The 6 Best Countries to Incorporate a Company for Your Online Business

Last Updated on 29/06/2021 by Edy Ragnoli

Discover the best countries to start a business and incorporate your online company. The guide for all bloggers, freelancers, digital nomads, online entrepreneurs, e-commerce websites, and web agency.

Finance, Legal & Tax Disclaimer: I'm not a financial, legal or tax professional. I'm a self-taught entrepreneur who likes sharing lessons learned. Given the complexity of the topic, this article may contain some inaccuracies regarding the laws and taxation of the countries mentioned. Always consult a professional before making your choice.

Working online allows you to do business, potentially, where and when you want. You can live anywhere in the world and move continuously as per your needs and desire. But when you start an online business, you must choose carefully the type of business entity and the country of incorporation. That's why I created this guide.

In fact, there are countries with corporate income tax rates above 30% such as France and Colombia. But other locations offer a more convenient and lower tax rate reducing it all the way down to zero per cent with the right business setup.

So, making the right decision can give you great advantages in terms of taxes, expenses, potential revenue, and ease of doing business abroad.

In this article, you'll discover the best countries to incorporate your company, how to choose the right location for founders and startups and the top jurisdiction to set up an online business.

This guide isn't about not paying tax. This article explains how you can set up your company to maximise your income, reduce costs and eventually grow a successful business.

For the purpose, I examined the best entity types and countries where you can

  • pay below 21% in tax,
  • have a zero per cent tax rate or
  • pay zero corporate tax thanks to a pass-through entity (tax are paid at the shareholders level).

Best Countries to Start a Business – an Overview

There's no perfect country for incorporating a company, but many solutions and interesting locations. So, you must find the country that best fits your business needs. For that, you have to consider several variables that will eventually lead to finding the best country to incorporate your company.

Top five factors for choosing the best startup countries

  1. Type of product/service you sell
  2. Country of your potential clients
  3. Available capital
  4. The reputation of the country of incorporation
  5. Your country of residence.

In the next chapter, I will dig deeper into it and explain all the 10 variables that will help you make the best possible choice.

Groups of Countries to Set Up a Business

In the world, you can find many countries that offer good corporate tax rates. We can divide them into four main groups.

1. Offshore countries with no income tax rate (tax havens or offshore jurisdictions). They offer very attractive yet abusive tax practices. For this reason, they are considered as non-cooperative jurisdictions for tax purposes. They are blacklisted and can vary depending on the organization. For instance, the EU list of non-cooperative countries is different than the FATF blacklist and greylist.

Notoriously, blacklisted countries have a bad reputation. Companies incorporated there are, generally, “inactive” because are just used to hide or launder money. Some of the most popular tax havens are Panama, Seychelles, and the US Virgin Islands. For the record, last October 2020, the EU Council has removed the Cayman Islands from its tax “blacklist”.

2. Whitelisted countries with low tax rates. Unlike tax havens, these countries have a good reputation and infrastructures but offer attractive tax conditions. Some examples are Malta (5%), Gibraltar (10%), Cyprus (12.5%), Latvia (15%), The United Kingdom (19%), and Estonia (20%).

3. Countries with a preferential tax regime. These are locations such as Ireland (12.5%), Netherlands (from 19%), and Luxembourg (15%) where companies can benefit from low tax rates. As an example, look at the big corporations (mainly holdings). How many of them are incorporated there. The list is quite long.

4. Countries which are a mix of the groups above. They present some of the characteristics already mentioned but make an exception. Let's see three of them and why they are different.

  • Delaware, USA (0% tax rate). It's not blacklisted. It's more suited for big companies or businesses not selling to the US (otherwise, you'll pay tax on each country you sell your products or services).
  • Florida (0% tax rate). It's not considered an offshore country.
  • Singapore (8.5% to 17% tax rate). It's neither on the blacklist nor on the ‘grey list'. It has a good international reputation. I explained why in the third chapter.

Note: I'm not an international lawyer nor involved in any company incorporation business. My goal here is to give you a quick yet exhaustive overview on the best countries to open a business. For more detailed information and legal suggestions, always consult an expert.

Criteria to Consider When Choosing a Country to Incorporate a Company

Legal advice on the best countries to start a business online
Legal advice to open a company

What does your business really need to be successful? Are you sure a zero per cent tax rate is enough or necessary? What would you prefer between $2,000 revenue with 0% tax and $2 million revenue with 40% tax (which means a $1.2 million profit)?

If I made this question to all 7.8 billion people on earth (at the time of writing), I'm sure they would all choose the second option.

