International Legal Policy Barometer - Starting up a business abroad: preferences and differences

Berlin, December 1st 2011. “What are the two legal forms most frequently adopted by foreign businesses in your country?” This was the first question asked in Ecovis’ in-ternational survey of the various situations facing entrepreneurs and companies when starting up businesses abroad – for example, when establishing a sales organisation or a production facility. The responses given by Ecovis’ partners in 22 countries in Europe but also in Tunisia, China, Japan and Korea produced “an astonishing con-sensus”, in the words of Peter Lüdemann, a member of Ecovis’ board of directors. “The most popular choice of legal form when establishing a branch abroad is the lim-ited liability company, where the partners are liable only for the company’s liabilities to the extent of their participation in the share capital.” In second and third place come the joint-stock company and the legally dependent subsidiary (ref. chart). In contrast, there are major differences in the minimum capital requirements, in corporation tax and, as was to be expected, in fiscal treatment. The good news: in all the countries surveyed, as a general principle foreign proprietors may own up to 100% of company assets.

“Whatever the legal form, in each of the 26 countries surveyed registration in the commercial or corporate register is obligatory,” says Lüdemann. With respect to the minimum number of partners, one is sufficient in most of the countries surveyed, both in the case of limited liability companies and joint-stock companies. However, in Poland there is one proviso: “A Polish limited liability or joint-stock company may not be established by another limited liability com-pany which has only one shareholder“, explains Artur Rymarcyk, an Ecovis partner in War-saw. At the other end of the spectrum, Lithuania sets a limit of 250 to the number of share-holders allowed for a limited company.

In France, the one-person limited liability company has its own acronym (EURL, entreprise unipersonnelle à responsabilité limitée) to distinguish it from the normal limited liability com-pany (SARL). Another acronym, SASU instead of SAS, has also been adopted for the simpli-fied form of a joint-stock company, the second legal form favoured by foreign enterprises established in France.

Four countries require at least two shareholders for a limited liability company to be estab-lished: China, Turkey, Norway and, as a general rule, Malta. In China two founders are re-quired to establish a joint-stock company, in Turkey five and in Tunisia as many as seven. In the Czech Republic and Slovakia, more differentiated regulations are applied: a single legal entity may establish a joint-stock company, but where the founders are natural persons there must be at least two. “At a later date the number of shareholders may be reduced,” com-ments Mojmir Ježek, a legal partner with Rutland Ježek, Prague, an office which co-operates with Ecovis in legal matters.

Minimum capital: an enormous range
The amounts required as minimum capital (ref. table) diverge widely. This is not simply a question of the relative currency values. In France, Korea and Cyprus, for example, no defi-nite figure is cited as minimum capital for their equivalents of limited liability companies. Ja-pan only requires a symbolic minimum (one yen, roughly € 0.1), Bulgaria (two lews, i. e. around € 1) and Great Britain one pound. In Portugal each shareholder must contribute a minimum share of € 1. Austria is the country with the highest requirement in the category limited liability company: € 35,000, of which, however, only half has to be paid in in cash.

Partners in limited liability companies especially need to keep on their toes in the Czech Re-public. “If one or more partners have not yet paid in their share in full, then all the partners are jointly and severally liable for any amounts outstanding,” says Rutland Ježek. “And in Turkey“, explains Celal Çelik, Ecovis’ partner in Istanbul, “You may under certain circum-stances have to answer for the company’s tax liabilities.”  

Registration: One hour express service in Portugal
The time it takes for newcomers from abroad to have their businesses established and regis-tered differs from country to country. It can take anything from one day to three months. In many countries the registration courts also work at a different pace, for example in Slovenia or Spain. In other countries, again, the establishment procedure for joint-stock companies takes longer than for limited liability companies – in China about three months, in Poland two months instead of one.

The fastest registration is in Portugal, if you avail yourself of the express service offered. The standard procedure, producing tailor-made statutes and with the assistance of a notary or solicitor, takes one week. As Peter Lüdemann comments, “If you are not familiar with the local legal system, it should be worth waiting that week to be sure that you have a watertight legal solution.”

