In which country can I set up a small company so that I pay a lower rate of corporate tax?
"There are countries out there that are known as tax havens, where they offer companies low or no taxes on earned revenue. I haven't looked into this in over a decade, but recall that countries like the Cayman Islands, Switzerland, Ireland, and Nauru, to name a few fit that tag. But like bstpierre stated, there's a reason why the IBM's of the world can pull that off easier then us mere mortals. They have the financial clout to make sure they have accountants that dot every i, cross every t, and close every loophole that would give an ""in"" to the folks at the IRS, CRA, Inland Revenue, or who have you." Grass is always greener at the other side of the hill.  Tax is only a small proportion of your costs. you could easily set up a small company in a so called tax haven. But are you willing to emigrate? If not, will the gain in less taxes cover the frequent travel costs? Even if you would like to emigrate less tax might be deceiving.  I recently had a discussion with a US based friend. In the US petrol is way cheaper then in Europe. THere were many examples in differences, but when you actually sum up everything, cost of living was kind of the same. So you might gain on tax, but loose on petrol, or child care to just name some examples  For big companies who think globally it makes sense to seek the cheapest tax formula. For them it does not matter where they are located. For us mortals it does.
"Call me rude, but I would be less concerned with taxes and more concerned with increasing your income. Double your income and say ""fuck you"" to the taxes!  Also, I'm no expert on taxes, but a corporation would not prevent you from having income so you would likely be passing the profits through and still paying the same income tax rate." Sure you can. Obviously it means your company will make less profit, saving you 20% corporation tax, while your personal income will be higher, meaning you will likely spend more than 20% in income tax and National Insurance contributions. if it was not China, then India, Brazil, South Africa, or Russia... the companies want lower taxes and wages, and will go where these are, in Brazil where I live there is a Shenzhen and Hong Kong equivalent(Polo de manaus), but never boomed because China had even lower wages and taxes, if the taxes were lower maybe the factories would come back but I doubt.  simplify the law and the taxes  would be enough of a change for a start. each day america looks closer to Brazil's 16 metric tons of taxes law and 69% corporate taxes "(Disclaimer: I am not an accountant nor a tax pro, etc., etc.) Yes, a Canadian corporation can function as a partial income tax shelter.  This is possible since a corporation can retain earnings (profits) indefinitely, and corporate income tax rates are generally less than personal income tax rates.  Details: If you own and run your business through a corporation, you can choose to take income from your corporation in one of two ways:  as salary, or as dividends. Salary constitutes an expense of the corporation, i.e. it gets deducted from revenue in calculating corporate taxable income.  No corporate income tax is due on money paid out as salary.  However, personal income taxes and other deductions (e.g. CPP) would apply to salary at regular rates, the same as for a regular employee. Dividends are paid by the corporation to shareholders out of after-tax profits.  i.e. the corporation first pays income tax on taxable income for the fiscal year, and resulting net income could be used to pay dividends (or not). At the personal level, dividends are taxed less than salary to account for tax the corporation paid.  The net effect of corporate + personal tax is about the same as for salary (leaving out deductions like CPP.) The key point: Dividends don't have to be paid out in the year the money was earned.  The corporation can carry profits forward (retained earnings) as long as it wants and choose to issue dividends (or not) in later years. Given that, here's how would the partial income tax shelter works: At some point, for you to personally realize income from the corporation, you can have the corporation declare a dividend. You'll then have to pay personal income taxes on the income, at the dividend rates.  But for as long as the money was invested inside the corporation, it was subject only to lesser corporate tax rates, not higher personal income tax rates.  Hence the ""partial"" aspect of this kind of tax shelter. Or, if you're lucky enough to find a buyer for your corporation, you could qualify for the Lifetime Capital Gains Exemption on proceeds up to $750,000 when you sell a qualified small business corporation.  This is the best exit strategy; unfortunately, not an easy one where the business has no valuable assets (e.g. a client base, or intellectual property.) * The major sticking-point:  You need to have real business revenue!  A regular employee (of another company) can't funnel his personally-earned employment income into a corporation just to take advantage of this mechanism.  