Europe

GERMANY

Introduction

Germany is one of the world's thriving market economies. Germany is an adherent to closer European economic and political integration, and its economic and commercial policies are increasingly determined by agreements among EU (European Union) members and EU single market legislation. Whatever your business development strategy, in France you will find an appropriate legal structure for the kind of business you wish to set up. Investors can set up a permanent or temporary structure and enjoy full legal peace of mind; they are then free to drive their project forward in an uncomplicated and inexpensive environment.

Types of Business Structure

Branch

All foreign investors are able to open a branch of their existing business abroad (individual entrepreneurs, corporations or partnerships). Part of the process does however require the foreign investor to register the branch of their existing business at the local court and municipality. While such a branch is an unincorporated body, it is entitled to act as a legally binding entity in its own name.

Subsidiary

There are various different structures of subsidiaries open to foreign investors when they decide to set up a business in Germany. The German Commercial and Company Law distinguishes between unincorporated companies and corporations. In deciding what structure is best for each circumstance, thought should be given to what the liability of the structure will be of the subsidiary. For example, a corporation is a legal entity and is liable itself, limited to the value of its assets, for any debt. In comparison to this, in an unincorporated company the partner is personally liable for any debt.

Taxation

The corporate tax rate is 33.33% and the VAT/Sales Tax is 19%



ITLAY

Introduction

The geographical position of Italy (at the centre of the Mediterranean and the infrastructural links with the countries of Europe) allows it to form a crossroads for international trade, a natural bridge between Europe and Africa. Italy, particularly the prosperous north, has one of the highest per capita incomes in Europe. Italian consumers are sophisticated and demanding, particularly in terms of quality.

Types of Business Structure

Subsidary

Italy Srl 100% owned by a foreign company. For further assistance on this type of Italian company formation structure and how we can help, please contact us

Branch

An Italian branch office of a foreign company is considered a permanent establishment in Italy. It is fully dependent on the foreign head office in terms of responsibility but has its own VAT number. The foreign HQ is fully responsible for all liabilities incurred by the Italian branch. Please contact us for further assistance on this type of Italian incorporation structure.

Holding Company

Companies main activity is holding assets.

Taxation

The corporate tax rate in Italy is 31.4%.

Vat

VAT is invariably 20%. There are reduced rates of VAT of 4% and 10% on basic products. VAT is charged on assets and services in Italy as well as on imports into Italy. VAT returns are made monthly. In certain cases, it is possible to make a return once a quarter. An annual VAT return must be filed once every year on March 15th.

SPAIN

Introduction

Spain has one of the most robust economies in the EU and is the 9th largest economy in the world, thanks to strong inward investment, a booming manufacturing sector and a liberal business environment. Annual growth, currently well over three per cent, has been outperforming the EU average for a number of years.

Types of Business Structure

  • branch or representative office.

Branch or representative office

Form a Spanish company: traditionally, the most-used corporate form has been the corporation (S.A.); however, in recent years the formation of limited liability companies (S.L.s) has also become commonplace. Associate with other businesses already established in Spain: joint ventures are a common way of setting up business in Spain, since they enable their members to share risks and pool resources and experience. Spanish law provides for different types of joint venture.

However, creating a new entity or associating with pre-existing entities is not the only way to invest in Spain. It is possible to gain a foothold in the Spanish market without having to physically set up a center of operations in Spain by: • Making distribution agreements. • Operating through an agent. • Operating through a commission agent. • Establishing a franchise.

Taxation

Any person or legal entity with economic interests in Spain must hold a tax identification number (NIF) (legal entities). Corporate tax is standard at 30%. Lower rates are applicable in certain situations (such as smaller size). For small and medium-sized companies, tax on the first 120 202.41 euros of taxable income is 25%. Anything above that is taxed at 30% (annual sales less than 8 million euros).

IVA(VAT in Spain)

The standard rate of VAT is 16 % and this applies to most goods and services. There is a reduced rate of 7% applicable to things such as food, water, pharmaceutical products etc. There is a super-reduced rate of 4 % applicable to things such as bread, milk, flour etc. Certain things are VAT free, such as insurance and financial services, health, education etc.



