Starting Up In Europe? How To Choose The Best Country For Your Business
If you’re thinking about starting a new business in Europe, arguably the most important consideration is the location. With over 50 countries to choose from, deciding where to base your business can often be both complicated and confusing. Unlike the US each European country has its own set of VAT rates, sales taxes, registration procedures, languages and minimum capital required in order to open your company.
A common mistake for eager entrepreneurs keen to keep costs to a minimum is to base a large part of the decision solely around taxation. While certain countries may look attractive from this perspective, local legislation, labour and the funding market may turn out to be issues that can impact the creation or future growth of your company.
A more pragmatic approach would be to define your business requirements first, before using this information to choose which country is best suited to your needs. This can include thorough research and consultation with specialists with extensive local expertise. Things to consider when making your decision can include:
Days to Start a Business
Depending on your own individual requirements, the time it takes to set-up a business may be an important consideration. While some European countries are known for their bureaucracy and red tape, others encourage overseas investment and make it relatively easy to open a new company.
Austria for example is seen as a good place to do business and according to the World Bank report is ranked 21st throughout the world when considering all aspects of “doing business”. However the number of days it takes to open a business (22) can often deter entrepreneurs and may not fully suit your immediate business requirements.
Registering Your trademark
If you’ve taken the time and energy to build up a brand that promotes a reputation of credibility and quality, registering your trademark overseas is one of the most valuable tools you have for protecting your name.
As with most business practices in Europe, each country will have its own set of procedures and registration services. However the Community Trade Mark (CTM) provides protection across all member states of the EU via one application process, reducing administration and minimising the cost when compared to applying individually to each country.
Customers & Suppliers
Some European countries and cities are better suited for particular industries. London, Berlin and Paris all have a thriving tech scene, the eastern European countries of Poland and the Czech Republic have some of the lowest manufacturing costs, and companies dealing in apparel could take immediate advantage of the “Made in Italy” brand if you decide to open in Milan or Rome.
Taking the time to research the local market, competition and your potential customer base is an integral part of selecting the most appropriate location. Ask yourself these questions:
- Where is the majority of your customer base?
- What are your shipping needs?
- Are you close to your suppliers?
- What type of products are you shipping?
VAT Rates
Different VAT rates apply in different countries throughout Europe, typically ranging from 15% to 27%
If you’re considering the UK, new legislation implemented on the 1st January 2015 has fundamentally changed the way VAT is applied to products and services.
The new MOSS VAT scheme affects any company trading digital products (e.g. eBooks, apps, games, telecoms etc.…) throughout the EU. VAT is now charged based on the place of purchase, rather than the place of supply. For example if you sell an app to a user in France, the French VAT rate will apply, not the UK rate.
The location of your primary customer base and the additional reporting functionality required to handle the changes have become much more important consideration when choosing the location of your business.
The speed of the VAT registration process can also differ depending on the country. Within the UK you can become registered for VAT within 24 hours, in Germany anywhere between 2-5 weeks is standard.
Employment
Your research should also include how you intend to staff your workforce and which countries have skilled labour pools and the required talent to help drive your business forward.
Employment law will also vary with the UK having more flexible rules when compared to those of France and Germany. Additional costs that are often overlooked include the number of holiday days per country and the typical working hours, all of which make a contribution to your overall labour costs.
Available Grant Incentives
A number of European governments have incentive programmes or grants in place to help attract entrepreneurs to their respective countries. This is particularly common in economically disadvantaged areas where the financial support is used to help boost the local economy.
For example Germany offers governmental loans and grants of up to 50% to SMEs. Beneficial tax rates are also available for new companies but are generally not available in major metropolitan areas like Berlin, Hamburg and Munich.
All of these considerations can really help to determine which European country is best suited for your business, both now and in the future. Having a good understanding of every element that will impact your business will ensure that you make the best decision right from the very start.
This post was written by Open A European Company.com. Offering clients a number services including company formation with bank accounts, bookkeeping, virtual offices, accounting, company incorporation and immigration advice.