What does it mean? It means a country with a zero per cent tax rate is not necessarily the best choice if it allows you to earn just $2,000 while you could get 600 times more elsewhere. In fact, you must consider all the other factors that can help you get more customers, fast and accessible payment processing, reliable banks, a smoother business, and so on.

That's why it's so important you take into consideration all the following 10 variables along with the business entity type and the country regulations.

For example, a UK LTD company is different than a UK Limited Partnership. At the same way, a PTY LTD company in Australia can get different benefits compared to a PTE LTD company in Singapore (keep reading because later, you'll discover the benefits of incorporating a limited company in Singapore).

Banking

Banking is essential when you start a business. The easier, cheaper, and safer banking is the better your business in terms of time and money.

Imagine a country has a low tax rate, but bad banking. Well, if it's difficult to open a bank account or make and receive payment, your company will become fruitless.

But even if banking is good, procedures and habits in the country can be not ideal for your business. Let's make just two examples to clarify what I mean: the USA and Canada.

In the US, cheques are still very popular. Do your business need it? In Canada, instead, you must be located there and walk into a branch every time you need to make a simple wire transfer. Is it something you can really do if you work online, sitting on the beach in Thailand?

So, what should you look for to have good banking for your online business? Wherever you are located, make sure your bank account offers you at least the following things.

  • Internet banking for both local and wire transfers of min $10,000
  • A corporate debit/credit card for your business spending
  • Easy import/exports feature to a known bookkeeping system
  • Ease of receiving funds/payments even of many thousands of dollars (transactions can get lost, experience processing errors or extreme delays).

Believe me, getting your money lost can happen. For example, I experienced that with some financial technology companies. It's all good on paper or with small amounts of money. But it can get frustrating when you deal with higher amounts. So, you could miss the boat and say goodbye to that prestigious contract or early-stage investor just because money never arrives.

Therefore, check carefully the banking system of the country of incorporation. But don't worry. Sometimes there's a trick to overcome this banking problem: opening a bank account in another country.

For instance, you can incorporate a company in Hong Kong and a business bank account in Switzerland or Singapore. Ask an agency specialised in foreign company incorporation. They will suggest the best bank for your needs.

Merchant Accounts & Payment Processing

Your business needs customers to be successful. But your customers need to pay for your products and service to make the business profitable. For that, you must set up good payment processing and a merchant account that make payment easy, fast, safe, and affordable for both your customers and company.

Is your customer base (or target) international? Make sure the payment method is accessible to anyone, from any country. Everything depends on the nature of your business and the type and location of your customers.

Are you considering wire transfer? Think about how easy and comfortable it is for your clients and whether it'll create any sort of friction (that will eventually translate in missed sales or higher churn rate if you run a SaaS business).

Are your potential customers more comfortable with cash? You must arrange a professional and trustworthy POD (Payment on Delivery) process. For example, in some places in the Philippines (but the list can be long), there's no chance you sell a product if you don't offer payment on delivery. I experienced that several times.

Do you need to reach the whole world in the fastest and widest way? Accepting credit cards is surely the easiest way and here's the payment gateway I suggest.

My Recommended Payment Gateway Provider

There are many payment gateway providers and processors. Some of the most used worldwide are PayPal and Stripes. But before making your choice, you must answer a few questions.

  • Are they safe?
  • How much do they cost?
  • Do they accept your business?

Not all payment platforms are the same. Not all businesses are accepted by major providers, especially if you run a high-risk business.

My suggestion is SecurionPay, a cross-device payment solution that offers both an online and mobile-based payment gateway. The platform is designed to maximise merchants' revenue. It accepts high-risk businesses (to the banks) and offers a truly competitive price.

To make things easier, I created a simple table for you to discover the fees and accepted businesses.

Regular Merchants

2.95% + €0.25 per successful transaction

Supported eCommerce products

  • Clothes & Shoes
  • Sports & Hobbies
  • Technological Devices
  • Toys, Children & Baby
  • Home, Garden, Pets & DIY
  • Educational Courses

Supported business models

  • B2B recurring products/services
  • Subscription-based shopping
  • SaaS applications

High-Risk Merchants

From 4.9% + €0.35 per transaction

Rolling reserve from 5% to 10% withheld for a period of six months (depending on the business model and volume processed).

A minimum registration fee of €500 may apply for high-risk merchants.

