- The 2023 ranking of countries with low taxes for businesses
- Top countries for business based on VAT policies
- Business-friendly countries with favorable capital gains tax (CGT) rates
- Zero taxation zones: what countries don’t impose corporate income tax?
- Prime destinations for company incorporation in 2023: summary of the best countries with low taxes
When it comes to establishing a business structure overseas, choosing the right country is of utmost importance. Taxation is a major factor to be taken into account when you make this decision. What jurisdictions are currently considered the best countries with lowest corporate tax rates, and where is corporate income tax not levied? In this article, we’ll take a closer look at the countries with the best tax rates that have favorable taxation policies for both domestic and foreign companies in 2023.
Setting up a company requires careful consideration and attention to detail. To ensure a smooth and successful process, it is crucial to seek the assistance of experienced global experts. At International Wealth, we offer our customers a free initial consultation on business planning and tax optimization, as well as comprehensive services for turnkey company incorporation overseas.
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The 2023 ranking of countries with low taxes for businesses
Are you wondering which countries offer the lowest corporate tax rates in 2023 for companies that operate within their borders? The International Wealth comprehensive ranking takes into account tax rates for net profits without considering any exemptions, as well as rates on capital gains or VAT for non-resident foreign companies.
Cyprus, Ireland, and Liechtenstein all apply a corporate income tax rate of 12.5%. In Macao and Moldova, it makes 12%.
Other countries that apply a tax rate of 10% for companies include Andorra, Bosnia and Herzegovina, Bulgaria, Kyrgyzstan, Paraguay, and the Republic of Macedonia. Hungary and Montenegro, on the other hand, are known to be the states with the most favorable taxes for businesses, with a rate of only 9%.
If you’re looking for even more favorable conditions, consider Uzbekistan, where the corporate income tax rate for 2023 is only 7.5%. Finally, Barbados offers the lowest tax rate for entrepreneurs at 5.5%, rounding out our list.
When you assess the potential of a country for business setup, it’s not enough to rely solely on its corporate tax. Several other factors may come into play, such as registration renewal fees, value-added tax (VAT), and capital gains tax. All of them can significantly impact the profitability of a business. Therefore, a comprehensive analysis of a country’s tax system and its associated costs is crucial to avoid any unexpected financial risks.
Establishing a company overseas is a major decision that requires careful consideration and thorough research. Before you embark on such a venture, we recommend you review all relevant criteria, including tax laws, regulations, cultural differences, and economic stability, to name a few. To ensure a comprehensive evaluation of a foreign country, consider seeking the guidance of International Wealth seasoned experts who will provide you with valuable insights and strategic advice.
Top countries for business based on VAT policies
Besides the corporate tax, it’s crucial to consider the value-added tax (VAT), which also affects businesses and companies operating overseas. For you to make informed decisions, here’s a list of countries that apply the minimum VAT rate in 2023:
- The United Arab Emirates – only 5% VAT.
- Thailand – VAT is set at 7%.
- Timor-Leste – a tax of 2.5% applies only to imported goods.
- Trinidad and Tobago – VAT is 12.5%.
- Taiwan – general industries have a VAT rate of 5%.
- Switzerland is among the countries with the lowest taxes globally, with a VAT rate of 7.7% in 2023 that will grow to 8.1% in 2024.
- Saint Lucia – VAT is 12.5%.
- The Philippines has a 12% VAT rate.
- Panama – a VAT of 7% applies to the transfer of movable goods and services.
- Papua New Guinea has a VAT rate of 10% on goods and services.
- Paraguay – VAT rate is 10% and 5% for the sale and rental of real estate, certain medicines, and agricultural products.
- Oman – VAT is set at 5%, with due account for special privileges and zero rates stipulated by local legislation.
- Liechtenstein – VAT is 7.7%.
- Jersey, Channel Islands – goods and services tax (GST) is only 5%.
- Indonesia has an 11% VAT rate.
- Canada – combined federal and municipal and/or territorial sales taxes range from 5% to 15%.
- Botswana has a 12% VAT rate.
There are several countries where no value-added tax (VAT) is applied, including Aruba, Bahrain, the Bahamas, Bermuda, Brunei, Gibraltar, Guernsey, Hong Kong, the Cayman Islands, Qatar, Kuwait, and Curaçao.
Business-friendly countries with favorable capital gains tax (CGT) rates
Capital gains are often subject to the regular corporate income tax rate or an equivalent tax rate in many countries. However, some jurisdictions are more favorable for businesses since they do not levy capital gains tax (CGT). Offshore territories and entire countries like Hong Kong SAR, the Isle of Man, Barbados, the Cayman Islands, Bermuda, and others fall under this category in 2023.
