The competitiveness of jurisdiction is determined by many factors, but the main one is the tax climate. The higher the corporate taxes, the less foreign investors will want to start their own business in the country. A decrease in rates leads to an increase in resources for investment, therefore, over the past 20 years, the average corporate tax rate in the world has decreased by a quarter - from 28.6% in 2000 to 21.4% in 2020, Excluding countries with a zero tax on profit (Bahamas, Bahrain, Bermuda, Guernsey, and the Cayman Islands), the decline is still significant - up to 24 percent. There is, of course, a country where officially there are no taxes at all - the DPRK, but it can hardly be called a promising area for investors. In this article, we'll take a look at the countries with the lowest corporate taxes in 2021 and look at the pros and cons of jurisdictions for businessmen.
Lowest corporate income rates
| № | Tax jurisdiction | Tax rate |
|---|---|---|
| 1 | Montenegro | 10% |
| 2 | Albania | 10% |
| 3 | Bosnia and Herzegovina | 10% |
| 4 | Bulgaria | 10% |
| 5 | Gibraltar | 10% |
| 6 | Macedonia | 10% |
| 7 | Paraguay | 10% |
| 8 | Qatar | 10% |
| 9 | Macau | 12% |
| 10 | Oman | 12% |
| 11 | Cyprus | 12,5% |
| 12 | Ireland | 12,5% |
| 13 | Liechtenstein | 12,5% |
| 14 | Jordan | 14% |
| 15 | Georgia | 15% |
| 16 | Latvia | 15% |
| 17 | Lithuania | 15% |
| 18 | Mauritius | 15% |
| 19 | Serbia | 15% |
How to choose a tax-friendly jurisdiction
First, you need to understand what factors you should pay attention to besides the declared corporate tax rate and special conditions for the distribution of profits. For example, it is worth considering the general nuances of doing business such as:
- Promising areas for investment;
- The ability to scale;
- Number of shareholders allowed;
- Opportunities for non-resident business owners;
- Permissible volumes of cash turnover for the year;
- Bank requirements and the ability to use financial services;
- Requirements for the authorized capital;
- A double taxation treaty with your country;
- Protection of company assets;
- Currency control.
Having studied all the points and conditions, you can start choosing a country.
Montenegro
This country has one of the lowest corporate taxes in Europe - only 9%. But the economy of Montenegro is not as stable as it seems at first glance. Although the country has very low inflation and unemployment rates, wages are also growing rapidly - pervasive corruption is destroying the economy from the inside. There are tendencies for a fall in industrial production. The main income of Montenegro comes from tourism.
Companies that are registered in this country and have a tax resident status are required to transfer 9% tax on profits received in any country in the world. Important! If you decide to register your business in Montenegro, be sure to consider the fact that there are still a large number of additional fees in the form of customs duties, city, and other types of taxes.
Macedonia
The country has very low corporate taxes, but according to the International Monetary Fund, Macedonia's external debt is growing, which may soon lead to a worsening economic situation. The significant advantages of this jurisdiction include the fact that Macedonia does not automatically transmit tax information.
Companies registered in this country are required to pay 10% corporate tax only if the organization's income exceeds 100 thousand euros per year. Until this limit, companies are taxed at a preferential rate of 1% (except for gambling establishments and banking organizations).
Georgia
After seceding from the USSR, Georgia is one of the few countries of the post-Soviet space that has chosen a strategy to reduce taxes to develop business and attract foreign investment. The transparency of registration procedures, a minimum of corruption, and bureaucracy add to Georgia's positive points. The 2005 reforms in Georgia reduced the total number of taxes from 21 to 6. Tax rates and income tax in Georgia decreased significantly, and as a result, in the Paying Taxes report on the ease of paying taxes for December 2020, the country took 14th place among 190 participants.
If you are the owner of a company, then the income tax in Georgia for you will be a full 15%. At the same time, for individual entrepreneurs with the status of a small business, a simplified taxation regime is applied in the amount of 1% of revenue within the range of 120,000 euros per year. You can read more about preferential tax regimes in Georgia here.
Currently, Georgia is actively developing its tax system. This was confirmed by the introduction of the “Estonian model” of taxation in 2017. The essence of this model is that the profit received from doing business is returned back to the company, that is, it is reinvested. If a company operates under this taxation model, then it is automatically exempted from paying income tax contributions. That is, the country has a zero tax rate on retained earnings of companies.
Thailand
Corporate tax in Thailand is set in the range from 0 to 20% and is payable by any company that is registered in the country and has tax resident status. It is important to know that any worldwide income is taxed in this country, but there are exceptions for non-resident companies if they provide proof of status. A preferential rate of 15% can be used by companies with a registered capital of up to 137,000 euros and an annual income of up to 820,000 euros.
If you decide to register a company in Thailand, then in terms of value-added tax it will be really beneficial - the VAT rate is 7%. Companies with an annual turnover of up to € 4,000 are completely tax exempt.
Malta
Malta has a corporate tax of 35%, which is quite a lot, but the country uses a notional tax assessment system. Thanks to this, you can very quickly get back most of the tax already paid during the distribution of dividends. Let's give an example: You paid 35% tax. If you are a recipient of dividends and a non-resident of the country, you can return as much as 30% (if the beneficial owners of the company are also non-residents of Malta or residents without domicile).
By registering a company in Malta, you do not bear currency risks, because the payment of corporate tax and the refund is made in the currency in which it was received.
There are far more than five countries with the lowest corporate taxes in 2021, as you can see from the table at the beginning of the article. We just gave the most striking examples. When choosing a country to open or transfer your business, be sure to study all possible preferential regimes and special requirements that apply to companies.