You May Be Missing Out!
Are you trying to find a jurisdiction for your company where you can pay little without problems?
I feel you… However, that’s what I’m here for! To suffer with you!
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In all seriousness, there are some interesting opportunities available to you that some businessmen and investors may miss. While it is easy to do a quick google search to find out a corporate tax rate, your scenario is undoubtedly far more nuanced that a simple google search. There is the Cayman Islands, Bahrain, Bermuda, Isle of Man, Guernsey, Bahrain & others. You may be aware of the list of jurisdictions with 0% corporate tax. They are great and certainly have a place in reducing your tax bill. However, many people dismiss countries with a corporate tax rate far higher than zero because they see the headline rate of 20%, 25%, 30% or more and figure, no way!
Rightfully so. But what they fail to note is that given their specific circumstance, they may be able to utilize a tax exemption offer from those otherwise high tax countries.
Here are 5 tax breaks whereby you can scoot that high tax bill, under these specific programmes.
Romania’s Microbusiness entrepreneur scheme:
In a bid to support entrepreneurs, Romania has a great offer where you can get the normal 16% corporate tax rate for a tiny 1%. Other benefits include that profits reinvested derived from assets used in production and processing is granted a corporate tax relief. The conditions you have to meet are that A) The capital must come from individuals who are not members of the state or state-affiliated units B) The revenue (not income, revenue) of the precedent fiscal year cannot exceed 500,000 Euros. C) It is not in a state of dissolution or liquidation. D) The company should have 1 employee E) The company’s shareholders should not hold more than 25% ownership in more than three other Romanian micro company tax enterprises. F) The activities and sources of income must be of a qualifying origin
What are these activities that qualify? Under the micro company tax regime…this 500K Euros cannot come from banking, capital markets, gas and oil exploration, reinsurance domain, insurance, gambling and management Keep in mind that only a maximum of 20% of the income of your company can be from consultancy/management services (excluding tax services) or passive income (rentals, dividend, royalty, interest). If any of these are not fulfilled the tax shoots back up to 16% the next quarter from when they ceased compliance.
2) Slovenia’s investment fund:
Slovenia’s corporate tax rate is normally 19%. Not the best. However, they do have a system whereby investment funds can be totally exempt from corporate income tax. This is permitting however that the fund distributes 90% of its investments per tax year. I imagine this would be suitable for a REIT-like holding where the fund collects royalties or rent and distributes its profits via dividends to shareholders. The distribution incurs a tax depending on double tax treaties and where the receiving agent is located.
3) San Marino’s High Tech regime:
This is for businessmen and investors who wish to incorporate a company involving technology. It needs to be accepted by authorities in San Marino. San Marino corporate tax rate is 17% and for normal companies will grant 8.5% rate for 5 years. However, this regime is for 12-years broken down into 3 components.
The first is known as the Start Up phase, lasting 3 years where the idea is transformed into an organized business project. There is no corporate tax in this phase. The second phase, lasting 4 years, is the initial expansion phase where the company is expected to have positive turnover. The tax rate here is 4%. The last phase which lasts 5 years is the sustained operation phase where the company is meant to achieve full commercial viability. The tax here is 8%. Some real benefits of this regime are that the yearly fees for a business license are exempt (normally +1700 euros) + the annual company fees for the first 7 years. Additionally, the capital requirements (which are normally 12,500 Euros within 6 months of incorporation and 12,500 more by year 3) are reduced to 1 euro, 10,000 euros and 20,000 euros in phase 1, 2 and 3, respectively.
It’s also possible to receive residencies for directors and employees which is quite a good deal given that residency via the other existing routes is relatively pricey (+300,000 Euros). This program is tailored to individuals, small start-ups as well as company spinoffs who want to create another segment. Although, I should state that given that San Marino is a microstate, there are few corporate service providers and the ones I have spoken to charge a very high fee to review your company’s innovative potential and submission of documents.
4) Georgia’s microentrepreneur company tax:
Similar to Romania, individuals who have no employees, a turnover of less than 30,000 GEL (about 12,000 USD) and previously registered as a micro tax company will pay 0% tax. This jumps up to 1% tax on those companies who have an annual turnover of less than 500,000 GEL (200,000 USD) and who register as a small business. If the company exceeds 500,000 GEL in revenue, then the tax rate for that year will be 3%. If the revenue exceeds this amount for 2 years (on the 3rd year) the regime will be cancelled and the company will be treated to the regulat corporate tax rate of 15% .However, given my meetings with some Georgian lawyers, I can speak to that this program is definitely geared towards a more local-oriented business be it a restaurant, café, retail shop—something physical on the ground. Also, it is known as an individual entrepreneur tax program as opposed to a venture involving many investors and directors. So, this won’t be appealing to you if you’re not living in Georgia or willing to hire locals on your own but if you do spend time in the country, wish to start something local in Tbilisi or Batumi and wish to take advantage of their territorial tax regime than it’s something worth considering!
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Norway’s start up/investor combo:
Not many people are aware of this, but Norway does have start up incentives for those who start their own business and those who invest in those start-ups. There is an income deduction of up to 1 million NOK for investors and while this isn’t as sweet as the ones before, it could be interesting if you have a draw to Norway. From the investor perspective, your share contribution must equal at least 30,000 NOK (about 2,900 USD), the deduction allows you to deduce 22% from your tax bill up to 1,000,000 NOK, over this amount and you’re ineligible for the tax deduction. If you see 500,000 listed on the internet, this was the value used before 2022.
An important catch is that this deduction is only valid if you have acquired the shares through the establishment or new subscription of shares. If the investor is a shareholder during the start-up phase at the time of share contribution their deduction is deemed invalid. Furthermore, the benefit does not apply to existing or prior shareholders (just new ones), the investors cannot be employees (board members are not included) of the start-up In question (at least for the first 3 years since ownership). If you invest in year 1, you cannot sell the shares nor receive dividends until year 5, if you do the deductions will be reversed (paying the owed tax).
- From the businessman perspective, the company can receive a maximum of 5 million NOK annually, the company cannot issue dividends or payments in connection to these new shares for the next 3 calendar years (from when first acquired), the company cannot be more than 6 years old, it must have less than 25 employees, it must have a balance sheet of a maximum of 40,000,000 NOK, it must provide an annual basis salary of a minimum of 400,000 NOK, it must carry on its activity other than passive capital management, it’s operating revenues must not exceed 40,000,000 NOK, it must be a Norwegian private limited company, it must be liable to paying tax in Norway, & it cannot experience financial difficulty before the new share offer.
It should be clear that this option should be quite limited to who it benefits, but nevertheless, it could be interesting to those going to Norway anyway.
If you have any questions about these programs don’t hesitate to contact me using the emails below & be sure to check out my website for articles on travelling, investing, and geopolitics.
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