To find out about other countries where the CGT is applied, and how it can either benefit or harm businesses, please refer to the table below.
|Country or territory||Corporate capital gains tax (%)|
|Belgium||Instead of CGT, CIT is applied. An exception is the capital gains from stocks under certain conditions.|
|Canada||Tax is levied on half of the capital gains. The latter are a part of the company’s income and subject to corporate tax.|
|Costa Rica||15 (2.25, subject to certain conditions)|
|Ecuador||When a business gains capital by transferring ownership rights to shares, it is subject to an income tax of 10% on the amount gained|
|Egypt||0.10 or 22.5|
|El Salvador||10% or 30%|
|Gabon||Gabonese companies pay a 20% tax on capital gains|
|Greenland||25% + tax surcharge of 6%|
|Hungary||CGT is equivalent to CIT (9%), but a preferential tax regime providing for tax exemptions may apply|
|Italy||In the case of corporate capital gains, the regular CIT rate applies. For financial investments, the PEX regime is available. Under certain conditions, the latter allows for tax exemptions of up to 95%.|
|Jamaica||Jamaica does not have a specific capital gains tax regime. Instead, there is a local transfer tax of 2% imposed on the transfer of real estate and securities.|
|Liechtenstein||Capital gains tax does not apply to the sale of stocks. Capital gains resulting from the sale of real estate are subject to a profit tax rate of up to 24%.|
|Malaysia||Profit from the company’s capital assets is generally not subject to taxation, except for income from the sale of real estate located in Malaysia. The latter is subject to a Real Property Gains Tax (RPGT) of up to 30%.|
|Mexico||Resident companies in Mexico are subject to a capital gains tax rate of 30%, which is treated as regular taxable income. For non-residents, the capital gains tax rate is either 25% of the gross income or 35% of the net profit.|
|Netherlands||The regular CIT rate of 25.8% is applicable, with provisions for exemptions.|
|New Zealand||New Zealand does not have any capital gains tax. Instead, the capital gains of a business are taxed as dividends when they are distributed among shareholders, subject to some exceptions.|
|North Macedonia||The increase in business assets is included in the annual profits and taxed at the CIT rate.|
|Papua New Guinea||The taxation system currently in place in Papua New Guinea does not levy any capital gains tax on individuals or businesses.|
|Saudi Arabia||In Saudi Arabia, corporate gains are subject to corporate capital gains tax. The rate of the capital gains tax for non-residents is 20%|
|Switzerland||Switzerland’s effective tax rate (ETR) is determined by the company’s residency and ranges from 11.9% to 21.0% across cantons.|
|Taiwan||In most cases, capital gains tax (CGT) is replaced by corporate income tax (CIT) in the country’s taxation system, except for tradable securities and real estate.|
|The United States of America||21|
|Uruguay||In the case of businesses, the capital gains are subject to a CIT tax rate of 25%.|
To learn more about the top countries with favorable tax policies for businesses, check out the International Wealth article Top Low Corporate Tax Countries in 2022.
Zero taxation zones: what countries don’t impose corporate income tax?
In addition to tax havens, there exist countries that do not impose corporate income tax on businesses, be it at all or under certain conditions:
- British Virgin Islands
- Cayman Islands
- Isle of Man
- St. Barthelemy
- Turks and Caicos
- United Arab Emirates (though, from 2023, a corporate tax of 9% will be implemented on the mainland)
For international corporations, registering a business in countries that follow the territorial principle of taxation offers significant benefits. Under this principle, taxes are only levied on income earned within the country. Hence, businesses operating outside the country are exempt from taxes. This creates a favorable environment for them to boost profit margins.
For those seeking to set up a business and avoid worldwide income tax, several countries offer ideal conditions. The above jurisdictions include the Dominican Republic, Georgia, Hong Kong, Macau, Marshall Islands, Mauritania, Morocco, Panama, Paraguay, and Seychelles.
Prime destinations for company incorporation in 2023: summary of the best countries with low taxes
While tax breaks may appear advantageous for launching a business or incorporating a company overseas, it’s important to bear in mind that they’re not always the best choice. Certain foreign nations provide standard tax rates and other advantages that can significantly reduce financial expenses.
It’s essential to consider the organizational and legal structure, which can have a direct impact on taxes and benefits. For example, trusts are not subject to taxation. If you consolidate offshore businesses and let such an entity manage them, you will safeguard assets and prevent conflicts with foreign creditors. A notable instance of this is the combo of an offshore trust and an LLC in Nevis.
Before you establish a business in a foreign country, be sure to seek advice from International Wealth experienced profs who will assist with your inquiries. At International Wealth, we provide a complete range of services in multiple areas:
- incorporating offshore or European companies, trusts, and funds
- relocating businesses from one country to another
- opening bank accounts, inter alia, for offshore companies
- changing tax residency to a country with more favorable business conditions
- resolving any administrative, customs, tax, and other issues that may arise.
In case you need further assistance or have any queries, feel free to reach out to the International Wealth online consultant or get in touch with our experts directly. For your convenience, use the contact details on our website.