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Quiet Haven for Business. 10 Most Suitable Countries for Russian Companies
September 25, 2019 12:05

Cyprus, Luxembourg and Singapore topped the ranking of the best countries for Russian business, compiled by UFG Wealth Management and Confideri family office.

The Russian authorities don’t stop forcing businessmen to return assets to their homeland. In the spring, an extension of the capital amnesty was announced for another year for those who decide to transfer their business to special administrative areas - internal offshore on Oktyabrsky Island in Kaliningrad and Russky Island in Primorye. However, a breakthrough did not happen - mass registration has not been observed yet, the Russians still prefer to keep their assets in jurisdictions around the world.

The business continues to search for more convenient markets for structuring operations where it is cheaper and safer to work, says Alexey Ilyukhin, senior partner at ITS Wealth Management, a multi-family office. However, he admits that due to sanctions, businessmen began to look at Asian countries with great interest.

For those doing business abroad or thinking about it, experts from UFG Wealth Management and Confideri family office management companies ranked the  most preferred jurisdictions for doing business. It took into account the peculiarities of the tax systems of the studied countries, the rules for obtaining licenses and the simplicity of company registration, especially banking services and the specifics of working with Russian clients. In addition, they used four ratings - the best countries for doing business by Forbes, the World Bank's Doing business, the OECD's Better Life Index and the UN World Happiness Report.

1. Cyprus

Island jurisdiction remains one of the most popular areas for Russian business, despite the tightening of the rules for foreign clients in Cypriot banks. One of the lowest, by the standards of the European Union, income tax rate - 12.5% - continues to attract businessmen, including those from Russia. However, the first signs of cooling of Russians to the island are evident: Central Bank statistics show that Russian business has become less likely to use Cypriot jurisdiction. At the end of 2018, Cyprus, which has traditionally been a leader in foreign investment in the Russian economy, showed a record net outflow of investment from Russia - $ 10.3 billion. The main advantages of Cyprus are its legal field, transparency of the tax system, protection against double taxation and the absence of a tax on securities transactions.

2. Luxembourg

Luxembourg has a more expensive jurisdiction in terms of the cost of maintaining a business than Cyprus, but is more convenient for managing collective investments. Interest in Luxembourg among wealthy Russians has grown significantly over the past five years, the authors of the rating note. Among the advantages of a jurisdiction are a flexible tax policy, a favorable investment climate, lack of currency control, a high concentration of financial structures and a simplified procedure for registering companies. The income tax rate in Luxembourg is 15% for profits of less than € 175,000, and 17% for more than € 200,000. If profit is between € 175,000 and € 200,000, then the tax is calculated using a special formula.

3. Singapore

Singapore is an alternative financial outpost, the popularity of which has grown among Russians amid growing sanctions pressure on business, the rating authors note. The income tax rate in Singapore is approximately in line with the EU average and stands at 17%, but thanks to tax incentives provided by the government, the real income tax rate is lower. Among the attractive conditions of jurisdiction are a developed financial system and the absence of barriers to entry into the market. The minimum size of the authorized capital during registration of the company may be $ 1, and the registration itself takes only 1-3 days. The country's legislation is loyal to foreign citizens: you can run a business from abroad.

4. The Netherlands 

From January 1, 2019, the income tax rate was reduced from 20% to 19% for companies with profits  not exceeding  € 200,000. If the profit is higher, then the rate is 25%. Among the main advantages of the jurisdiction are a developed financial system, a large concentration of foreign business and more liberal business registration procedures compared to other EU countries.

5. Ireland

Ireland is called the European "Silicon Valley." This jurisdiction is more favorable for the operation of investment funds, IT-business, and the attraction of international investment. There is a developed infrastructure for supporting startups. The income tax rate in the trade sector in Ireland is 12.5%, and in all other sectors it is 25%.

6. Malta

The nominal income tax rate in Malta is one of the highest - 35%. However, thanks to the tax refund system, depending on the source of profit, the effective tax rate can drop to 5%. The dividend tax rate is 10%. The status of an international company allows paying dividends to the owners of a Maltese company without tax. Among the advantages of jurisdiction is a double taxation treaty signed with Russia.

7. Hong Kong

The income tax rate is 8.25% if the company's net profit does not exceed 2 million Hong Kong dollars, or $ 260,000. For individual entrepreneurs, the tax rate is 7.5%. If the company's revenues exceed 2 million Hong Kong dollars, then they will have to pay 16.5%, for an individual entrepreneur - 15%. The main advantages of Hong Kong are its developed financial infrastructure, quick registration of property rights and the presence of a large number of qualified lawyers working under the Anglo-Saxon system of law. Due to sanctions, this jurisdiction is rapidly gaining popularity among Russians. Hong Kong is best suited for equity structuring deals or for companies targeting Asian clients.

8. Great Britain

The traditionally popular jurisdiction among Russians in recent years has lost ground due to the uncertainty of Brexit and the tightening of procedures for revising the sources of origin of capital. This is a more expensive jurisdiction in terms of maintaining business compared to EU countries, but the corporate income tax rate does not exceed the EU average and is 19%. Among the advantages of the UK are a developed financial sector and fast quick company registration procedure. Among the main difficulties for Russians is the passage of compliance procedures when opening a bank account and checking the origin of capital.

9. UAE

In the UAE, most legal entities are exempt from income tax, with the exception of the banking and oil sectors, for which income tax rates are 20% and 50-80% depending on the emirate where the company is registered. There are no taxes on personal income. In recent years, there has been a steady demand for this jurisdiction from Russia and the CIS countries, in particular from Kazakhstan. Most of all, the UAE is suitable for the registration of large holdings. Among the minuses is the frequent adjustment of legislation and compliance procedures in banks.

10. Liechtenstein 

The income tax rate in Liechtenstein is one of the lowest in the European Economic Area - 12.5%. This country provides good conditions for private and family foundations. Among the advantages of the jurisdiction are the development of the banking sector, the availability of highly qualified workforce and the great flexibility of tax legislation when working with foreign investors. In addition, there is no dividend tax in Liechtenstein.

Read More Articles about Russian Business

Author: Anna Dorozhkina

Tags: Russian business Russian companies Russian economy   

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