Tax-Friendly Countries for Tech Companies

In the past, most businesses were brick and mortar ones that only served customers within their town/local community. As such, they were stuck paying corporate taxes in that location. In this digital age, the majority of businesses serve clients worldwide. Tech startups, SaaS providers, consulting firms, and other online businesses have the option of basing themselves in tax-friendly countries. You need to run your business from a place that makes sense for your bottom line!

To start, we should mention that some jurisdictions do not have corporate taxes at all: Anguilla, Bahamas, Bermuda, British Virgin Islands, Cayman Islands, Guernsey, Isle of Man, Jersey, Saint Barthelemy, Tokelau, Turks and Caicos Islands, and Vanuatu, Wallis and Futuna Islands. 

Obviously, business owners want to pay 0% corporate tax. However, taxes are not the only consideration for entrepreneurs. International reputation, infrastructure, compliance burdens, and ease of incorporation are some other important factors. Additionally, as demonstrated in our article Best U.S. States To Incorporate A Business, certain jurisdictions have more favorable laws and court systems in the event your business faces litigation. 

Below are some nations with friendly corporate tax systems and pro-business policies that will appeal to non-resident business owners. We will provide a brief introduction to each tax system, and provide an example (with profits in USD to keep it simple). However, tax requirements may differ depending on your business activities. So, if one of these jurisdictions sounds good to you, please consult with qualified local professionals to discuss forming an entity, or moving your business operations there. 

This Northern EU country is a popular choice for tech startups and entrepreneurs. Its progressive government is friendly to businesses and understands the digital landscape. Its e-Residency system makes it easy for non-residents to apply for a digital identity card, incorporate a company online, and access banking, accounting, and admin services remotely. For example, Estonia supports Electronic Money Institutions (EMIs) like Wise, Revolut, and Payoneer, and is compatible with payment processing systems such as Stripe and PayPal.

Corporate Tax System:

Estonia uses a deferred corporate tax model that levies 0% corporate tax on retained and reinvested earnings and 22% when profits are distributed as dividends. 

Additionally, it has 0% withholding tax on dividends (for both resident and non-resident shareholders). 

To Demonstrate: If your company earned $100,000 in profits and distributed them as dividends, it would pay $20,000 to the Estonian tax authorities, and the remaining $80,000 would come to you, the shareholder, in the form of dividends.

Estonia’s tax approach allows companies to grow (without being taxed on reinvested profits). It is ideal for startups and solopreneurs who don’t need to draw large salaries or dividends early on.

You can learn more about Estonian taxes on the Republic of Estonia E-Residency website.

Another European nation with appealing tax rates is Ireland. It has a great reputation internationally, and offers a wide range of banking and payment processing options. Its pro-business government even offers tax credits and incentives for startups. For example, it has a startup relief program that exempts new businesses (with annual profits below €40,000) from paying corporate tax for the first three years. If you need more convincing, Ireland is the jurisdiction that Apple, Google, and Facebook chose for their EU operations.

Corporate Tax System:

Ireland levies a 12.5% corporate tax on active trading income (i.e., from software sales, consulting services, app revenue). It has a higher tax rate of 25% for passive or investment-related income (i.e., royalties, rent from real estate, interest from banks/loans). 

Ireland has a 20% withholding tax on dividends (by default). However, EU residents and others that have double taxation treaties with Ireland are exempt. 

To Demonstrate: If your company earned $100,0000 in profits, and you live in a non-treaty country, the company would pay $12,500 to the Irish tax authorities. Of the $87,500 remaining profits, $17,500 (20%) would be withheld, leaving you the shareholder with $70,000. However, if you live in the EU or a treaty country, you would receive the entire $87,500 as dividend income. 

Please consult the Irish Tax and Customs webpage for more information.

This self-governed British Crown Dependency between England and Ireland is one of the 0% tax jurisdictions that we do recommend. This is especially true if you, the owner/shareholder, are a personal tax resident of a tax-free/territorial tax nation like the ones discussed in our article 0% Tax? Yes, It’s Legal In These Countries. The Isle of Man levies taxes on banks and property developers, but if you operate a tech business you can avoid corporate taxes entirely! 

The only downsides to the Isle of Man are 1) it can be difficult for foreign directors to open bank accounts, and 2) though white-listed by the Organisation for Economic Co-operation and Development (OECD), it still has a “low-tax jurisdiction” label which may raise eyebrows with some partners or payment processors.

Corporate Tax System:

The Isle of Man levies 0% corporate income tax and 0% dividend withholding tax. 