Supported High-Risk businesses

  • Online Gaming
  • Travel, booking, and tickets
  • Dating
  • Adult-Themed Websites
  • Regulated Forex Trading
  • Regulated Online Casinos
  • EU licensed investments & money transfers

Supported countries

Unsupported High-Risk businesses

  • Technical Support & Web Development
  • ISP and Hosting Services
  • Software & Other downloads
  • Smartphones – sale, resale & spare parts
  • Electronics
  • Health & Wellness Products
  • eCigarettes
  • Nutraceuticals
  • Multi-Level Marketing
  • Jewellery, watches & related accessories
  • Credit Repair
  • Money Transfer

Full list

Limited Administrative Overheads

Are you a super-smart entrepreneur? Do you know all the administrative procedures required by the government? Can you do everything alone in the blink of an eye? Do you have special powers to do all of these things perfectly overnight?

If your reply is yes, move to the next chapter. Otherwise, keep reading.

Administrative tasks and bureaucracy can be tedious, time-consuming, and pricey. Moreover, there's a big chance you make mistakes if you don't know things well.

Therefore, a country with limited administrative overheads offers great advantages. There are many examples, but I will list the most common.

Business Licenses

In many countries, you are required to get one or more licenses to start a business. For your company, this means more work, time, costs, and hassles.

So, what choice do you have? a) You find a country that doesn't request a license, b) you change your business or c) you choose a country that makes the business license process as easy as possible.

Tax Reporting

If you're reading this guide, you're probably interested in learning how to set up and run a business in the best possible way. This also includes finding the easiest way to report and pay taxes.

In fact, some jurisdictions require you to do that once a year, but others quarterly. This means, again, more time, work, and expenses. If you prefer, instead, to focus on growing your revenue and business, make sure tax reporting is easy (fairly and legally due but easy).

Operating Agreements & Share Certificates

Depending on the country of incorporation and the type of business, you are legally required to create and file certain documents such as the operating agreement, certificate of formation or share certificates for your LLC.

An operating agreement states the company internal operating procedures and how the members – or owners – relate to each other. The share certificates are documents issued by the company and certify the ownership of one or more shares. The certificate of formation (also known as articles of incorporation, certificate of incorporation or corporate charter) establishes the relationship between the company and the state of incorporation.

Each country has its procedures to follow when you form a business or change something. The faster and easier the better for your business success. It can be very quick in some countries or time-consuming and costly in others.

An example can clarify better. Let's assume we open a business with two other partners and after two years we want to change the ownership structure of our LLC (and, maybe, the entity type). What will happen if we incorporate the business, respectively, in the US and Andorra?

In the USA, we have to

  1. update the operating agreement;
  2. sign it digitally;
  3. notify the banks and payment processors.

Time and effort: a couple of hours or less and a few dollars.

Andorra is a sovereign microstate in the Iberian Peninsula, in the Pyrenees. Personal and corporate income tax is fairly low, but procedures can become a nightmare for many entrepreneurs.

In Andorra, we have to

  1. write and update the documents in the local Catalan language;
  2. book a physical meeting with a notary and inform him/her about the changes;
  3. review the document with the notary;
  4. sign the document in his/her presence;
  5. pay a substantial fee to the notary;
  6. notify the banks and payment processors;
  7. update records with the government offices (which is not instant nor free);
  8. change any references to the company name.

Time and effort: a lot of days and money.

Who's the winner?

Resident Directors or Local Office Requirements

Do you need to be physically present in the country of incorporation and have a local office to start and run your business? Well, it depends on the jurisdiction.

Do you live in the country of incorporation for whatever reason? Do you have a trustworthy partner there (relative, friend or wife/husband)? Then, you can incorporate in countries that require a local resident director (you or your partner).

Do you run a large enterprise that earns millions in profit each year? You can then set up your company in countries that require a local functional office such as in the UAE RAK Free Trade Zone (FTZ) as a foreigner (although you may rent a flexi desk to reduce expenses).

But can you really afford this if you are an average digital nomad earning $1,000 a month?

If you can't physically live in the country of incorporation or open a local office, there are jurisdictions where you can pay others to get a local nominee resident director and registered office. Sometimes, this can be pricey. For example, a Singapore nominee director service can cost $2,000 per year.

Perception & Reputation

The country of incorporation has an impact on business perception and reputation. For example, according to CodeCondo's ranking of the best tech startup countries, the United States and Singapore are the top locations for technological companies.

Conversely, if you're thinking of setting up your business in a tax haven, be ready to inherit the bad reputation of some offshore companies due to their illegal activities.

This doesn't necessarily mean you'll be working illegally. You can do a legitimate job from an offshore country too, but it will still influence the perception of your business. In what ways? Here's a quick list.