Sorry. :-/" "Depends on the State. In California, for example, you pay a franchise tax of $800 every year just for having LLC, and in addition to that - income tax on gross revenue. But in other States (like Wyoming, for example) there's no taxes at all, only registration fees (which may still amount to ~$100-300 a year). IRS doesn't care about LLC's at all (unless you chose to treat is as a corporation). You need to understand that in the US we have the ""Federal Government"" (IRS is part of that) and the ""State Government"" that deals with business entities, in each of the 50 States. Since you're talking about Italy, and not EU, you should similarly be talking about the relevant State, and not US." No, if you are taking a loss solely and purely to reduce the tax you have to pay, then it is not a good strategy, in fact it is a very bad strategy, no matter what country you are in. No investment choice should be made solely due to your tax consequeses. If you are paying tax that means you made a profit, if you made a loss just to save some tax then you are loosing money. The whole point of investing is to make money not lose it. In cases like this you should be aware that tax treaties may exist and that countries are generally willing to enter into them. Their purpose is to help prevent double taxation. Tax treaties often times give you a better tax rate than even being a resident of the countries in question! (For instance, the Italy to US tax rate is lower than simply doing business in many United States)  This should guide your google search, here is something I found for Germany/Spain http://tmagazine.ey.com/wp-content/uploads/2011/03/2011G_CM2300_Spain-Germany-sign-new-tax-treaty.pdf It appears that the dividend tax rate under that treaty is 5% , to my understanding, the income tax rates are often multiples higher! I read that spain's income tax rate is 18%  So what I would do is see if there is the possibility of deferring taxes in the lower tax jurisidiction and then doing a large one time dividend when conveninet. But Germany isn't really known for its low taxes, being a Federal Republic, the taxes are levied by both the states and the federal government. Look to see if your business structure can avoid being taxed as the entity level: ie. your business' earnings are always distributed to the owners - which are not germany citizens or residents - as dividends. So this way you avoid Germany's 15% federal corporate tax, and you avoid Spain's 18% income tax, and instead get Spanish dividends at 5% tax. Anyway, contact a tax attorney to help interpret the use of the regulations, but this is the frame of mind you should be thinking in. Because it looks like spain is willing to do a tax credit if you pay taxes in germany, several options here to lower your tax footprint. Let's take your argument to its logical conclusion. Let's say there is a company that uses infrastructure of UK, Germany, France, US, Japan, Italy and Spain (because it's a global multinational). Corporate taxes in these countries are 19%, 29.65%, 33% (for large companies), 35%, 32.1%, 27.9% and 25%. Now according to your logic, each of these countries should tax the company's profits. Such a company in your world would pay more in taxes than it makes in profits (tax rate &gt; 100%). The issue only arises when the investments grow in size.  A small amount won't trigger the higher tax rates. If the amount is large enough, then consider using either: Insurance products that are 'segregated', or RRSPs in your own name after your business pays you wages, or Gifting to other family members. A lower statuory rate, relative to the statutory rates of other developed countries (every single one of which have statutory rates much lower than ours), incentivises firms to invest more money in the US and hire more American workers, and to make good business decisions, rather than forcing them to make decisions based on steep, arbitrarily set tax liability. "Yeah, I understand that is a nebulous term, akin to stopping ""pork"" in various bills. However, getting back to that Economist article, this really stood out to me:  &gt; America’s corporate tax has two horrible flaws. The first is the tax rate, which at 35% is the highest among the 34 mostly rich-country members of the OECD. Yet it raises less revenue than the OECD average thanks to myriad loopholes and tax breaks aimed at everything from machinery investment to NASCAR race tracks. Last year these breaks cost $150 billion in forgone revenue, more than half of what America collected in total corporate taxes.  I'm not clear on where they got that number, but assuming it is true, there are certainly plenty of places we could start if we were to lower the tax rate to a sane level.   Also, I still don't see how just lowering the tax rate and removing the repatriation tax on foreign earned profit would truly disincentivize inversion. If there are countries like Bermuda still out there with say, random number here, a 5% corporate tax, wouldn't the incentive still exist?" There is no tax code I know that would grant you such a privilege. And it just isn't practicable. In your examples, you always sold your product and were thus able, in retrospect, to give a value to your work. What if you don't sell your product? What if in one case your worked hour is reimbursed with one price, with the next product at another (i.e. difference in margin)? No, it won't work like that.  