I do believe that the answer to this question depends on your needs and priorities.
For instance, you could be asking "which country will charge me the least tax?" Look for a tax haven, like some of the Caribbean islands.
But you could equally be asking "which country will provide the fastest internet speeds?", in which case it's South Korea.
The list of considerations you might be using to filter your decision also includes paperwork (at start-up and ongoing), access to mentors, fastest access to the largest number of users, or even language and lifestyle (if you wanted to live or spend time in the country). Some of these will differ again depending on whether your online software will be B2C, B2B, or Enterprise focused.
Are any of those factors for you? Are there others?
It's undoubtly the country where you love to live. Since tax and other technicalities are irrelevant compared to YOU feeling good and not not having to worry about nothing else but software.
Not necessarily.
You can live wherever you like and still have a software business in another country.
Software does not require a physical office space. You (or the people you may employ) can work from home or from a co-working space.
As such, taxes, the associated paperwork trail, etc. can still be the driving factors when deciding where to incorporate. At a later stage the accessibility of additional funding may also be a point.
My (software) company is incorporated in Hong Kong for, among others, these reasons.
But I neither live there nor work there.
That's quite interesting. Could you elaborate the process more? How did you incorporate? Are you Chinese? Was it difficult to do? Where should I be careful? etc.
Yes, but you'll be taxed in your country of residence unless you can prove that you don't have a Permanent Establishment, which will be near impossible. If you wholly manage your business from a given country, your business is prima facie established in that country and wholly taxable there, regardless of where it is incorporated.
There may be some advantages to incorporating abroad in order to take advantages of streamlined legislation - many Germans incorporate in the UK to avoid the complex and expensive GmbH - but trying to outsmart tax authorities just isn't worth the effort for a small startup.
Indeed, but you are taxed on /your/ income, not your company's.
The company itself is not a citizen of the jurisdiction you live in.
Have the company pay yourself a salary that is below (or just above) the lowest tax bracket in the jurisdiction you live in and you pay zero or very little taxes on that income.
When you ever want to take out more than this salary from that company, make sure you do so either through another company that you control or while not living in a jurisdiction that taxes individuals on such income.
A company is primarily a financial device to avoid paying (too much) taxes.
Regarding the last part: I don't know if you ever incorporated abroad. But 'streamlined' is an understatement. I have frankly no idea what 'effort' you are referring to. Could you elaborate?
If a company has a lasting place of business in a country (a Permanent Establishment), it falls under that country's tax law for some proportion of it's profits. You acting as a director or manager counts as a Permanent Establishment.
If I register a limited company in Britain but I manage it from France, that company will be taxable in France to a greater or lesser extent. While it may be possible to distribute profits in a more tax-efficient manner, a company cannot operate in a country but completely avoid paying tax by mere fact of being incorporated abroad. Simply employing a contractor or renting a server in a country may be sufficient to fall under the Permanent Establishment rules.
International taxation is punishingly complex. Inadvertent evasion is easy and mistakes expensive. If your company is only paying tax in Hong Kong but has offices or employees elsewhere, you need to contact a competent accountant now.
One more thing. As a software developer in such a setup and w/o a good reason to stay in one place (family, fear to travel, &c.), it is perfectly legal to have no residency anywhere.
Most jurisdictions consider you a "resident for tax purposes" if you spend more than 180 days in the resp. country.
This is independent of you having taken actual residency there (rented a flat/hotel room &c.)
For example, you could crash on a friend's couch in Barcelona for 6 months and the Spanish government would ask taxes on the income you made during that period from you because that is past the 180 days.
Assuming they know you are in the country for that long and can get a hold of you (send you a letter &c.)
But you could just make sure you fly to your other friend in Rome and crash on their couch for a bit just before hitting that 180 days mark. ;)
Basically, if you like traveling and write software, just make sure you read the fine print for when non-residents become "residents for tax purposes" in each country you want to stay in for an extended period and make sure you never spend more than the resp. amount of days (i.e. mostly 180 days/fiscal year) in that country and you do not need to pay taxes anywhere -- w/o breaking any law.
Wherever you live. If your country of residence is highly bureaucratic or corrupt, you may wish to incorporate as a Delaware C-Corp or a British Limited Company.
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[ 3.4 ms ] story [ 34.8 ms ] threadFor instance, you could be asking "which country will charge me the least tax?" Look for a tax haven, like some of the Caribbean islands.
But you could equally be asking "which country will provide the fastest internet speeds?", in which case it's South Korea.
The list of considerations you might be using to filter your decision also includes paperwork (at start-up and ongoing), access to mentors, fastest access to the largest number of users, or even language and lifestyle (if you wanted to live or spend time in the country). Some of these will differ again depending on whether your online software will be B2C, B2B, or Enterprise focused.
Are any of those factors for you? Are there others?
EDIT: Removed some useless stuff.
As such, taxes, the associated paperwork trail, etc. can still be the driving factors when deciding where to incorporate. At a later stage the accessibility of additional funding may also be a point.
My (software) company is incorporated in Hong Kong for, among others, these reasons. But I neither live there nor work there.
There may be some advantages to incorporating abroad in order to take advantages of streamlined legislation - many Germans incorporate in the UK to avoid the complex and expensive GmbH - but trying to outsmart tax authorities just isn't worth the effort for a small startup.
When you ever want to take out more than this salary from that company, make sure you do so either through another company that you control or while not living in a jurisdiction that taxes individuals on such income.
A company is primarily a financial device to avoid paying (too much) taxes.
Regarding the last part: I don't know if you ever incorporated abroad. But 'streamlined' is an understatement. I have frankly no idea what 'effort' you are referring to. Could you elaborate?
If I register a limited company in Britain but I manage it from France, that company will be taxable in France to a greater or lesser extent. While it may be possible to distribute profits in a more tax-efficient manner, a company cannot operate in a country but completely avoid paying tax by mere fact of being incorporated abroad. Simply employing a contractor or renting a server in a country may be sufficient to fall under the Permanent Establishment rules.
International taxation is punishingly complex. Inadvertent evasion is easy and mistakes expensive. If your company is only paying tax in Hong Kong but has offices or employees elsewhere, you need to contact a competent accountant now.
For example, you could crash on a friend's couch in Barcelona for 6 months and the Spanish government would ask taxes on the income you made during that period from you because that is past the 180 days. Assuming they know you are in the country for that long and can get a hold of you (send you a letter &c.) But you could just make sure you fly to your other friend in Rome and crash on their couch for a bit just before hitting that 180 days mark. ;)
Basically, if you like traveling and write software, just make sure you read the fine print for when non-residents become "residents for tax purposes" in each country you want to stay in for an extended period and make sure you never spend more than the resp. amount of days (i.e. mostly 180 days/fiscal year) in that country and you do not need to pay taxes anywhere -- w/o breaking any law.