5 Best Countries in Europe for Company Formation

Are you planning on expanding your business in Europe? You have plenty of options, maybe too many. To make a choice that fits your business the best, first try and identify those aspects that matter the most to you. We have collected some aspects to watch out for, complete with an adequate list of the Top 5.

How to decide where to set up your European business

Whatever sector you wish to do business in, the below aspects will most probably be relevant:

Options for remote or online business setup and operation
Ease of opening a corporate bank account
Corporate tax rates and complexity
Rate of English-speaking population

For other relevant aspects, you can also consult the “Ease of Doing Business” report of the Work Bank, which is issued every few years, and gives a great overview of relevant aspects.

Let’s see some of the best countries Europe can offer to businesspeople.

Sweden

Sweden ranks 10th in ease of doing business globally. It boasts a mature startup scene with unicorns such as Skype, Spotify, or Klarna. Taxes in Nordic countries are relatively high, and Sweden is not an exception with its 20.6% corporate tax (although it is still average in Europe, and significantly lower than a few decades back). However, taxation is at least not too complicated – unlike opening a corporate bank account, the required time for which ranges from a few days to a few weeks. At the same time, electronic administration in Sweden is pretty advanced, while the rate of the English-speaking population is also above 85%.

Hungary

While Hungary ranks only 52nd on the ranking of the World Bank, it attracts investors with easy company registration and the lowest corporate tax in the EU, which is only 9%. Company formation in Hungary takes only 4-5 business days, while companies immediately get an EU VAT number as well, without much ado. Setting up a corporate bank account is mandatory, but sometimes it can prove tricky because banks are picky. You can be best supported by providing local activity, such as preliminary business agreements and feasible business plans. While only about 20% of the population speaks fluent English, your partners will easily fall among those who do, and most services are available online, often in English too.

Estonia

Estonia ranks 18th in the Ease of Doing Business list thanks to its digital business options and its e-residency program. It is one of the most heavily digitalised countries in the EU, with over 99% of bank transactions carried out online, alongside 98% of tax declarations. Moreover, it is not even a requirement in Estonia to have a corporate bank account with a local bank. More than half of the locals speak English. Corporate tax is 20%.

Portugal

Portugal, ranking 39th on the list, is a great target if quick links to the US and Africa matter to your business as much as having access to the EEA market. The lovely culture and the mild climate are also a great plus, and Portugal’s ambition is to be considered a true digital nation. Opening a corporate bank account is a must, and is it possible remotely, but Portuguese banks are known for their scrutiny and may request additional information concerning the ultimate beneficial owners of the business. Corporate tax is 21%, which is average, while the rate of English speakers is around 30%, converging around the larger cities.

Malta

Malta ranks a bit lower on the list at the 88th position because of complicated bureaucracy and the difficulties in getting credit or registering property. However, these aspects matter little to all digital business owners, especially advertising and gaming companies that are happy to set up their EU headquarters here. At the same time, the low cost of living and the high living standards attract many traditional investors as well. Setting up a business bank account is quick, easy, and cheap, while above 60% of the locals speak English. Nevertheless, corporate tax is a bit higher than elsewhere at 35%.

Moving to Europe

Another important aspect of company setup is whether you intend to move to Europe yourself and whether you intend to bring any employees along. EU directives suggest that residency application should not take more than 4 months, and e.g. receiving a work permit in Hungary takes about 3-4 months. Thanks to the Schengen agreement, residency in any EU country doubles as a Schengen visa, so you will be able to travel visa-free to every other Schengen member state too, not only your country of residency.

Moving to Europe normally entails becoming a tax resident too. If you have income in Europe, you will have to pay taxes after it. To avoid paying taxes both in your new country of residence and your country of origin, most countries have double taxation agreements in place with other states. Consider the rates of personal income tax as well as the available tax benefits. For example, tax benefits in Hungary are offered mostly to married people and couples with children, making it an excellent destination for families.

Explore: 7 Ways Entrepreneurs Can Reduce Year End Tax Liabilities

For those interested in citizenship: most European countries offer citizenship to all nationalities after 8-10 years of residency. While some of them also offer investment residency, another possible route is citizenship based on descent. For example, Hungarian citizenship by ancestry is available to everyone who has at least one parent, grandparent, or other direct ancestor who was Hungarian, going back as long as there is a recorded history of the family in official archives (typically late 19th century).

Consider what you want and plan accordingly

In our globalised world, you can quite easily set up a business in a new country to expand your market. Europe offers digital solutions and transparent procedures in general, while different countries offer different additional perks. Decide what is important to your business and choose your new headquarters accordingly.

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