing small and medium-sized businesses, offering various financing programs, tax incentives and grants. Business incubators and accelerators are developing, helping aspiring entrepreneurs develop their ideas and enter international markets.

However, it is important to remember that in Europe, each country has its own requirements for new businesses, and new companies face different levels of bureaucracy and regulation. When deciding which jurisdiction is best for a company, it is important to consider start-up costs, the length and complexity of the registration process, the amount of government fees, the minimum capital required, and other legal and administrative aspects.

When choosing where to open a company abroad, it is important to study the economic and political stability of the region, the availability of highly specialized personnel, and also to evaluate the possibilities of opening a bank account for a foreign company, as this directly affects the convenience of conducting financial transactions. No less important are business tariffs applied to real estate used for commercial purposes, as high tariffs can significantly increase operating costs.

It is worth paying attention to the conditions for obtaining an immigration visa, especially if you plan to move employees to a new country, study tax obligations that can significantly affect the company's financial results. Choosing a country with a favorable tax system can bring significant economic benefits to business.

Freeing up additional financial resources by minimizing the tax burden allows you to direct more funds to development and innovation. This helps improve the quality of products and services, introduce new technologies and expand the market, which strengthens the company's position in a competitive environment. Choosing a jurisdiction with a favorable tax regime can help in the effective management of international operations and optimization of financial flows.

European countries with the most favorable taxes

The tax burden varies greatly from country to country. Choosing a jurisdiction with special tax regimes can significantly reduce tax liabilities, allowing businesses to save money and invest it in development and expansion. This is especially important for startups and small businesses, which are often limited in resources.

When choosing a country with the lowest taxes in Europe, it is also necessary to consider such factors as benefits for new companies, opportunities to avoid double taxation, special tax conditions for certain businesses and tax breaks for small businesses. At the same time, it is worth remembering that the tax burden on an entrepreneur depends on the tax system of the country in which he is a resident and the specifics of his activities.

In 2024, taxes in European countries vary significantly, which can significantly affect the financial health of a business. Below we discuss which European countries have the most favorable tax regimes.

Madeira, Malta and Cyprus have taken the leading positions among European countries with low taxes for foreigners or the availability of tax refund schemes. These countries offer a wide range of tools for tax optimization.

They are characterized by a developed infrastructure, provide access to global markets, and offer reliable legal guarantees for business. Company registration in Malta attracts entrepreneurs due to the implementation of a tax credit scheme in this country, which allows reducing the effective tax rate to 5%. Company registration in the Madeira International Business Center allows you to receive significant tax benefits.

At the same time, Cyprus, which previously attracted businessmen, is facing economic and political difficulties. In modern realities, business registration in Cyprus is not associated with business benefits, but rather with the desire to move there for permanent residence.

Company Registration in Madeira

As we have already said, thanks to its favorable tax rates, Madeira, a Portuguese archipelago, is recognized as an important center for international activity. The regional legal and economic stability, along with a high level of security, provide a favorable business environment. As part of Portugal and the EU, Madeira opens up access to the significant advantages that the European region offers.

One of the advantages that it provides opening a business in Madeirais free access to the vast EU market, which allows Madeiran companies to export goods and services to other EU member states without hindrance. Madeira receives significant financial support through European funds and programs aimed at improving infrastructure, developing small and medium-sized businesses, implementing innovative projects and environmental initiatives.

We must not forget about the benefits of participation in pan-European scientific and educational projects, which promotes cultural exchange and improves the level of education. In addition, as we have already mentioned, this is a country with the lowest tax rates in the EU.

Madeira is deservedly among the top countries with the best tax system. This jurisdiction has reduced tax rates and benefits for entrepreneurs and IT specialists. Simplified procedures for opening bank accounts and the opportunity to participate in Startup Portugal make this jurisdiction attractive for creation of IT companies from scratch. Young entrepreneurs implementing business projects in Madeira have the opportunity get a residence permit in Portugalif their project is highly innovative.