To Demonstrate: If your company earned $100,000 in profits and distributed the money as dividends, it would pay no corporate tax to the local tax authorities. Furthermore, with no withholding tax on dividends, you the shareholder would receive the entire $100,000.

Visit the official Isle of Man Government website for additional details.

The UAE is an attractive tax jurisdiction, especially if you have a small startup with lower profits. Its infrastructure for digital companies is impressive, especially in big cities like Dubai and Abu Dhabi. You also have the option of basing your company in the “Free Zone” with minimal tax requirements. The United Arab Emirates were once seen as a tax haven, but the country has been removed from the EU blacklist thanks to recent reforms better aligning its tax regime with OECD and international standards. That being said, some authorities may still scrutinize UAE entities, especially companies based in the offshore Free Zone with little substance.

Corporate Tax System:

Companies pay 0% tax if they have annual profits below 375,000 AED (approx. $102,100 USD). Larger companies pay 9%. Huge multinational corporations under OECD Pillar Two rules (those with annual revenues over €750 million) face a corporate tax rate of 15%. 

The UAE does not impose a withholding tax. 

To Demonstrate: If your company earned $100,000 in profits and distributed the money as dividends, it would pay no corporate tax to the local tax authorities (because it falls below the income threshold). Furthermore, with no withholding tax on dividends, you the shareholder, would receive the entire $100,000.

If you are running a digital business that does not sell directly to UAE consumers, you should consider incorporating in a Free Zone such as Dubai Internet City, ADGM, or RAKEZ. So long as you maintain adequate economic substance in the Free Zone, you can take advantage of lower setup and compliance costs, and low tax rates on qualifying income. If your company earns income above the 375,000 AED threshold, you could still pay 0% corporate tax. 

To qualify for a 0% tax rate, the income must 1) come from outside the UAE, 2) result from transactions with other free zone persons/entities or 3) be passive income (i.e. rent, dividends, royalties, or interest) from activities with mainland UAE. 

If your company sells products/services directly to UAE customers or operates in certain sectors (banking, real estate development, certain financial services) it is considered non-qualifying income and your business will have to pay 9% corporate tax.

The Federal Tax Authority for the United Arab Emirates explains its tax regimes more thoroughly.

This Asian tech hub has a favorable territorial corporate tax system. Only profits sourced from Hong Kong are taxable. Even if your company is incorporated in Hong Kong, its offshore profits are not taxed. Hong Kong boasts a robust digital infrastructure, respected legal and banking systems, and even support for English-speaking founders. Please note that some Western governments may treat Hong Kong with caution due to China’s political influence, but this typically only affects sensitive sectors (such as defense tech and data security), not startups or SaaS.

Corporate Tax System:

An 8.25% corporate tax is levied on the first 2 million HKD (approx. $255,000 USD) of profits generated in Hong Kong. Profits above that are taxed at 16.5%. 

Additionally, the country has no withholding tax on dividends. 

To Demonstrate: If your company earned $100,000 in profits within Hong Kong and distributed the money as dividends, it would pay $8,250 to the local tax authorities. Since the country has no withholding tax, the other $91,750 would be distributed to you, the shareholder, as dividend income. 

However, if you are approved for an offshore tax exemption you may be able to avoid corporate taxes entirely. You would need to prove that all your business activities occurred outside Hong Kong (i.e., no customers in Hong Kong, no contracts signed there, and no local staff/offices). 

Hong Kong’s Inland Revenue Department provides a detailed overview of corporate tax requirements.

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Here are a few more countries to consider:

Singapore: 17% corporate tax rate, but has partial tax exemptions for the first SGD 200,000 of profits (approx. $155,500 USD) and the first three years for new startups. It also has 0% withholding tax on dividends paid to shareholders. 

Georgia: Corporate tax rate of 15%, but 0% on reinvested profits (Estonia-style). It has a dividend withholding tax of 5%. Please note that Georgia has a special tax regime aimed at boosting the country’s IT sector. The government allows qualifying Georgian-registered IT companies, serving clients outside of Georgia, to pay 0% tax. 

Malta: The official corporate tax rate is high (35% of worldwide income). However, in practice, corporate taxes can be as low as 5-10% thanks to Malta’s tax refund mechanism. For example, active trading income is taxed at 35%, but 6/7ths of that (30%) is refunded to the non-resident shareholder when dividends are paid. 

Hopefully, this brief discussion of corporate taxes around the world helps you choose the best jurisdiction for your business. If you have other suggestions, feel free to mention them in the comments section.