6 ms·
Ask HN: Where would you incorporate your European startup?
Say you had to incorporate an Ecommerce startup that's based in Portugal, currently sells in Portugal and the Netherlands and plans to sell all over Europe? Main issue is tax planning.
- osullivj 11y agoEIS & SEIS [1] tax breaks for UK angel investors are a strong argument for the UK. Also R&D investment has tax credits too, so startup salary spend on new product dev is treated well by the UK tax office [2]. Don't know if PT & NL offer any similar breaks for startups & their investors. [1] https://www.crowdcube.com/pg/seis-tax-relief-42 https://www.crowdcube.com/pg/seis-tax-relief-42 [2] http://forrestbrown.co.uk/rd-tax-credits-explained/ http://forrestbrown.co.uk/rd-tax-credits-explained/
- Phemist 11y agoNL offers R&D tax credit - http://english.rvo.nl/subsidies-programmes/wbso-rd-tax-credit http://english.rvo.nl/subsidies-programmes/wbso-rd-tax-credi... Don't know about the other part.
- mpswardle 11y agoTo take advantage of R&D though your staff need to be contractors or UK employees, so more difficult if you already have a workforce elsewhere.
- martinald 11y agoThat's not true. http://inplus.co.uk/rd-tax-credits-foreign-companies/ http://inplus.co.uk/rd-tax-credits-foreign-companies/ If you have some horribly complex multinational structure then you'll have more scrutiny but it's not impossible.
- dotcoma 11y agoI would have listed Lisbon as one of the places I'd choose. Guess not. Taxes? What about Tallinn?
- aharonovich 11y agoWhy did you change your mind about Lisbon?
- charlesdm 11y agoFor what purpose? Normal corporate tax planning? A neutral entity so you you can raise investment from European investors? Does Portugal have CFC laws?
- aharonovich 11y agoYes, Normal corporate tax planning, while maintaining the simplicity of doing business within the EU.
- siscia 11y agoI would definitely check out estonia, you are not taxed on profit but only when you get money out of the company. https://en.wikipedia.org/wiki/Taxation_in_Estonia#Corporations.2Flegal_persons_income_tax https://en.wikipedia.org/wiki/Taxation_in_Estonia#Corporatio.... On wage there is a 33% social tax with is pretty much the same in Italy and I suspect to be pretty much standard across europe.
- aharonovich 11y agothanks!
- siscia 11y agoYou are welcome ! BTW if you are a Portuguese citizen you can register your company in a easier way, from this page: https://e-estonia.com/component/e-business-register/ https://e-estonia.com/component/e-business-register/ Finally if you want to open a company in estonia you will need a physical address, fortunately the government is aware of this hurdle, and in it's website suggest an handful of providers: https://e-residency.zendesk.com/hc/en-us/articles/205207022-Getting-an-Estonian-Address https://e-residency.zendesk.com/hc/en-us/articles/205207022-... The one with the nicer website is LeapIN, that has very affordable prices...
- mikkom 11y agoYou need more than a physical address, you need to live in estonia if you don't want to pay extra taxes. This is true for at least Finland, I have consulted tax lawyers about this.
- siscia 11y agoI have explored quite a bit the idea of opening a company in Estonia via e-residency and this particular point of extra taxes never showed up. I am sure is not something that they would put on the first page, however I am a little surprise. Do you care to elaborate ?
- phillc73 11y agoIreland perhaps. Forming a Limited company in Ireland is cheap and straightforward. That is compared to a GmbH in Austria or Germany where you need thousands of Euros in share capital just to form.[0] Ireland uses the Euro, which might be an advantage over the UK with Pounds Sterling. No forex worries. Ireland also has a low corporation tax rate of 12.5% The only two trickier bits are setting up a registered address in Ireland (not P.O Box) and opening a bank account. Not insurmountable tasks, and various organisations can assist for a few hundred Euros.[1] [0] https://en.wikipedia.org/wiki/Gesellschaft_mit_beschr%C3%A4nkter_Haftung https://en.wikipedia.org/wiki/Gesellschaft_mit_beschr%C3%A4n... [1] http://www.companyservice.ie/ http://www.companyservice.ie/ (€255 for the basic service. Not affiliated, don't even know this particular company, just found with a search)
- hengheng 11y agoGermany does have the UG (haftungsbeschränkt) for this very reason.