It is worth mentioning that opening a corporate account in a Portuguese bank for organizations registered in Madeira provides the opportunity to use international financial markets and provides a high standard of legal security thanks to the prestige of Portuguese financial institutions.

Madeira has a smooth banking environment, reducing administrative barriers for businesses. This is important in today's economic environment, where the speed and reliability of financial transactions determine the competitiveness and efficiency of business processes. A favorable banking environment facilitates international interaction and promotes stable financial flows both at the regional and international levels.

Portuguese banks play a key role in the financial system not only of the country but also of the whole of Europe, offering clients a wide range of products and services. The banking sector of Portugal is distinguished by modern technologies, strict security standards.

Returning to the issue of countries with the lowest corporate tax in Europe, it is worth noting the role of the International Business Centre (MIBC). It plays a key role in promoting economic and social change in its region. Company registration in MIBC (Madeira) provides significant tax preferences.

First of all, the purpose of tax incentives is to promote the modernization and international expansion of Madeira's manufacturing and service enterprises. This contributes to the economic diversification of the region and its integration into modern global market trends. The second aspect is incentives to help new companies overcome the structural difficulties associated with the remoteness of this region.

Businesses operating in MIBC are subject to a low corporate income tax (CIT) rate of just 5%. This benefit applies to companies licensed by MIBC and will be valid until the end of December 2027.

Companies can count on benefits if one of the following conditions is met:

• 1 to 5 vacancies were created during the first six months of the enterprise’s operation, an amount of 75 thousand EUR was invested in fixed assets within 2 years from the start of the enterprise’s operation;

• At least 6 vacancies were created during the first 2 years of the enterprise’s operation.

The CIT of 5% will only be applicable to taxable income according to the number of open vacancies for employees (illustrated below).

Under this regime, it is possible to significantly reduce the base CIT rate from 14.7% to 5%, subject to the annual limit (illustrated below).

In addition to the reduced rate, companies in the manufacturing sector registered with MIBC can receive a 50% discount on taxable income if the following conditions are met:

• Promoting the economic development of the region through the introduction of technological innovations in products, modernization of production processes and business models.

• Implementation of new models of economic activity with a high level of added value.

• Attracting highly specialized personnel and improving the environmental environment.

• Creation of at least 15 jobs for a period of at least five (5) years.

In addition, Madeira is among the TOP countries with low taxes for foreigners, since the MIBC offers an exemption from import duties on raw materials and components, if the final product manufactured by a company registered in the MIBC is not exported outside this zone.

Another advantage from a tax point of view is that companies registered with MIBC can receive an 80% discount on stamp duty when registering various documents, contracts and other necessary transactions, provided that the partners/counterparties with whom the company has such contracts are not residents of Portugal or act in accordance with the legal regulations of MIBC.

Company Registration in Malta

Malta has been positioned for many years as one of the regions in Europe that is known for its high level of transparency and security in the business sphere. The state offers political and economic stability, infrastructure that provides a high level of service and convenience, tax incentives and privileges for business. The government develops the national economy through investments in innovation, education and technology sectors.

After joining the EU, Malta harmonized its laws with European standards. Despite the high costs of servicing companies and the fact that it is among the countries with the highest taxes in Europe, the advantages business registration in malta often justify these costs.

Registering a Maltese company allows free trade with other EU members without additional customs or trade barriers, enhancing their global competitiveness. The country is developing high-tech industries, including fintech. Regional regulators promote the development of innovation clusters, which helps attract investment and new players to the industry. Malta is ambitiously aiming to become a leading European hub for fintech innovation, offering startups and companies not only legal and regulatory assistance, but also access to specialized infrastructure networks and technology platforms.

This approach makes Malta a hotspot for international investors and companies looking to exploit its unique capabilities to test and implement innovative financial technologies. The increased focus on fintech not only contributes to the country’s economic development, but also supports its global reputation as a key hub for the development of innovative financial solutions.