  • Your local tax department will audit your business to confirm its legality.
  • Banks will ask for more information.
  • Payment processors will be more suspicious.
  • Credit card companies could block customers' payments.
  • Clients could decide to refrain from buying your products/services due to mistrust (even without evidence).

Each country is good and well-known for certain industries. In the next chapter, you'll discover the best countries for your business industry.

Your Customers and Suppliers

In some countries such as the US, when you conduct a trade or business connected in the country (with customers and suppliers), you get the so-called Effectively Connected Income (ECI).

This means that regardless of your country of residence or incorporation, you must pay tax in each US country where you effectively conducted your business. This can happen, for instance, if you are

  • a nonimmigrant temporarily present in the United States and receive a scholarship or fellowship grant;
  • a member of a partnership engaged in a business in the US;
  • a business performing personal services in the USA;
  • and more.

Other categories of income are included, but there are also some exceptions.

CFC rules

CFC stands for Controlled Foreign Corporation. It's a corporate entity registered and doing business in a different country than the one where the controlling owner resides. The ownership threshold is usually 50% or more, but some countries have different percentages. A controlled corporate can be owned either by individuals or companies that open a foreign subsidiary.

CFC rules were created to prevent tax evasion and each country has its own CFC laws (although the structure is similar). CFC rules take place when the controlled company is set up in a low or no-tax jurisdiction (e.g. a tax haven) and the owner's resident country has a higher tax rate. In this case, you (as the controlling owner) are liable to pay tax, in your country, on certain income (active or/and passive) generated by the controlled foreign corporation.

As said, each jurisdiction is different. So, before choosing the best country to start your business, I suggest you check the CFC rules around the world because they can be strict, soft, absent and with exceptions.

Double-Tax Agreement

Many countries signed treaties for double taxation avoidance. But if there's none between your country of residence and the one of business incorporation, you'll end up in paying income tax twice.

So, look for a country with which yours has a Double Taxation Agreement (DTA). I give you two references that can help you find the best combination.

The Best Countries to Start an Online Business

Now that you know the basics, it's time to choose the best country to start your online business.

This list covers the whole world and reveals the best jurisdictions and business entity types. I focused on solutions for small businesses (bloggers, freelancers, and digital nomads) and mid-sized enterprises (web agency, e-commerce platforms, etc.).

Tallinn capital of Estonia

Estonian Limited Liability Company (OÜ)

Best Country for: Digital Nomads, E-commerce (European Market), Information Businesses, Tech Companies
Country (and Company) Reputation: 
Average
Bank Account Opening: 
Easy
Cost to Open a Business: €320/US$390 
(€100 e-residency + €190 State Fee + €30 Provider Fee)

In Estonia, an OÜ (“osaühing” in Estonian) is a Private Limited Company in which the owners' liability is limited to their share. This is the most common form of business in the country and you don't need to be physically resident there.

Estonia is well-known for its e-Residency program. But don't get confused. You won't get a tax residency in Estonia. In fact, e-Residency is a government-issued digital entity and status that lets you start and manage an EU-based company online. This makes Estonia the ideal country for any tech startups, freelancers, and digital nomads who would like to start a business in Europe easily and with little incorporation expenses.

In Estonia, you have a 20% flat income tax paid on distributed dividends, hence there's no corporate tax. The tax rate is not among the lowest. In fact, jurisdictions such as Malta, Gibraltar, and Cyprus are cheaper when it comes to tax, but they have higher incorporation expenses. Furthermore, these countries are more suited to medium-sized and large enterprises.

As for the sales tax, the VAT rate in Estonia is 20%, but obtaining a VAT number becomes mandatory only over €40,000 in sales in a calendar day. Read the last chapter for more information on this regard and eventually consult a tax advisor to know all the variables and exemptions – on the other hand, this is a general rule of thumb you should always follow.

Note: When you open a company in Estonia through the e-Residency program, remember to check which payment processor supports both your business model, country of incorporation, and your physical residence (or the director's country of residence). For example, Stripe supports companies registered in Estonia through e-Residency, but only if the individual associated with the account is located in one of the supported countries.