- mpswardle 11y agoAnnoyingly though UG doesn't have the same respect as GMBH amongst German corporate, so if you do a lot of business in Germany it often worth capitalising it anyhow.
- ForeignEntrepre 11y agoI've only heard similar comment from accountants. I am not sure whether providers/customers really care about that. In fact I think accounts say that just because it was something new (so more work for them to learn).
- bbrazil 11y agoThe going rate for setting up an Irish company is around €250, and mine only took a few days. Getting an Irish bank account is painful though, and that's with me being Irish in Ireland. I wouldn't try it from Portugal - though presumably you could use a local bank.
- dmichulke 11y agoIn Luxembourg you should also have a low capital limited company by now. Income tax + social security is approx. 1/3, so for each 1k net invoiced (excl VAT) and paid in salary, you'll receive ~667 In addition, interest rate payments on loans are tax-deductible. Locals speak French, German, English and Portuguese (and Luxemburgish of course). My second choice would be Estonia but maybe only because I don't know Ireland that well.
- lazyjones 11y agoIf taxes are the main priority, Malta seems like a good choice: http://www.fbsmalta.com/malta-tax-structures/malta-company-tax-treatment/ http://www.fbsmalta.com/malta-tax-structures/malta-company-t...
- kbody 11y agoJust make sure, you check for hidden fees by such company forming operators.
- nimbix 11y agoUnfortunately, being incorporated in Malta just screams "shady business" - at least here in Slovenia where such companies belonging to questionable characters are constantly in the news.
- tzaman 11y agoI wasn't aware of that. Not Malta at least. Cyprus definitely :)
- kyriakos 11y agolots of legit startups incorporated in Cyprus
- aharonovich 11y agoInteresting!
- lazyjones 11y agoHopefully that'll pass some day. It's the same in Austria, however recently there's been new legislation for LLC companies with very low starting capital almost all over Europe, so you can have shady-looking businesses anywhere (e.g. 1-Euro-LLC in Germany).
- phillc73 11y ago
- mpswardle 11y agoI think a major factor in this decision that should not be forgotten is language. We have a German UG that is a wholly owned subsidiary of a UK Ltd. My co-founder speaks German but without this it would have been extremely complicated to setup and operate the German company.
- ForeignEntrepre 11y agoGood point! Everybody thinks in Germany everyone speaks English. Well, they normally don't.
- r2dnb 11y agoI've incorporated in the UK but I kind of wonder if I made the right choice. It's a fantastic country, but one thing that bothers me and that I discovered too late - only a few weeks ago - is privacy. This is a real one, pay attention to it. Basically, private companies are as public as american public companies. It's ok to have disclosures to make to the government, but here you also have to disclose your financials to the general public. Basically with a simple Google Search anyone can know your turnover, your board minutes, but even - more shockingly - your balance sheet, your MONEY IN THE BANK (are you kidding me ?) and the amount you paid yourself as a director among many other things. I find this shocking for companies that are supposed to be private. After research I've found this is due to European Regulations so it will likely be the same - or quickly be the same - no matter where you go in Europe. For this very reason, I'd say that if you value privacy, the best place to incorporate a European Web startup is in the US. I'm gutted because I was more than happy to pay my taxes here, this is just a shame. Then it will of course depends on your focus and your specifics. For me, I am not after exposive growth and investors money, so controlling my disclosures and my image is key to make serious deals with big clients / partners. I hope my perspective can be somehow useful for you.
- Loic 11y agoTake a good lawyer, accountant. I am French and created two companies in UK (Ltd) and one in Germany (GmbH). In theory, UK was better, in practice, because I live in Germany, the GmbH is more convenient. Also, a lot of your optimisations are dependent on your products. Are you selling software (licenses), consulting or goods? Are you doing import from outside of the EU? Sometimes, depending on your product, a country which is normally not "interesting" turns out to be a great place if you setup more than one company and split who is getting the money for what (here I have software licensing and development in mind). At the end you need the details to be able to find the good answer, because for taxes, it is always a question of details.