SWITZERLAND

Introduction

Switzerland is undoubtedly one of the most attractive countries in the world in which to live, work, and run a business. It offers a combination of political and economic stability, a clean and safe environment, and comparatively low personal and corporate tax rates. But the tax regime, whilst relatively benign, is quite complex.

A tourist visa can be converted into a business visa if the non-citizen intends to apply for an Occupation Permit.

Types of Business Structure

  • Corporation
  • Limited Liability Companies
  • Sole Proprietorship
  • Partnership
  • Stock corporation

Corporation

A capital company has a share capital of at least CHF 100,000. There is no personal liability for the owners. On establishment, 20 percent of the share capital must be paid-in (a minimum of CHF 50,000). The nominal value of shares must be at least one Swiss Cent. Share are divided into registered or bearer shares.

Limited Liability Companies

A Limited Liability Company is a capital company with certain aspects of a partnership. There is no personal liability for owners. Liability for additional contributions and collateral obligations of quotaholders can be provided for in the articles of incorporation. The quota capital must be at least CHF 20,000 and 100 percent of the share capital must be paid-in upon establishment. The nominal value of a quota must be at least CHF 100 and all quotas must be registered

Sole Proprietorship

Individuals and small businesses usually opt for a Sole Proprietorship. It is a straightforward business structure and the owner has total power over the business. The negative side is that a sole proprietor bears responsibility for the debts of the business and could potentially lose all his or her private and business assets should things go wrong.

Partnership

Where two or more individuals wish to form a business, one of the ways that they can do this is via a General Partnership. This business form is not a separate legal entity, though the partners may choose to operate using a trading name. Partners should sign a partnership agreement and each partner is liable for their own taxes (paid at personal income tax rates). Partners in such partnerships have unlimited joint liability for the debts of the business . A General Partnership must be entered in the Commercial Register (further details on which are available here).

Stock corporation

A Stock Corporation (AG) is a popular business form and represents a separate legal entity from its owners. Liability for the debts of a Stock Corporation is limited to the assets of the company. The Board of Directors runs a Stock Corporation, one of whom must be a Swiss resident. Share capital is agreed ahead of forming the company and is allocated into shares, but the minimum required is CHF100,000, of which at least CHF50,000, (or 20% of the par value of the shares, whichever is the larger amount) must be paid up. This may put this type of corporate vehicle out of the reach of smaller businesses.

Taxation

Corporate income taxes are imposed on profits of companies incorporated in Switzerland or those companies managed from within its regions. Corporate income is between 13% and 22%.

VAT

The VAT rate is 8%.



TURKEY

Introduction

Turkey offers a natural gateway to three of the world's largest and most dynamic markets: Europe, Asia and the Middle East. No wonder its economy is booming, up 34% over the four years to 2005, and still growing more than 5% per annum. Add to this a huge domestic market, an ambitious labour force and low wage costs, and you can see why Turkey is emerging as an essential centre for foreign investors seeking to set up business in Turkey.

Types of Business Structure

Limited Liability Companies

There are two main types of legal entities:” Limited Sirket” (limited company) and “Anonim Sirket”(anonymous company). They have the same establishment procedures such as registration with the trade registry and publication in the Trade Registry Gazette. The directors of the company and any changes in the by-laws are also published. Anonymous companies are the widely preferred types of legal entity. For banks, financial leasing companies and some other specific fields of activity, this type is required. It is also used to place capital with the public through the stock exchange or otherwise.

Branches of Foreign Companies

Branches are treated as fully established companies. Their commercial transactions, all routine matters and returns, expenses, salary payments etc., are subject to commercial, social and tax procedures similar to an independent legal entity.

Representative offices

Representative offices should not have any commercial activities. The salaries of the employees should be paid from abroad.A simple permission from the Treasury is required to set up a Representative Office.

Joint Ventures

A joint venture or a consortium may be set up for international contracts to be carried out in Turkey. It is a simple formation of a special contract. It can be freely established based only on the international contract signed. Without any obligation to establish a company, the joint venture or the consortium can carry out the business activities. The only requirement would be registration with the tax office and the Social Security Institution. When the contract is completed, the Turkish joint venture dissolves.

Taxation

The tax rate applicable to corporations in Turkey is 20%. Capital gains tax in a corporation is usually added to the regular income of the corporation

VAT

The VAT rate is 8%.