Entity Type: Company
Liability: Limited
Law Type: Civil
Time to Establish the Entity: 2 days
Min. Govt. Fees: €190
Corporate Tax Rate: 0%
Double Taxation Treaties: Average
Min. Shareholders: 1

Min. Directors: 1
Resident Director: Not Required
Min. Secretaries:
 0
Resident Secretary:
 Not Required
Minimum Share Capital:
 €2,500
Public Records:
 Yes
Auditing:
 Over €4M sales revenue or income
Return Filing:
 Monthly

London capital of England

UK Limited Liability Partnership

Best Country for: E-commerce, Service Businesses, Payment Processing
Country (and Company) Reputation: Excellent
Bank Account Opening: Easy

The UK is a respected jurisdiction and well-known international trade and financial centre. The country has economic and politic stability and is highly desirable for company formation.

A UK LLP (Limited Liability Partnership) is composed of at least two members (person or company). It's perfect for foreign entrepreneurs who don't carry business within the country, don't want to pay any local UK taxes but wish to get all the following benefits this business entity type grants.

  • Limited liability to the owners
  • Zero corporate tax
  • Organizational flexibility
  • A big choice of digital banking solutions
  • Tax transparency
  • Cheap, easy and fast company registration (electronically, by post, through an agent).

A UK LLP is a pass-through entity so each member pays tax on their share of the profit in the country of residence. What about the sales tax? For an annual turnover below £81,000, you are not required to register for the UK VAT.

Are you thinking of registering a UK LTD instead (one of the most common business entities)? Just remember this is a separate entity and your company will have to pay a 19% UK corporate tax.

Last but not least, CFC rules don't apply as long as the CFC's accounting profit is under £500,000.

Entity Type: Partnership
Liability: Limited
Law Type: Common
Time to Establish the Entity: 1 day
Min. Govt. Fees: £10
Partnership Tax Rate: 0%
Double Taxation Treaties: Many
Min. Partners: 2

Resident Partner: Not Required
Min. Secretaries:
 0
Resident Secretary:
 Not Required
Minimum Capital:
 £1
Public Records:
 Yes (by default)
Auditing:
 Over £10.2M turnover
Return Filing:
 Annual

Skyscraper in Miami, Florida

USA Limited Liability Company

Best Country for: E-commerce, Service Businesses, Payment Processing
Country (and Company) Reputation: 
Excellent
Bank Account Opening: 
Easy
Cost to Open a Business:
 from US$79 to US$249 + State Fees

Although the United States is a rich country, setting up an LLC is very quick, easy, and affordable. In fact, the US is one of the cheapest countries to incorporate a company. It has an excellent reputation and is ideal for any online business. In the US, you'll have plenty of choice for banking, credit cards, payment processors, and more.

The average US federal corporate tax rate is 21% if you carry out business in the country. But a US LLC is a pass-through entity (similar to the UK LLP). Therefore, if you're a non-resident and don't trade within the United States, you'll end up in having a 0% tax rate.

There are several interesting States where you can incorporate your LLC in the USA. However, taxes and fees vary from a State to another. Some of the most common business entities are:

  • Delaware LLC for online businesses and large enterprises thanks to the State extensive corporate case law.
  • Wyoming LLC for small businesses thanks to more privacy and lower operating costs.

Here are more details in case you'd like to register a Wyoming LLC.

Entity Type: Company
Liability: Limited
Law Type: Common
Time to Establish the Entity: 1 day
Min. Govt. Fees: US$25
Corporate Tax Rate: 21% (average)
Double Taxation Treaties: Many
Min. Shareholders: 1

Min. Directors: 1
Resident Director: Not Required
Min. Secretaries:
 0
Resident Secretary:
 Not Required
Minimum Share Capital:
 US$0
Public Records:
 No
Auditing:
 Not Required
Return Filing:
 Annual

Skyline Toronto, Canada

Canadian Limited Liability Partnerships

Best Country for: Consulting, Marketing Agency, Sales Agents, Payment Processing.
Country (and Company) Reputation: Excellent
Bank Account Opening: Easy

In Canada, you can register either a Limited Partnership (LP) or Limited Liability Partnership (LLP). You can use them as disregarded entities (pass-through entities) and pay zero partnership tax. This makes them ideal for foreign investors and online entrepreneurs who want a presence in Canada.

Here are the three main reasons for setting up your online business in Canada.

  • There's a 0% tax rate at the business level.
  • Company registration is easy and cheap (it costs a few hundred dollars).
  • Canada has an exceptional reputation for consulting, marketing and sales businesses.

So, which business entity is better for you? A Limited Partnership or a Limited Liability Partnership? Let's see the structure.

Most provinces offer LPs. These entities require a general partner who has 100% liability (it's usually a corporation to reduce liability) and one or more limited partners who have limited liability. Entrepreneurs often use them to raise money for some kind of business ventures.

