Starting a business in Europe can be a challenging and rewarding endeavor. With so many countries to choose from, it’s not easy to decide where to establish a company.
In this article, we’ll take a look at some of the best and worst EU countries for starting a business.
Starting a business in Europe can be both rewarding and challenging. Some countries offer low taxes and extensive support for entrepreneurs, while others have tax burdens and a shocking level of corruption. In this article, we will explore the best and worst EU countries to start a business.
We start with the European countries where doing business is quite challenging and move on to the best ones adapted for business.
Malta
Foreign entrepreneurs remember Malta as an attractive place for business, mainly thanks to its relatively low taxes. However, this is where the significant advantages of Malta find their end. One of the main cons of establishing a business in Malta is a small domestic market. That leads to a highly competitive level with modest growth potential.
Those who run a company in Malta but live somewhere else have to pay a regular tax on distributed dividends. Thus, the effective tax rate often exceeds 20%, decreasing net profit.
The corruption level is the most significant concern for conducting business in Malta. The country has experienced numerous financial crimes that have impacted the government, allowing actual offenders to escape punishment while wrongfully incriminating innocent individuals and investors. This situation can result in the seizure of businesses and the freezing of financial activities, as demonstrated by the high-profile cases of Pilatus Bank and Satabank.
France
At first sight, France has no benefits for a foreign business but only offers obstacles. Creating a business in the country is too bureaucratic and time-consuming. The process can be even worse for non-EU residents. Corporate income taxes in France are among the highest ones in Europe, reaching 28.4%. Besides, business owners must pay property, payroll taxes, and consumption taxes for goods and services.
Another obstacle is local employment regulation. Labor laws are tightly regulated in France, and there is a strict social security system. Entrepreneurs must reckon with local realities, which are not always on their side.
The linguistic aspect may seem insignificant at first, but it still can cause inconvenience when doing business in France. Speaking French, at least on a basic level, is what is expected of company owners in the country. Partners, investors, or suppliers may refuse to speak English, and trying to start a conversation in a language other than French may be considered rude.
Italy
Italy has a historic economic instability which makes the local business environment challenging in general. Setting up a business in the country costs about €4,452 when the average salary is €2,795. Besides, entrepreneurs must pay grant, registration, and stamp duty taxes as well as Chamber of Commerce registration and annual membership fees.
The financial burden doesn’t end after establishing a company. Corporate tax in Italy is one of the heaviest in Europe, equaling 24%. Paying corporate income tax, regional production tax, social security, real estate, and value-added taxes is mandatory.
One of the most significant issues is the notorious Italian Mafia which has had a huge impact on the country for years. This fact and the lack of resources make it impossible for the government to fight organized crime. In 2022, a new wave of economic and social crisis in Italy caused deeper infiltration of the Mafia in local businesses. That increases the chance of meeting representatives of this group at a certain point in a company’s life.
Denmark
Denmark can be described as business heaven and not without reason. The cost of establishing a company is very low, and the corporate tax is a feasible 22%. Its employer and social security costs are also low.
There are favorable conditions for running a business in Denmark, including a minimal bureaucracy level. The corruption level tends to be zero making Denmark the most transparent country in the world. At the same time, the Danish government doesn’t want to attract as many businesses as possible. There is broad informative support for local and foreign entrepreneurs, such as free consultations and help with finding investors.
Another advantage is a completely open goods and services exchange due to minimal bureaucracy and transparent yet strict tax regulations. There is also the highest average monthly salary in Denmark compared to other EU countries, allowing consumers to afford more expensive purchases.
Netherlands
The Netherlands is highly competitive thanks to its innovative online system for business registration. That allows entrepreneurs to set up a company within a few days.
The Dutch tax system is one of the primary advantages of doing business in the country, as it supports foreign direct investments. Companies are taxed solely on their profits.
There are two taxable income brackets, with the first bracket being taxed at a lower rate of 15%. The current standard corporate income tax rate is 25.8%. However, the average monthly salary of €3,533 gives a positive potential for higher revenue.
Finland
In terms of business, Finland is much like Denmark, with low taxes and extensive support for entrepreneurs. The corporate tax in Finland is even lower and stands at 20%. Other mandatory taxes include profit tax and estate tax. There are extra tax fees for foreign companies’ owners, but they’re still low.
Like its Nordic neighbor, the Finnish government encourages entrepreneurs by providing free business advice. There are also various business organizations and communities in Finland offering help with market research, calculating profitability, and surveying financing. Moreover, such informative support is available in different languages, including English.
The Judiciary System is also favorable for running a business in Finland. The country ranks just after Denmark in the latest transparency index with one of the lowest corruption levels in the world. That increases trust between business partners and helps develop business in Finland more relaxedly.
Read more:
The best and the worst EU countries to start a business