There are a number of benefits to starting a business in Europe as a foreigner. For instance:
- You gain access to efficient trade routes that have long bolstered nations across borders.
- You benefit from a tax-friendly status that encourages overseas businesses to set up shop.
- You can maintain 100% ownership over your business, as many EU nations allow a non-resident to be listed as sole owner in the articles of incorporation.
According to the World Bank, it takes just 19 days to launch a new business venture. But how do you get started? There are 27 nations in the European Union (EU), each with its own processes, requirements, and restrictions.
This article is intended to provide a broad overview for anyone thinking of starting a business in the European market, but if you’d like to take the next step, it’s important to research the exact requirements in the country where you hope to conduct business.
Can a Foreigner Open a Business in Europe?
Most European countries are welcoming to foreigners who seek to open a business, as new enterprises help to bolster local economies. You don’t need a visa or work permit to start a business in most European countries, but you’ll generally need a residency permit in the country where you hope to establish your business.
Some countries have a real estate spend requirement for anyone seeking to establish residency. In Greece, for example, it costs €250,000 to take part in the country’s Golden Visa program. Other countries have similar programs.
Some countries, like Portugal, will waive the investment requirement if you start a business and contribute to the country’s economy. Portugal will let you skip the €500,000 property requirement if you start a business that creates at least 10 jobs.
Most EU countries have multiple paths for residency, and these paths sometimes involve investing in real estate, stocks, the arts, or another contributor to the nation’s economy. These investments generally range between €100,000 and €500,000. The process is much easier and more affordable if you already reside in the EU or have family with EU citizenship.
Which European Country Is the Easiest for Starting a Business?
When considering the easiest country to start a business, it all comes down to government processes and restrictions. You have to look at factors like corporate tax rates, registering property, obtaining lines of credit, and conducting business internationally. The World Bank’s Ease of Doing Business Index maintains rankings for 190 nations worldwide. When we isolate European nations specifically, the following countries come out on top:
Denmark ranks highest among European nations for ease of doing business. You must provide documentation proving that you have sufficient financial means to conduct business, and you must have specific Danish business interests. This information should all be included in your formal business plan.
Apart from that, you’re basically free to run your business as you see fit. One benefit of starting a business in Denmark is that you may automatically qualify for a one-year resident permit with the possibility of extension.
Though no longer part of the European Union, the United Kingdom remains an excellent place to establish a business. To start, you need at least £200,000 to invest into the business.
You’ll also need to maintain a controlling or equal interest in the enterprise, and you must be involved in its operation full-time (meaning that you can’t seek other employment or public assistance). You must also create at least two new full-time jobs for UK residents.
For non-resident entrepreneurs seeking to operate a business in Norway, you’ll need to obtain a Norwegian identification number (sometimes called a D-number or personal ID number) and then establish a Norway business address. You will then need to register your business through the Bronnøysund Register Center, completing the Coordinated Register Notification form. Note that most of the form is written exclusively in Norwegian, so you may need preparation assistance if you don’t speak the language.
As a prerequisite, you’ll also need to present NOK 30,000 in capital and pay a one-time charge of NOK 5,570 to add your company to the Register of Business Enterprises. Finally, your organisation will need at least two directors, at least one of whom must be a Norwegian or European citizen.
To start a business in Sweden, you’ll need to obtain a personal identity number (personnummer) from the Swedish Tax Agency (Skatteverket). You’ll also need to register for F-skatt, the företagare tax (or F tax). This distinguishes you as an entrepreneur and not an employee.
Your residency requirements will depend on your current citizenship. If you’re a Nordic citizen coming from Finland, Norway, Denmark, or Iceland, you won’t need to apply for a residence permit. If you reside elsewhere in the European Union or European Economic Area (EEA), you’re also exempt from the residency requirement. If you come from outside of Europe, you’ll need to apply for a residence permit with the Swedish Migration Agency (Migrationsverket) before coming to Sweden. If you don’t have significant capital to start up your business, you can apply for a business loan with a local bank or with the state-owned Almi Företagspartner (Almi).
Business Taxes in Europe
When considering the best countries to start a business in Europe, you also have to consider the tax code. Most European nations have two major types of taxes that will affect your day-to-day operations: corporate income taxes (CIT) and the value-added tax (VAT).
When you register your business with the local or national financial authority, a portion of your profits will need to be paid in the form of corporate income tax. The VAT will need to be paid at every stage of a product’s production at which value is added to the product.