Conversely, LLPs give limited liability to each partner. In most provinces, they are limited to regulated professions such as accountants and lawyers. But in British Columbia (BC) and Ontario, LLPs are available for all kinds of businesses.

Entity Type: Limited Partnership
Liability: Limited
Law Type: Common
Time to Establish Entity: 1-5 days
Min. Govt. Fees: C$305
Partnership Tax Rate: 0%
Double Taxation Treaties: Many
Min. Partners: 2

Resident Partner: Not Required
Min. Secretaries: 0
Resident Secretary: Not Required
Minimum Capital: C$1,000
Public Records: Yes
Auditing: Not Required
Return Filing: Not Required

A glimpse of Hong Kong at night

Hong Kong Private Limited Company

Best Country for: E-commerce, Investment Funds, Holdings
Country (and Company) Reputation: Average
Bank Account Opening: Difficult

Hong Kong was once one of the favourite offshore destinations for online businesses. Today, Hong Kong is losing a bit of its appeal because opening a bank account is getting difficult (or impossible) although the banking system is excellent.

Despite that, it remains a good country to start a business if you run a big company or an e-commerce platform, especially if you sell electronics and tech products. Maybe Hong Kong is one of the best for this business industry and here's why.

When you register a PLC in Hong Kong, you pay a 16.5% corporate tax. But you can sell outside the country, apply for the offshore tax exemption and get a 0% tax rate.

Moreover, the city has no withholding tax and no tax on capital gains, dividends, and sales (or VAT). That's why Hong Kong is a popular shopping destination (online shopping included). For instance, have a look at the electronic products listed on eBay. Cameras coming from Hong Kong usually cost US$200-US$300 less.

The downside? Costs to set up and run a Hong Kong company can be expensive. You can choose the cheapest DIY way, but it won't be an easy path. Alternatively, you can use an intermediary (aka formation agents or registration agents). This can raise the cost up to US$2,000 or more.

Entity Type: Company
Liability: Limited
Law Type: Common
Time to Establish Entity: 1-4 days
Min. Govt. Fees: HK$1,720
Corporate Tax Rate: 16.5%
Double Taxation Treaties: Average
Min. Shareholders: 1

Min. Directors: 1
Resident Director: Not Required
Min. Secretaries:
 1
Resident Secretary:
 Required
Minimum Share Capital:
 HK$1
Public Records:
 Yes
Auditing:
 Required
Return Filing:
 Annual

Singapore skyline

Singapore Private Limited Company

Best Country for: Tech Startups, Financial Services, Investment Funds, Trading Companies
Country (and Company) Reputation: Excellent
Bank Account Opening: Easy

Singapore is one of the main financial centres in Southeast Asia. It's rich in cash and financial services and online trading companies can find the right audience to grow their business.

Singapore is also a great place for e-commerce and web platforms that can attract the attention of the local venture capitalists looking for tech startups.

The corporate tax rate is 17%, but certain businesses can benefit from a partial tax exemption, a three-year startup tax exemption or other tax incentives.

In addition, companies in Singapore pay taxes only on profits. So, there's no tax on dividends, capital gains, and foreign-sourced income if already subjected to taxation overseas.

Foreigners can't self-register their company but have to appoint an agent. Costs for setting up and run a PLC in Singapore can be high going up to US$2,500. But you can also find consulting companies that offer Singapore incorporation packages at a promo price.

Entity Type: Company
Liability: Limited
Law Type: Common
Time to Establish Entity: 1-3 days
Min. Govt. Fees: S$315
Corporate Tax Rate: 17%
Double Taxation Treaties: Many
Min. Shareholders: 1

Min. Directors: 1
Resident Director: Required
Min. Secretaries:
 1
Resident Secretary:
 Required
Minimum Share Capital:
 S$1
Public Records:
 Yes
Auditing:
 Over S$5M turnover
Return Filing:
 Annual

Which is the Winning Country? Estonia!

Actually, there's no perfect country to incorporate a company that operates online. As you read in the previous paragraphs, there can be many variables and personal needs to consider (your country of residence, the sector and type of business in which you'll operate, the available capital, and so on).

Based on my personal experience, Estonia is the best choice for any professional who offers marketing consultancy services (for example, SEO, Paid Advertising, Social Media Management, Affiliate Marketing, etc.), aspiring successful bloggers eager to monetise their websites through affiliations and display advertising, or for small and medium e-commerce startups.

Keep reading below to discover why in detail.