And by the way, I think you might have got some definitions upside down. What you want is a salary that your own company pays out to yourself and you can deduct from other profits. But as long as you can't afford to pay yourself a salary, and you don't have access to investors who are willing to front you the money, the time invested is your personal investment and cannot be deducted anywhere - though it might pay off nicely in the long run. That's the risk entrepreneurs take. "Federal taxes are generally lower in Canada.  Canada's top federal income tax rate is 29%; the US rate is 35% and will go to 39.6% when Bush tax cuts expire.  The healthcare surcharge will kick in in a few years, pushing the top bracket by a few more points and over 40%. State/provincial taxes are lower in the US.  You may end up in the 12% bracket in New York City or around 10% in California or other ""bad"" income-tax states.  But Alberta is considered a tax haven in Canada and has a 10% flat tax.  Ontario's top rate is about 11%, but there are surtaxes that can push the effective rate to about 17%. Investment income taxes: Canada wins, narrowly.  Income from capital gains counts as half, so if you're very rich and live in Ontario, your rate is about 23% and less than that in Alberta.  The only way to match or beat this deal in the US in the long term is to live in a no-income-tax state.  Dividends are taxed at rates somewhere between capital gains and ordinary income - not as good a deal as Bush's 15% rate on preferred dividends, but that 15% rate will probably expire soon. Sales taxes: US wins, but the gap is closing.  Canada has a national VAT-like tax, called GST and its rate came down from 7% to 5% when Harper became the Prime Minister.  Provinces have sales taxes on top of that, in the range of 7-8% (but Alberta has no sales tax).  Some provinces ""harmonized"" their sales taxes with the GST and charge a single rate, e.g. Ontario has a harmonized sales tax (HST) of 13% (5+8).  13% is of course a worse rate than the 6-8% charged by most states, but then some states and counties already charge 10% and the rates have been going up in each recession. Payroll taxes: much lower in Canada.  Canadian employees' CPP and EI deductions have a low threshold and top out at about $3,000.  Americans' 7.65% FICA rate applies to even $100K, resulting in a tax of $7,650. Property taxes: too dependent on the location, hard to tell. Tax benefits for retirement savings: Canada.  If you work in the US and don't have a 401(k), you get a really bad deal: your retirement is underfunded and you're stuck with a higher tax bill, because you can't get the deduction.  In Canada, if you don't have an RRSP at work, you take the money to the financial company of your choice, invest it there, and take the deduction on your taxes.  If you don't like the investment options in your 401(k), you're stuck with them.  If you don't like them in your RRSP, contribute the minimum to get the match and put the rest of the money into your individual RRSP; you still get the same deduction.  Annual 401(k) contribution limits are use-it-or-lose-it, while unused RRSP limits and deductions can be carried forward and used when you need to jump tax brackets.  Canada used to lack an answer to Roth IRAs, but the introduction of TFSAs took care of that. Mortgage interest deduction: US wins here as mortgage interest is not deductible in Canada. Marriage penalty: US wins.  Canadian tax returns are of single or married-filing-separately type.  So if you have one working spouse in the family or a big disparity between spouses' incomes, you can save money by filing a joint return.  But such option is not available in Canada (there are ways to transfer some income between spouses and fund spousal retirement accounts, but if the income disparity is big, that won't be enough). Higher education: cheaper in Canada. This is not a tax item, but it's a big expense for many families and something the government can do about with your tax dollars. To sum it up, you may face higher or lower or about the same taxes after moving from US to Canada, depending on your circumstances.  Another message here is that the high-tax, socialist, investment-unfriendly Canada is mostly a convenient myth." As JoeTaxpayer has mentioned, please consult a lawyer and CA.  In general you would have to pay tax on the profit you make, in the example on this 10% you make less of any expenses to run the business. depending on how you are incorporating the business, there would be an element of service tax apart from corporate tax or income tax. I have some more inputs to investigate: India has dual tax avoidance treaty signed with european countries so that NRIs dont pay tax in both countries. Please check if India has some agreement with Swiss Also for freelance job that is delivered from India, u need to make sure where you have to pay taxes as you are still in India so the term NRI will not hold good here. Also, if Swiss company is paying tax there, and you are  a freelancer from India(resident in india) how to tax filing /rate etc has to be investigated. Also, can you apply for tax back from swiss( a portion of tax paid can be refunded eg: in Germany) but I dont know if this is true for Freelancers and also for people out side SWISS. Bip