Meanwhile, when it comes to taxes in the EU, despite the perception that it is expensive to start and run a business in Malta, especially with a corporate tax rate of 35%, one of the significant benefits is the tax refund system. Foreign applicants can set up a company in Malta and then qualify for a 6/7ths refund of the corporate tax, reducing the effective rate to 5%. For royalty and interest income, a 5/7ths refund is possible, resulting in a final tax rate of 10%.

The preferential tax regime attracts highly specialized specialists and innovators to the country. In addition, Malta provides favorable conditions for the establishment of holding companies, and favorable legislation has been developed in the field of intellectual property.

Company Registration in Cyprus

As we have already said, in the past Cyprus was considered one of the most sought-after places for international business and international tax planning. This was mainly due to the favorable conditions for corporate taxation (the CIT rate on the island is 12.5%).

Cyprus was a leader among countries with low taxes for business, as non-resident companies were taxed only on income earned directly in the Republic of Cyprus. This means that income earned outside the country is exempt from taxation, which helps reduce the tax burden and improve the financial efficiency of companies.

Setting up a company in Cyprus may not be a viable option at this time. Doing business here involves unexpected expenses for administrative fees, legal and accounting services, and tax liabilities. These costs can significantly increase the overall operating costs for the business.

Implementing regulatory requirements may entail additional costs for companies, including audit fees and compliance consulting. Increased regulatory requirements and government oversight make it more challenging to operate a business in Cyprus. Competition and globalisation are forcing many companies to seek ways to reduce costs by considering alternatives.

International transactions by Cypriot companies often present challenges, especially when it comes to transactions in dollars and euros. In the recent past, opening a bank account in Cyprus took a couple of weeks, but today the process has become much longer and can take months, with a successful outcome not always guaranteed. These changes are due to increased regulatory requirements and more complex compliance procedures, forcing banks to conduct thorough checks on clients and their transactions.

Transactions in Cypriot banks are subject to strict checks, which increases their processing time and complicates the process of making international payments. This can cause serious inconvenience to customers and business partners who require prompt and efficient financial transactions.

In addition, checks are also carried out on business partners of companies registered in Cyprus. The introduction of new requirements for full transparency and accounting of financial flows has become a necessary step to prevent illegal financial transactions. This causes delays and makes it difficult to carry out payments and financial transactions, which slows down business processes and increases difficulties in communicating with international partners.

Previously promising business opportunities in Cyprus are now limited and difficult, so entrepreneurs are turning to Malta and the more economically advantageous Madeira to start and run their companies.

The table below compares where the lowest taxes are.

When compared to jurisdictions such as Cyprus or Madeira, Malta may at first glance appear to have a significantly higher tax burden due to the base corporate tax rate of 35%. However, the introduction of a tax refund system, as well as the expansion of tax deductions and exemptions, have helped stimulate the domestic business environment. These measures not only reduce the overall tax burden for companies, but also make Malta competitive with other jurisdictions in Europe, where taxation is most advantageous.

Conclusion

Despite the preservation of tax advantages, Cyprus is no longer attractive to foreign entrepreneurs due to tightening legislation, reputational risks and increasing competition with other countries. But the main disadvantage of Cyprus is the lengthy compliance checks of bank transactions, especially when making transactions in dollars and euros. Bank managers ask many questions, which negatively affects the speed of approval of transfers and the time frame for their implementation.

Those who are planning to start a business from scratch and are looking for countries with the most favorable tax rates may want to consider Madeira or Malta. Regardless of the country in Europe you choose to register your company, it is important to ensure professional support from the moment you choose the legal form to the completion of licensing formalities.

Each country has established standards and regulations, as well as non-obvious legal aspects that may arise during the registration process. Experts YB Case We are ready to provide the necessary consulting support and full assistance in registering a company abroad.