Opening a Company in Estonia: Advantages

Estonia is in the top positions in Europe. It's one of the countries with the largest number of active startups registered. Furthermore, for the sixth consecutive year, the Tax Foundation, the US independent, and non-partisan research institute have positioned the Estonian system at the top of the ranking of the most efficient tax systems in OECD countries.

Each year, in fact, the institute prepares an index, the International Tax Competitiveness Index, which measures the effectiveness of the tax system of the most important countries in the world through the adherence of each system to the criteria of competitiveness and neutrality.

You have surely heard that Estonia was the first country in the world to have established the “digital residence” to attract brains from around the globe and encourage the opening of new digital businesses.

The e-residency allows “digital nomads” (or remote workers) from all over the world to acquire, under certain aspects, the same rights as an Estonian resident: open a business in Estonia, submit applications and requests for certificates to the public administration, pay taxes, etc.

Opening a company in Estonia gives several advantages. Let's see the main ones.

  • Possibility to open the company without having to travel to Estonia.
  • Low establishment costs: €290 (€ 100 e-residency and € 190 state fee).
  • Low share capital: € 2,550 (deferrable over 10 years),
  • Flat Tax at 20%: (applied only if you distribute dividends at the end of the year).
  • VAT at 20%: (not compulsory up to € 40,000 in annual turnover).

Let's see all the advantages together in details.

Opening a Business in Estonia: Tax Advantages

Corporate income tax in Estonia

Opening a company in Estonia allows you to benefit from one of the most favourable tax regimes in the world. In fact, a 20% flat tax is applied regardless of turnover, but with an exception. When the corporate profits are reinvested in the company, so that there are no distributed dividends, the income tax rate is 0%.

To simplify the concept as much as possible, if you withdraw money in the form of a salary, for example, without distributing dividends at the end of the year, you pay ZERO TAXES!

Little Known Tips on Personal Taxation


If you incorporate a company in a country other than the one in which you are resident, you have double taxation. In the country in which you have incorporated the company, you'll pay the company tax, while in your country of residence, you'll pay taxes as individual on the income produced abroad. Let's see the example where you are resident in France and have your company in England. You'll pay company taxes in England plus personal taxes as a natural person in France.

However, there are some exceptions that few people know about. If you are resident in Ireland or England (not born there, therefore without citizenship), you acquire a "Res Non-Dom" (non-domiciled resident) status. This status allows you to pay zero taxes as an individual if your company is located in another country and you don't physically transfer the profit generated to your country of residence.

The same exception also exists in Malta. Unfortunately, since 2019, the authorities have imposed a flat-rate tax of €5,000/year for incomes over €35,000 annually. This means you pay zero taxes if you earn less than €35,000. Otherwise, you'll pay a minimum tax of €5000 regardless of the profit produced.

So you got it right. If you are resident in Ireland or England, have a foreign company and don't transfer in your country the profits produced, you pay zero taxes as an individual or very little if you are resident in Malta.


VAT rate in Estonia

The standard VAT rate that applies to business activities in Estonia is 20%. There's also a reduced rate of 9%, which applies to the sale of hotel services, books and pharmaceutical products.

However, it's possible to open a company in Estonia without registering it for VAT purposes. In this way, you obtain a total exemption from value-added tax even on sales made in Estonia. The condition? Having an annual turnover of up to €40,000.

I'd like also to remind you that Estonia is part of the European Union. Therefore, all goods and services sold to other EU companies, located outside the country, are not taxable for VAT purposes.

Costs for contributions paid to employees

Employers registered in Estonia (including permanent establishments of foreign companies) are obliged to pay social security and welfare contributions to their employees.

The rate of contributions is 33% of the salary (20% for social security and 13% for health insurance). The minimum wage in Estonia for a full-time employee is €500/month as of 2018.

How to Incorporate a Company in Estonia: Step-By-Step Guide

If you are thinking of setting up a company in Estonia, these are the few steps you need to follow.

  1. Apply for the Estonian e-Residency.
  2. Register the company electronically.
  3. Open a virtual office in Estonia.
  4. Choose the company for monthly accounting management and annual tax return.
  5. Open a multi-currency bank account.

How to apply for Estonian e-Residency Card

You can apply for the Estonian digital residency at the following web address: https://e-resident.gov.ee/become-an-e-resident/

In the form, in addition to personal data, you have to upload your personal photo and a copy of your identity card (for European citizens) or passport (for non-EU citizens) with a minimum size of 1300×1600 Pixels in .jpg .jpeg formats. To complete the application, you must also pay the state fee: the amount is €100 plus a €1.99 fee for the payment collection service.

Depending on the chosen pick-up location, the following additional fees apply.

