Let’s find a beautiful country to incorporate your nomad business.

Before you explore some popular options, it’s important to know that opening a business in the country of your nationality is usually not a good idea unless you spend the majority of the year there.

Sometimes it can be a bad idea to open a business at the location of your current tax residence or the country in which you have a permanent residence permit. However, this depends on the country and your nationality.

In general, you should also wait to set up a foreign company until you have officially left your home country, as some countries will tax your newly established company with a special tax exemption.

However, choosing a jurisdiction for your new company should be based on several criteria:

  • The opportunity to build the business remotely
  • The ability to remotely manage the company
  • The ease of doing business, or do you need an expensive local agent, regular audits, etc.?
  • The simple opening of a bank account for your company
  • The corporate tax rate
  • Whether your trading partners accept bills from companies in these countries
  • Whether the country is on a blacklist, such as tax havens, trade embargoes, etc.
  • The political stability of the country
  • Whether CFC / BEPS regulations apply in your country of residence

Let’s take a closer look at these criteria:

The ability to build the business remotely

Some countries are well advanced and allow you to register your business over the Internet or at least through a local agent. This can save you significant travel expenses if you do not want to visit this country anyway. Countries that require your on-site presence, if only for a simple signature, may still be worth the effort if they excel in all other areas.

The ability to manage the business remotely

Similar to starting a business from a distance, it is a great advantage that everything can be managed remotely. If you need to visit the country on a regular basis to submit reports, renew licenses, etc., the cost of ownership can have a significant impact on the business.

The ease of doing business there

Countries with a large bureaucracy are usually not on the list that a digital nomad examines when choosing the jurisdiction of future business. The laws should be easy to understand, the need to have local agents should be low or absent, and the scope of accounting and auditing should be reasonable. Countries where there are no accounting rules may look like a bargain here, but sometimes they have some difficulty dealing with certain stricter jurisdictions, such as: An invoice issued by a company from the British Virgin Islands to a company in the EU may not be recognized as a business expense by the tax authorities of the EU country.

The ease of opening a bank account there

The best business structure is useless if you do not have a bank account your customers can deposit on. In some countries, it is difficult for non-resident directors of a company to open a bank account in the country, and opening a bank account in another jurisdiction requires a lot of paperwork, such as certified documents of the company and its directors.

The corporate tax rate

It should be one of your priorities to pay as little tax as possible, because the fewer taxes you have to pay, the fewer hours you will spend to finance the lifestyle of your designer life. It is important not to confuse the legal efforts to minimize your taxes with blunt tax evasion. The latter is not part of this website. We focus on the legal ways to reduce your tax burden. While there is zero tax rate in many countries, many of them are considered tax havens (e.g. the Cayman Islands, the British Virgin Islands, etc.) and are therefore open to serious business with countries such as the US, Canada, the European Union, etc often useless. However, there are some exceptions, such as the United Arab Emirates, which are still recognized by these countries as a trusted business location, along with a zero tax rate.

Another interesting point about the tax rate is the country’s tax system. In some countries, there is a so-called territorial tax system where you only have to pay taxes on the income your business has earned in doing business in that country. All foreign types of income are tax-free.

Whether your trading partners accept bills from companies in these countries

If you choose a more exotic jurisdiction, some companies in other countries may have difficulty or reluctance to do business with your business because they fear problems with their local tax authorities. If you only bill consumers, this is usually not a problem. The bigger the company you work for and the stricter the tax system in that country, the more likely you are to get into trouble with your exotic business.

If the country is blacklisted, such as tax havens, trade embargoes, etc.

Regardless of how favorable the tax rate is and how convenient business is in a country, when the country is blacklisted, because it is a tax haven or some active trade embargoes exist with the country you want to do business with, you have just bad luck.

The political stability of the country

The tax rate may be cheap, and accounting may not be a big deal there. But if you have to fear a revolution, a corrupt politician, or a war that can break out every other day, then this country should not be on your list if you are looking for a place for a stable corporate structure. You could one day wake up and find that your bank account is empty, inflation has gone up to insane levels, or just a tank has been driving through your virtual office. Better stay away from such countries.

Whether CFC / BEPS regulations apply in your country of residence

CFC rules, also known as controlled foreign company rules or foreign tax laws, are imposed by countries to make it more difficult to use an offshore company to avoid local taxes. In general, if you just open a company in a foreign country where there is no real substance (for example, no physical office, no employees, no telephone line, etc.), that company is taxed at the same tax rates as a local company in your country of residence. CFC rules vary from country to country. Some are stricter than others, and in many countries they do not exist at all. If you are a tax resident somewhere, make sure this place does not have CFC rules, or if you really live in a country where CFC rules apply, be careful not to violate the law and hide taxes from your government.

Now that you know what topics to consider, have a look at different countries and their feasibility for a digital nomad business.