- vruiz 11y agoInteresting. What are your obligations in Germany when you have a UK Ltd? How much of a hit do you get on your personal taxes? I've heard of someone with a Ltd operating completely under German tax law, but that sounds like a nightmare.
- Loic 11y agoThis is why now I am fully based in Germany and closed my company in UK. It started to be a nightmare. I started the company in UK before being in Germany, I kept it will being in Germany, but as basically a "one man Ltd" the Germans started to make problems (basically behaving like I tried to wash/hide money). Also, having the company now in Germany I was able to shift more expenses on the back of the GmbH, so you get some benefits there. This is why, the best option is to take a good accountant, you really have no "magic formula". If someone is selling you "package" for a flat fee, you are nearly sure to have problems down the line. Even in good faith, when the tax authorities start to attack you because they consider that they think that maybe you did something wrong, they can make your life a nightmare and this totally legally. So, handle everything with care, take a good accountant/lawyer and document everything.
- vruiz 11y agoI almost missed your reply, I might end up taking a similar road so thank you for your advise.
- cmenge 11y agoFor those suggesting the German UG, be aware that dissolving and operating it can be quite expensive. Fine if you have a solid business, problematic if it's more of a test and you simply needed some 'real' company for that stripe account... Yearly filing must be done by a tax accountant and you have to pay for the 'services' of the Handelskammer, which is around 800 and 200 EUR at least, respectively, per year. Dissolving takes one year at the very least and incurs additional cost of at least EUR 500,- plus the year in which the company lives as a zombie, so 1.5k total.
- ForeignEntrepre 11y agoThanks for the hints. I am planning to dissolve and I am one of those "tests". How can it take one year to dissolve? could you elaborate on that? Why I am leaving?: - My experience is that (my) accountants are bureaucrats, which may be necessary because. They only know about filling up forms and hours to charge you more and no advising. I am in a small city but the company is very big (BDO). Still the country encourages you to have an accountant (Even in the FinanzAmt, even in cases that in other countries you would do it yourself) - Taxes are huge (for a netto salary of "only" 2000€/m, so 24k year, is about 50-60k for the company). - Mentality is oposite to that of startup's. "You can feel it in the air" which means in everything you do, from lawyers, accountants, banks, even investors. - There is no benefit for investors (although I think there is some on work). However the for Handelskammer you only have to pay if revenue (or profit) is over a minimum, but I think it depends on the state. The first year that shouldn't be a big issue. Moreover, I would not start again in Germany because: - It is costly (500 min for standard basic in notary fees) - and long. No matter what they say in the official sites: is not 8 days; they don't count that you need to set (that means in advance) appointments with bank, notary, finance-amt,... usually several with each, It took me over a month to have the tax-number and wanting the VAT-number to operate internationally all was about 4 months. There is no one-stop company like in many other countries. Sorry Germany, but in this situation it is a no-go. Estonia, Irland, Luxemburg, I have hear about Bulgaria for low taxes too (10%). Spain, also problematic: you need to live there 50% of the year, you pay taxes even if you don't have income (this is crazy and it has been like that for... ever). Good thing, is not that high taxes and salaries are low for a very skilled people.
- martinald 11y agoDefinitely UK. Usual reasons (very very cheap, like $20 and then $20/yr filing fees), good legal system, you can do nearly all tax/regulatory paperwork online/through APIs (in fact, it's nearly impossible to do it by paper now). Corp tax is 20% and up to £~45k pa you will pay no further income tax on dividends drawn down (though I think this is changing this year to 5%). Flat rate VAT scheme is helpful for smaller companies. But by far the best thing is the ridiculously good tax breaks the govt offers for startups, esp tech. SEIS allows investors tax refunds for 50% of their initial investment, plus 25% if you fail. Which means for every £1 they put in, the govt is 'underwriting/giving you' £3. And if you succeed they will pay no further capital gains tax on their realised gains. R&D allows you to get back 23% of qualifying R&D costs in cash (or deducted off your corp tax bill). Put those numbers together and you can see why you should incorporate in the UK...
- glossyscr 11y agoSomething to consider: All EU countries have world's strongest consumer protection rights and labour rights since most local laws are following EU directives.
- aharonovich 11y agoTrue. Sadly, that's where I must incorporate.
- inderm 11y agoI would do it in Estonia