  • no additional fee if you choose an office in Estonia as the pick-up location.
  • €20 upon application if you choose a foreign representation of Estonia as the pick-up location.

After completing the procedure, you can collect the card within 6 months at the Estonian Embassy selected as a “pick-up location” (on average, it's ready in 30/40 days and you'll receive an email notification from the Police and Border Guard Board).

This is what your Estonian digital resident card will look like.

Estonian e-Residency Sample
Estonian e-Residency Sample

NOTE: E-residency isn't a way to obtain Estonian citizenship, much less to obtain legal residency. Which means that it's not a way to live abroad and pay Estonian taxes (notoriously low). So it's not a way to encourage tax evasion. Furthermore, the E-resident digital card cannot be used for travel, as an identity card or as a passport. It's simply a document within the Estonian system.

How to use the Estonian e-Residency Card

Estonian e-Residency Kit
Estonian e-Residency Kit

The Estonian digital identity card allows you to digitally sign and encrypt documents.

To use your e-Residency identity card electronically, you must have:

  • PIN codes issued together with the identity card.
  • A computer with an active Internet connection.
  • A smart card reader included in the kit when you collect your card at the Embassy.
  • The software ID that allows you to use your identity card electronically. You can download it on this link: https://installer.id.ee/?lang=eng

Now, you can proceed with the establishment of the Estonian company.

Here are the next steps to take.

  1. Locate a service provider (virtual office).
  2. Establish the company electronically.
  3. Open a corporate bank account.

Consulting, virtual office and accounting management in Estonia

To register a company in Estonia, you need to find a registered office.

You can choose one of the following locations as your registered office.

  1. A physical space (in which case you will need to rent an office).
  2. An address at a company that offers domiciliation and mail forwarding services.

Of course, the second option is the cheapest one. Many digital entrepreneurs work from home and don't need a physical space. Therefore, they opt for this second solution.

Opening a company in Estonia with a virtual office is a simple and inexpensive solution. The company providing the service will give you the address and register it as your corporate address with the Register of Companies. The Estonian tax authorities will use it to send you official communications.

With Whom Provider to Open Your Company?


Are you a freelance, digital entrepreneur or digital nomad? Do you sell digital or consulting services or monetize your sites through affiliations? Your best choice is Xolo.

With Xolo you can open your company in 3 simple steps (in 2-3 days if you already have the e-residency card, 4-5 weeks if you need to request it). You'll benefit from a simple and intuitive platform where you can register and issue your invoices.

The Xolo team will help you register your company in Estonia, provide you with the virtual office, manage your accounting, file your annual tax return, and issue your employees' payslips (if you have any). Yes! And all this starting from €79 per month!

To register the company, you need to connect to the online portal of the Estonian Company Register at this address https://ettevotjaportaal.rik.ee/index.py?chlang=eng (you will still receive all the information, step by step, from the service provider you choose ).

There are two fundamental aspects you must take into consideration.

  • If the corporate/administrative structure of the company is made up of more than one person, each of them must have a digital residence with smart cards and software installed. This is because each shareholder/administrator must digitally sign the deed of incorporation.
  • Upon incorporation, you'll be required to declare the share capital. The minimum share capital is equal to €2,500 which can be paid immediately online or subsequently within 10 years. In any case, you must pay it in order to distribute dividends to shareholders!

The company incorporation request costs €190 (in addition, the providers apply a fee of €20/€30). The Register of Companies usually processes it within a single working day.

Opening a bank account in Estonia

After establishing your company in Estonia, you must proceed with the opening of a bank account. The most used Estonian banks are LHV Pank and Swedbank.

Note: the opening of an account with “traditional” banks must be carried out by the administrator of the company. He/she will have to physically go to the branch to sign the contract and present the documents.

Do You Want to Open a Bank Account Without Going to Estonia? 


I have the perfect solution for you: Wise. You can open a business bank account with a multi-currency IBAN code and receive a Mastercard debit card completely online. With TransferWise, you can also send money to over 80 countries around the world at a cost 19 times lower than Paypal (That's according to independent research agency Alderson Consulting(Bristol) Ltd). 

Check on Trustpilot what over 106,000 customers say about Wise.

Choosing the best country to open a company depends on many variables. The right mix can define the perfect solution for your online business abroad as a digital nomad and international entrepreneur.

This guide gives you an overall overview of the best countries to set up your business. Always evaluate all the economic, tax, and legal aspects of the country of incorporation. Next time you talk with your tax consultant or lawyer, you'll already have all the main information to make a better and faster decision.

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