UNITED ARAB EMIRATES

Introduction

The UAE's, namely Dubai's, economy boasts an ambitious combination of cost, commerce and environmental advantages that make an ideal and appealing investment climate for local and foreign businesses. Indeed, these benefits not only pit the Emirate state as the Gulf's leading multifunctional business centre and regional hub-city, but also accentuate it as one of the world's most virile and progressive economic markets.

Types of Business Structure

Limited Liability Company

Foreign investors are permitted to hold an equity ownership in U.A.E. companies as long as 51% of the equity is held at all times by U.A.E. nationals. The preferred company form for foreign investors is the Limited Liability Company (“LLC”) due to, among other factors, its flexible management structure, and protection of minority shareholders. The L.L.C. requires a minimum of two and a maximum of 50 members and in all cases must have a minimum of 51% U.A.E. ownership. The minimum capitalization is Dh150,000. Management of the L.L.C. is vested in the “managers” (up to five natural persons).

Establishing a Branch or Representative Office

Through either a liaison office or a branch office, foreign entities may establish a presence with significantly less U.A.E participation than is required to establish a Limited Liability Company. Foreign companies are permitted to establish wholly owned branches and representative offices in the U.A.E.; however, these offices are limited in the activities they may conduct within the U.A.E. (Article 314 of the Commercial Companies Law).

The primary difference between a representative office and a branch office is that a representative office theoretically is limited to gathering information and soliciting orders and projects to be performed by the company’s head office. In this regard, representative offices also are limited in the number of employees they may sponsor (typically three or four). In essence, a representative office acts merely serves as an administrative and marketing center for the foreign company. By contrast, a branch office is a full-fledged business, permitted to perform contracts or conduct other activities as specified in its license.

A foreign entity must appoint a U.A.E. national “service agent” for the branch or representative office. A service agency should not be confused with a commercial agency discussed below. The service agent is not permitted to own equity in or participate in the substantive management of the representative or branch office. In practice, a foreign entity typically contracts with the service agent to provide specific services such as assisting in communications with government departments (e.g., facilitating visas for foreign company personnel) or undertaking other administrative matters. The compensation of the service agent is a purely contractual matter between the service agent and the foreign entity, usually measured by the level of services provided or in some instances by the level of activity or turnover of the branch or liaison office.

Due to the interaction between the U.A.E. federal government and the government of the particular Emirate in which the branch office is to be located (e.g., Abu Dhabi or Dubai), it should be noted that registration entails submitting a number of applications and obtaining a number of approvals from several government departments. After the application is approved by the government of the Emirate where the branch is to be established, the approval of the federal government approval is then required.

Enterprise in a Free Trade Zone

The U.A.E. has established ten Free Trade Zones (“FTZ”), and two specialized FTZ targeting IT, e-business, and the media. These Free Trade Zones are in various stages of development. The primary benefit of establishing a branch office in a Free Trade Zone is 100% foreign ownership; however, conducting business in the U.A.E. market itself is prohibited. The FTZ’s were established to attract foreign capital and investors by offering incentives such as

1. 100% foreign ownership of the enterprise

2.100% import and export tax exemptions

3.100% repatriation of capital and profits

4.No corporate taxes for 15 years, renewable for an additional 15 years

5.No personal income taxes

6.Assistance with labor recruitment, and additional support services, such as sponsorship and housing.

An independent Free Zone Authority governs each free zone, and is the agency responsible for issuing FTZ operating licenses and assisting companies with establishing their business in the FTZ.

Most of the free zones are tailored to meet the needs of industrial, shipping and manufacturing enterprises. As such, the FTZ’s tend to be located near major ports and have large warehousing and storage facilities available. The exception is Dubai Internet City (“DIC”), which is a unique free zone dedicated to IT and e-business companies wishing to set up bases in the Middle East. Dubai Media City (“DMC”) is a FTZ based on the same concept as DIC, but with a focus on media rather than IT.

Taxation

Personal or corporate income is not subject to taxation in the UAE. However, Dubai charges a municipal tax on the rental of properties.

A number of free zones are in place, aimed at encouraging investment. All can offer complete tax free incentives of anything up to fifty years.



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