Why Register a Company in a Foreign Country?

Registering a company in a foreign country would greatly extend your business horizons. A foreign company can bring your business operations to a new level.

Stability of financial operations

If you are planning to enter international markets, you will have to register a legal entity in a foreign country in any case. This will let you legally use various services and payment systems as well as make payments to foreign partners, suppliers, and counteragents and receive payments from your foreign customers. If you want to conduct financial operations in a foreign country, you need to have a company there.

No country would mind foreign direct investments and many of them offer special conditions to foreigners who register companies on their territories. They offer various incentives in order to attract entrepreneurs from abroad who could bring some money from their home countries. You can find serious tax incentives for foreigners in such countries as the USA, Great Britain, the UAE, or Cyprus, for example.

One more group of countries that you should consider is offshore jurisdictions. Many of them charge zero taxes on their resident companies’ global incomes and they have very lax reporting requirements. Apart from registering a company, you can buy a ready-made company in an offshore jurisdiction such as Nevis, for example. You can read more about this opportunity if you follow the link.

Access to new opportunities for taking out loans

Many countries support startup companies in various ways. They offer free consultations to rookie businesspeople, they provide administrative support, and, most importantly, they provide tax incentives to beginners. In addition to that, they offer loans at small interest rates to startups. Therefore, you may be able to find more chances to take out a loan if you register a company in a foreign country.

Countries such as the USA, EU, and UK have extremely powerful financial systems and they offer many attractive investment opportunities. On the other hand, countries such as China and India have immense manufacturing facilities, which can be a reason to give them some consideration too.

An opportunity to optimize your tax burden and minimize maintenance costs

Different countries charge taxes on corporate income at different rates. Speaking about Europe, Cyprus is the EU country with the lowest corporate income tax rate – only 12.5%. Serbia is not an EU member state but it’s a European country anyway and the corporate income tax rate is also comparatively low there – 15%.

Speaking about offshore jurisdictions, it would be wrong to say that you have to pay nothing in taxes there. After all, even though your global income may not be taxed, you have to pay an annual company registration fee anyway. At the same time, the registration fee is only a few hundred dollars a year so this is not too heavy a burden. Consider Comoros, for example. The jurisdiction is perfect for establishing an online gambling company. No tax is going to be payable on your global income, the company maintenance is going to cost you a few hundred dollars and think how much money you could earn by providing gambling services!

Relationships of trust with resident companies

Most business people are after growing their companies and some even aim at global expansion. However, to develop business operations in a foreign country, you need support from local companies: partners, suppliers, service providers, etc. Now you have to enter their circle to make them trust you. This means that you have to establish a company that would be a foreign company for you but a local company for your foreign partners.

Better chances to establish legal residence in a foreign country

As a rule, registering a company in a foreign country does not automatically entail acquiring a legal residence permit there. There are exceptions, however. In Serbia that we have mentioned above, registering a company (even a sole proprietorship) makes you eligible for a temporary residence permit. The essential condition is that yours has to be an active company. That is, you cannot have a company only on paper to qualify for legal residence in Serbia.

Besides, some countries that ‘sell’ their passports to foreigners allow making investments into business ventures on their territories. Set up a company in St Lucia, for example, invest into the local economy and you will qualify for a passport of the country.

Better business infrastructure

If you are looking to expand to new territories, you will benefit from an advanced infrastructure. For example, the EU countries are ideal for international business operations because they have made all the necessary agreements concerning logistics. If you set up a company in one EU country, you will automatically have free access to all EU countries. You can easily transport your goods all across the Union without paying any customs duties nor stopping for passport control at national borders.

What do you have to do to register a company in a foreign country?

First and foremost, you have to acquaint yourself with the corporate legislation of the foreign country that you are considering. Every country will have certain requirements to the company founders:

• In some countries (and with some company types), a single person can act as the company founder/ director/ shareholder. Other countries and other company types require several founders/ directors/ shareholders.
• Normally, a company has to have some registered capital but the amounts can be rather different depending on the country.
• In all countries, a Memorandum and Articles of Association need to be drawn up. In addition, company By-laws have to define the principles of the company’s operations.
• In all countries, company owners have to be identified. In some countries, the Registers are open to the public, while in some other countries, they are closed.
• Many countries provide opportunities for registering companies online these days. You have to bear in mind, however, that the official website is in the official language of the foreign country and its English version may be unavailable.
• Your foreign company has to have a corporate bank account. Opening a bank account in the country where your company is domiciled is not necessary but desirable.

You also have to realize that your foreign company will have to have some economic substance in the country of its domiciliation even if it is registered in an offshore jurisdiction. In rare cases, a virtual office could suffice but a brick-and-mortar office is usually obligatory. In any case, your company will have to have a registered legal address in the foreign country.

Finally, some reporting requirements are going to be in place in most countries. In some offshore jurisdictions such as Belize, for example, resident companies deriving profits from foreign countries do not have to submit any reports because they are not taxed. However, they have to keep financial records anyway. If you set up a company in an onshore jurisdiction, you have to be prepared to file the Annual Return, the Balance Sheet, the Profit and Loss statement, and so on. Even though registering a company in a foreign country brings many benefits, it imposes some obligations too.