Debates about where to register a planned or a newly launched startup can be endless – each jurisdiction has its own advantages and disadvantages, which are important to consider when choosing the country of registration of the business. This issue is especially important for startups in the field of information technologies. If you are planning to create a modern IT company, the first question which arises is where to register it – in homeland, or it will be wiser to use the so-called offshore jurisdictions.
According to some experts in the field of starting this kind of business, the correct choice of the appropriate jurisdiction for registering IT companies affects largely the future strategy of the company and its investment activities. That’s why experts recommend to make an objective assessment of the perspectives of the promoted products or services.
Besides, many entrepreneurs, who start not the first company, are initially duly focused on the peculiarities of the jurisdiction, where a new business will be registered. A thorough analysis of the factors that can have both favorable and adverse impact on future business and economic activities of the newly established IT company is carried out in such circumstances. In the materials of this article, we will try to figure out what should you pay special attention to when choosing the country for registering a launching startup.
Choice of the country for registering an IT company – what to pay attention to
The existing practice shows that until recently, many companies around the world have chosen the United States of America for registration. And if before such a choice was determined by a reliable intellectual property protection at the legislative level, in light of the current political situation, such a postulate for our international entrepreneurs do not always inspire confidence.
It should be noted that the scope of the company, and the occupied market niche largely determine the choice of the country for registering a business. So experts recommend companies, which are engaged in the field of pharmaceutics, and provide beauty services, to register business in the technological parks of China or Switzerland. This choice is dictated by the ability to attract additional investment assets, at the expense of the largest venture funds, which are widespread in these regions. It makes possible the creation of an expanded partner network, and respectively to increase the company's revenues.
When choosing the country for business registration, one should consider the availability of the appropriate industry clusters, without which the business development will be difficult. In addition to the fact, that such clusters are characterized by convenient location and the availability of the requisite communications and production facilities, they also have additional advantages for business, in particular these are:
- Modern and high-tech infrastructure;
- Preferential tax regimes in individual industries;
- Customs privileges;
- Assistance of the state bodies on the issues of registering and carrying on business;
- Possibility of getting in contact with potential investors.
This factor is of great importance for business development and attracting potential investors in your own projects. For example, today on the territory of the certain countries, investment mandates are not issued for many venture companies from the United States of America, what makes impossible to involve them as investors. And there are quite a lot of such collisions and inconsistencies in the international law, that’s why it is important to consider all the possibilities of a potential jurisdiction long before starting a business and registering an IT company.
Besides, you should give sound and objective assessment of the location of the main operating company and your potential clients in the view of the current political situation in the world and inter-state relations.
Registration and production expenditures
Registration expenditures include costs connected with the registration procedure and further business support. It should be noted that the UAE definitely has a whole set of advantages in this factor.
State system of taxation
Terms of collection and withholding of state payments to the budget is the most important factor when choosing the appropriate jurisdiction. Modern entrepreneur understands that the funds which are legitimately saved by mandatory budget payments are a real opportunity to gain more income. Moreover, some jurisdictions provide for this possibility in the framework of the current legislation. In other words, today you can easily reduce the level of corporate taxation or optimize the taxable base legally and without risk of penalties by the state fiscal authorities.
For example, if your business is registered in a jurisdiction with preferential tax regime, it is convenient for the payment of dividends to shareholders of the company, as they are not liable to the national tax. Besides, one should pay attention to the size of the proposed transaction and the ability to ruin reputation of the company when withdrawing assets via the traditional offshore areas. The United Arab Emirates may be a great alternative, where business can count on a favorable tax regime, and at the same time not to be afraid to do harm to the reputation of the company. Due to the fact that the United Arab Emirates are not included into the so-called "black lists" of offshore jurisdictions, nothing is threatened to the image of your company.
Features of the current legislation and norms of corporate law
According to the experts, entrepreneurs in the field of IT prefer to register business abroad, primarily due to the imperfection of the legal framework and applicable corporate law in homeland. The rules of the foreign law consider in more details the various aspects in the field of property rights protection and legitimate interests of shareholders, and regulate in detail such corporate moments like:
- Management and company administration;
- Degree of confidentiality of information about the shareholders and ultimate beneficiaries;
- Duties and rights of the parties in various legal relations;
- Procedures of the distribution of the gained income, etc.
Such approach in the law gives the parties the opportunity to provide business with the adequate legal and judicial protection. Moreover, the rules of law fix at the legislative level positions of the shareholders and ultimate beneficiaries. All abovementioned is equally applicable to the protection of intellectual property.
At first glance it may seem that it is impossible to find a jurisdiction that meets all the stated requirements, and one will have to choose the most favorable among the available ones. But the international experts have a different opinion as to this issue. The United Arab Emirates, in recent years, acquires an immense popularity in terms of development and investment attractiveness. This popularity is due to the two characteristic features, in particular:
- The Emirates, while not being an offshore zone in the traditional sense, offers significant competitive advantages for private business, including preferential taxation of the registered companies;
- Despite the financial crises, which stun the whole world, the economy of the Emirates is growing rapidly, and just few businessmen, who had paid no attention to it, remain in the world.
As to the abovementioned criteria, it is possible to cite the following information, which is justified by real economic achievements and rapid development of the various industries in the United Arab Emirates:
- Availability of the appropriate infrastructure – significant investments are involved into the area of the development of the business infrastructure, what allows one to build and to develop business of all types, including in the area of information technologies. Modern high-tech parks, which allow to optimize all business processes and to increase profitability of the enterprise, operate on the territory of the specialized trade zones;
- Opportunities to attract investors and business partners – free economic zones in the UAE are arranged in the form of industry clusters, what allows to concentrate all the necessary production resources and facilities in one place. It is worth noting that here there are the leading representatives of international venture market, which are interested in fruitful cooperation and show considerable interest in the young companies engaged in the area of information technologies;
- Registration expenditures and license renewal –expenditures on the maintenance of business in the Emirates are much lower comparatively with the European countries or the USA. And if to take into account the preferential tax regime, when business is exempted from the corporate taxation, the expenditures are insignificant and even not comparable.
All what was mentioned above results in one conclusion, that the optimal jurisdiction for the registration of IT companies – is the United Arab Emirates. If you have queries concerning the advantages of this country and about the possibilities of registering your business in the UAE, contact us and get the free professional advice.