In Italy, too, you can also get off to a quick start. “Your business will have its tax identification number and VAT ID within 24 hours of the official establishment of the company,” says Fabrizio Bianchi Schierholz, Ecovis’ partner in Milan. “If the enterprise agrees to the notary having the company entered into the companies register immediately, the authorities may require the enterprise to open a bank account the following day. In this case the firm can start up business straight away.” However, as in other countries too, it can take much longer if an official permit is required and the requisite documentation needs to be submitted.
Taxation: a big difference
Where taxation is concerned, treatment varies widely. Most countries impose a uniform tax rate on the profits earned both by limited liability and joint-stock companies, but this rate ranges from 10% in Cyprus to 35% in Malta. Anthony Vella, our Ecovis Malta partner, ex-plains “as in Malta the full imputation system is applied on tax computations, the bottom line effective tax rate may be 5%” In many countries the rates are staggered, depending either on the amount of the taxable profit earned, as in France, Great Britain and Portugal, or on the size of the enterprise, where small and micro-sized firms are taxed at a more favourable rate. In Tunisia exporters are not required to pay any taxes at all on their profits.

In other countries further taxes are imposed on profits, in addition to corporation tax. In Ger-many, for example, a solidarity tax and a local business tax at various rates, depending on the location, have also to be reckoned with, bringing the total tax burden to about 30%. This is, incidentally, similar to China, with a corporation tax rate of 25% and business tax of 5%.

It is of interest to note that in Italy even non-incorporated firms with their headquarters abroad are subject to corporation tax (IRES) on the income they earn in Italy. In addition there is a local business tax (IRAP), currently at a rate of 3.9%, imposed on the added value created in Italy. In other words, not only profits but also personnel expenses and interest on debt are taxed. In Japan an inhabitants’ tax is imposed in addition to national taxation, as well as a local business tax and an annual tax on capital (termed equalisation tax).

In most countries it becomes complicated when you start talking about the taxation of the dividends of limited liability firms and joint-stock companies. In some cases preferential treatment is given to stock owners residing abroad (for example in Cyprus, where their divi-dends are tax-exempt), in others to residents and/or EU citizens, and yet again to minor shareholders or partners with a certain minimum share in the capital. In many cases the taxation of partners and stockholders is governed by double-taxation treaties. The simplest and best treatment is meted out to recipients of dividends, no matter where they come from, in Slovakia and Tunisia: they can pocket them without paying any taxes on them at all.

There is one special case and that is the limited partnership, which, along with the limited liability company, is one of the two most frequent legal forms adopted by foreign enterprises in Germany. “Besides the general partner, who bears unlimited liability, there is one or several limited partners, whose liability is limited to their capital contribution,” explains Peter Lüdemann. “As a non-incorporated partnership it is fiscally transparent. In other words, the partners’ profits are first taxed proportionately, at each of their personal income tax rates, or in case of corporations, at the corporate tax rate. This also applies to any divestures of their share in the capital. It is only local business tax which the enterprise itself pays, but this is then credited against the taxable income determined.”


1) Number of mentions; in 5 of the 26 countries surveyed only one most favoured legal form was given, instead of two.
2) in France: simplified form of joint-stock company (SAS and SASU)
3) Norwegian Foreign Company (NUK) and German limited partnership (KG)

Enormous range

Minimum capital for limited liability companies

euros (or equivalent value) 


no definite minimum capital


less than 1, up to 50


500 to 5,000


over 5,000 (max. 35,000)


About Ecovis
Ecovis is a leading global consulting firm with its origins in Continental Europe. It has over 3,300 staff operating in over 40 countries. Its consulting focus and core competencies lie in the areas of tax consultation, auditing, legal advice and accounting and management consulting services. The particular strength of Ecovis is the combination of personal advice at a local level with the general expertise of an international and interdisciplinary network of professionals. Every Ecovis office can rely on qualified specialists in its back offices as well as on the specific industrial or national know-how of all the Ecovis experts worldwide. This diversified expertise provides clients with effective support, especially in the fields of international transactions and investments - from preparation in the client's native country to support in the target country. In its consulting work Ecovis concentrates mainly on mid-sized firms. Both nationally and internationally, its one-stop-shop concept ensures all-round support in legal, fiscal, managerial and administrative issues. The name Ecovis, a combination of the terms economy and vision, expresses both its international character and its focus on the future and growth.

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