The following countries have some of the lowest corporate income taxes in the European Union:
Hungary imposes a 9% CIT (the lowest in the EU) and a 27% VAT. Local municipalities can also impose their own tax on corporate profits, but this tax never exceeds 2%.
Ireland imposes a 12% CIT and a 23% VAT. It’s important to note, however, that the CIT in Ireland is expected to rise to 15% in the near future.
Lithuania imposes a 15% CIT and a 21% VAT. Some small organisations, though, may qualify for a 5% or even 0% CIT rate (at least temporarily) if they meet certain criteria.
Most European nations — like the Czech Republic, Poland, Slovenia, and Switzerland — have a corporate income tax rate around 20%. Certain countries, though, are considerably higher. These include Portugal (31.5%), Germany (29.94%), France (28.41%), and Italy (27.81%).
When applying for a tax ID in your country of choice:
- Find out if you’re responsible for local taxes as well. Some countries, like Switzerland, will have you paying taxes at both the federal and municipal level.
- Find out if you qualify for a lower tax rate based on the size of your business. For example, while the standard CIT in Poland is 19%, some small-time taxpayers will qualify for a reduced 9% tax rate.
- Find out if you qualify for a reduced VAT rate. Certain types of goods — like groceries, books, newspapers, medicine, and other goods deemed essential to the public good — may qualify for a reduced VAT rate, often as low as 5%.
Finally, if you plan to operate outside the European Union but open a permanent location (PE) within a European nation, you are only taxed on the profits generated from within that PE. You don’t have to pay the European corporate tax rate on all profits if your main business operations are abroad.
How Much Does It Cost to Start a Business in Europe?
The cost to start a business varies from one European nation to the next. In 2018, the average cost across all EU nations was €300. Italy and Luxembourg have the highest average start-up costs, at €2,000 and €1,100 respectively, but most nations charge far less for business registration.
Here’s a nation-by-nation breakdown of the business registration costs from highest to lowest:
- Italy – €2,000
- Luxembourg – €1,100
- Cyprus – €765
- Belgium – €517
- Spain – €464
- Croatia – €387.5
- Germany – €383
- Netherlands – €350
- Finland – €327.5
- Portugal – €290
- Austria – €244
- Slovakia – €225
- Sweden – €211.5
- Czech Republic – €180
- Lithuania – €173
- Estonia – €167.5
- Hungary – €105
- Malta – €100
- Denmark – €90
- France – €84
- Ireland – €75
- Poland – €59
- Latvia – €50
- Bulgaria – €42
- Romania – €26
- UK – €13
- Slovenia – 0
- Greece – 0
Note that the figures above only cover the business registration costs. When planning your venture, you also have to factor in additional start-up costs like real estate, industry-related licensing, insurance, marketing, payroll, residency, utilities, and inventory/production. These costs will vary from country to country.
Starting a Business in Europe as a Foreigner
If you want to get your business off the ground in Europe, you’ll generally need to follow these steps:
Learn about the residency requirements
This is generally step one for all business owners. Find out if any financial investment is required for residency, and then register accordingly. You’ll generally be granted temporary residency. If you plan to live outside the country where you’re setting up your business, you may be able to skip this step. Some countries, like Italy, have no residence requirement, so you can run your business from anywhere in the world.
Apply for tax status as an entrepreneur
For example, Sweden has the Swedish Tax Agency (Skatteverket), and France has the French Ministry of Economy and Finance. Before (or while) you register for your tax status, you might also have to establish a personal ID number.
Obtain permanent establishment (PE)
Each country has its own rules for permanent establishment. While the term can refer to a physical location, it doesn’t have to be a brick-and-mortar space. Permanent establishment can more broadly refer to business activities embedded in the nation and all of the profits generated therein. Determine the rules for permanent establishment in your country of choice.
Set up your business
Different types of businesses will have different start-up requirements. An ecommerce business, for instance, will need the infrastructure to sell products online, a merchant services provider to accept credit card payments, and a product to sell. When choosing a merchant provider, make sure to go with a company that accommodates all of the most popular payment methods in Europe.
Get Your European Business Off the Ground
Most importantly, make sure to work with an experienced attorney and accountant in the country where you plan to operate. The laws can be nuanced and complex, and you need knowledgeable authorities to help you remain in compliance and in good standing.
It doesn’t matter whether you’re looking to expand your business services into new territories or build a new business from scratch. As long as you plan ahead and do your due diligence, the European Union is an excellent place to launch your next business venture.