The process of incorporating a business in the EU as a non-EU founder can be complicated. This article provides an overview on how to go about this process and what steps you need to take. If you are a US or CIS-bThe process of incorporating a business in the EU as a non-EU founder can be complicated. This article provides an overview on how to go about this process and what steps you need to take. If you are a US or CIS-based entrepreneur wishing to incorporate a company in the EU, then this is for you!
First, you need to consider what type of business entity will best suit your needs. In Europe, the most common business entities are the LLC (Limited Liability Company) and JSC (Joint Stock Company). Most entrepreneurs, in particular those from the US and CIS tend to go for LLCs. They are fairly flexible when it comes to governance, purposes and their structure can be easily modified based on changing requirements of the business.
After deciding on a business entity type, you need to take care of another important step: deciding on where your company will be located. The most notable choices are Estonia, The Netherlands, Poland and Lithuania – and we’ll explain just why.
Estonia:
Estonia has the most competitive Tax system in the OECD. It is an attractive location for businesses of all sizes due to its stable economy and high-quality services. The nation has also made it possible to incorporate a business in Estonia within 5-10 days, with the “e-residency program” allowing foreigners owning an Estonian company to enjoy low taxes, great infrastructures, and an advantageous business environment.
According to the Tax Foundation, Estonia’s high position is attributable to several factors, including a low corporate tax rate of 20% with no double taxation of dividend income, a nearly flat 20% income tax rate, a property tax that only taxes the value of land and not the value of buildings and structures, and a territorial tax system that exempts 100% of foreign earnings.
For a startup or a small firm that is not linked to any location, registering in Estonia is an excellent choice. This entails all firms that operate in the digital world, create computer software, provide IT consulting, online education, design, marketing, and so forth. When a firm’s profit is taxed only when it is paid out, it has an important competitive edge over rivals who must pay taxes on all of their income – which is another edge that foreign founders obtain by incorporating in Estonia.
The Netherlands:
The Netherlands has low business taxes, as well as minimal taxes on interest and licensing income. In 2019, the Netherlands received $84 billion in foreign direct investment, making it Europe’s biggest FDI recipient. The Netherlands appears to be the most popular tax haven for U.S. businesses, with over half of the Fortune 500 firms having at least one subsidiary in the country. The Netherlands’ favorable tax treatment for multinational corporations has resulted in an increase of corporate headquarters and affiliates.
Dividend and capital gains tax exemptions are commonly known as participation exemptions, which relieve taxpayers of income taxes on dividends and capital gains accrued outside the country. The Netherlands does not impose income taxes on royalties or interest payments, but since 2021, the nation began withholding tax from businesses formed in low-tax jurisdictions.
Poland:
Plenty of foreign companies have incorporated and moved to Poland due to its strategic location in Europe, as well as the availability of skilled workforce, which makes it a natural choice for business owners from CIS and USA. Poland has the most investment projects in Central and Eastern Europe. Poland is now among the fastest-growing economies in the EU, thanks to its business-friendly environment and FDI policies.
Tax incentives and subsidies are available in Poland for organization formation. A company may get investment assistance based on its size, location, and other expenditures (land expenses, machinery costs, and leasing charges).
Overall, creating a firm in Poland is a good choice for companies from a variety of industries, including automobile manufacturing, food processing, electronics, aerospace, and business services
Lithuania:
Lithuania has developed its IT industry to become one of the largest technology and FinTech start-up ecosystems in central and eastern Europe. Lithuania has established a very strong position in fintech, ranking No. 4 in the Global Fintech Ranking and especially Vilnius, which is the country’s financial center. Vilnius has established a favorable atmosphere for fintech startups to thrive and blossom, and it has been able to attract one of the world’s largest fintech firms, Revolut. Furthermore, Lithuania is placed 11 out of 190 countries in the World Bank’s most recent annual ratings on ease of doing business.
Numerous US and CIS entrepreneurs have chosen Lithuania as a base for their business due to its favorable tax environment, including the 15% flat income tax rate. Due to joining the euro zone, investors can enjoy a favorable economic and political environment within a single currency area governed by the European Central Bank. The Lithuanian central bank promotes an open and liberal financial market.
Finally, Lithuania, which is part of Northern Europe and the geographical center of Europe, is close to three major markets: Western Europe, Scandinavia, Russia, and the CIS region. The country shares borders with Latvia, Belarus, Poland, and the Russian Federation’s Kaliningrad Oblast. Several non-stop flights arrive from all across Europe, making Lithuania easily accessible.
New Found Freedom: How To Incorporate Your EU Business As A Foreign Founder
Once you have established your company, the next step is transferring funds and assets. You must remember that you will most likely need to open a designated bank account that corresponds with your EU company incorporation (it is important that this be done before assets are transferred).
To pay your taxes, it is advisable that you hire an accountant specializing in EU taxation. These professionals can help ease the burden that foreign entrepreneurs often have with the complexities of EU tax law.
Once this is done, you can begin growing your company and incorporating further services to suit your needs. Moreover, the next step is to find a legal partner to help you with company formation and other relevant matters – that’s where we step in.
Legal Aid At Your Fingertips: How To Incorporate Your EU Business As A Foreign Founder
Once you have made up your mind to incorporate in the EU, LEGID can help you with all legal aspects. Our platform combines the power of AI-powered technology with legal aid for entrepreneurs all around the world. Using it is easy and hassle-free; simply register today at www.legid.app to experience the benefits that LEGID has to offer.
The Bottom Line on How To Incorporate Your EU Business As A Foreign Founder
To sum up, setting up an EU business can be difficult if you are not located in Europe. With the correct planning, it can be extremely simple and straightforward. We hope this article will help you simplify the process of incorporating your European business as a foreign founder. For more information on setting up an EU business, check out our other articles on this topic.
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