Four jurisdictions to start a company in
Contributed by BridgeWest
15 May, 2017
Entrepreneurs who are just deciding where to base their business can use several criteria to choose the most suitable location for their new company. One of the first distinctions is made between offshore and onshore companies. Certain countries may have a more suitable tax regime for offshore companies, while others may have lesser financial reporting requirements for onshore companies. We look at four jurisdictions to start a company in.
Hong Kong is a popular business choice for foreign investors who want to open an offshore company. The special administrative region is an international financial centre with a low taxation regime and it is located close to Mainland China. One of the main taxes for companies in Hong Kong is the corporate tax, which has a fixed value of 16.5% and a lower rate for unincorporated businesses. Offshore companies in Hong Kong will only have to pay taxes on their income derived from Hong Kong and not on that derived from outside of the city. Many foreign investors who open an offshore company in Hong Kong choose the private limited company: a flexible business structure that allows founders to have limited liability and has no corporate tax on offshore profits.
Singapore is another offshore location that is considered a tax haven. Like Hong Kong, it levies low taxes on companies and the taxed profits are those produced in the city. In some cases, foreign income may be taxed. Moreover, certain tax exemptions are allowed for some businesses like qualifying offshore funds, global trading companies or foreign banks. The corporate income tax in Singapore has a standard rate of 17%, however, the 75% of the first chargeable 10,000 SGD and 50% of the next chargeable 290,000 SGD are not taxed. Singapore imposes no restriction on foreign exchange transactions. Funds can flow without restriction in and out of the city-state.
China is a fountain of investment options, with an impressively large internal market. The country, although still a developing one, is diversifying its investment-friendly policies. The preferred business form for investors who choose China as an onshore jurisdiction is the wholly foreign-owned enterprise. This is the type of Chinese company for which foreigners are allowed to own 100%. For the other business forms, like the joint venture, partnership or domestic enterprise, a partnership with a resident is needed in most cases. The standard corporate income tax rate in China is larger than in Hong Kong, at 25%, however, smaller rates of 20% or 10% may apply to some qualifying businesses. Investors who want a more affordable alternative to opening a company in China can open an offshore company in Hong Kong.
As an onshore business jurisdiction in Europe, Spain has an attractive and open economy and a good business framework. Investors are welcomed with a series of investment incentives and a large number of double tax avoidance treaties signed between Spain and other countries facilitate bilateral investments. Investors who want to open a company in Spain can open a limited liability company, a corporation, a European company, a professional company or become limited liability entrepreneurs. The branch and representative office are reserved for those foreign corporations that want to enter the Spanish market or are simply testing their options in the country. Spain has a general income tax rate of 25% and banks are subject to a larger rate.
Entrepreneurs should take the time to consider the particularities of their onshore and offshore business location in order to choose the most suitable jurisdiction.
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