Tax incentives are important for investors who wish to set up a company in a certain jurisdiction. The effectiveness of the incentive and/or tax deduction program, as well as the overall taxation regime, can be an important factor when choosing where to base the business. We take a look at the tax incentives for businesses in different jurisdictions across the world, starting with some of the EU countries with the lowest taxes and moving onto traditional tax havens like Belize.
Tax incentives for investors in the EU
Europe offers an attractive and unified market under the EU rules and countries like Germany, France or the Netherlands are known for their large internal markets or their business advantages. When choosing the right jurisdiction to base or expand a company in the EU, investors can and should also look at the available tax incentives for companies.
Some of the EU countries with the lowest corporate income tax rates include Hungary, Cyprus, Latvia, Poland and Ireland, which is also one of the countries to offer some attractive tax credits and cash grants for companies. For example, investors in Ireland can benefit from R&D expenditure deductions, cash refunds and financial support depending on the research and development and innovation activities carried out by the company.
Estonia is another EU country that offers a very attractive tax system. While there are no specific tax incentives that target certain activities, investors benefit from tax advantages regardless of the business field: the tax system in Estonia encourages the reinvestment of profits.
Tax incentives in other locations
Some countries offer an overall attractive tax regime and investors can think of the entire system as a type of tax incentive. Hong Kong offers a low and simple corporate income tax regime and has long been competing with Singapore as an Asia-Pacific location with considerable attractiveness for foreign investors.
Entrepreneurs who are forming companies in Singapore benefit from cash grants and special tax deductions, including those that are referred to as a super deduction (in essence, an enhanced R&D deduction applicable in the field of science and technology for companies that enhance novelty or undertake technical risks). What’s more, a deduction scheme also applies for certain types of investors in Singapore.
Some jurisdictions are perceived as having such an attractive taxation regime that they can be considered tax havens. Belize is not only a tax haven but also one of the most reputable offshore locations in the world because of the lack of taxes and the low accounting requirements. Setting up an offshore company in Belize or other offshore centers like the Cayman Islands or Seychelles has a number of clear tax advantages, although investors must pay attention to the manner in which they do business as the activities are required in some cases to be strictly international ones.
Tax incentives are one of the sure manners in which countries can increase their attractiveness for foreign investors. How each jurisdiction treats these incentives, either specific and targeted or more broadly can be important when starting a company. We advise investors to check the available types of incentives as well as the eligibility criteria when opening a company in a new country.
Published in Partnership with Bridgewest