In this article, we take a look at the 25 best countries to start a business.
Businesses thrive only when certain policies, a suitable economic framework and institutionalized principles like rule of law and transparency are present in a country. Absent these conditions, a country becomes economically unattractive and can make it hard for businesses to grow and turn a profit.
For instance, a country with a high corporate tax rate, coupled with poor human capital, excessive government regulations, poor state of rule of law and unreasonably strict antitrust legislation can derail its market prospects.
By far, the most important condition for businesses is a free market, where markets are run by the market forces of supply and demand. Free markets usually provide most of the conditions needed for ease of doing business.
Free markets are efficient because they allow incentivization through profit motive, but high corporate tax rates can prove to be demoralizing, which is why nearly 40% of multinational corporate profits are relocated to tax havens every year, according to research from UC Berkeley and University of Copenhagen. Speaking of the US, it loses 16% of the corporate tax revenue.
For example, according to a Reuters report, Alphabet Inc. (NASDAQ:GOOG) in 2017 reported $23 billion in profit in Bermuda, a small British island territory with zero corporate tax rate. Alphabet Inc. (NASDAQ:GOOG) did it through a Dutch shell company, in a tax-avoidance technique known as Double Irish With a Dutch Sandwich.
Corporations do it by reporting profits in countries with low taxes, where they move their intellectual property and license it to their subsidiaries using the so-called arm’s length principle in transfer pricing.
Corporate tax rates have been falling around the world to encourage business growth and discourage tax revenue flowing out of the corporations’ home countries. According to the Tax Foundation, the unweighted mean statutory tax rate has reduced worldwide by 42% from 1980 to 2022. In the US, corporate taxation as a percentage of GDP has consistently declined since World War 2, making up only 1% of the GDP as of 2019.
Another important factor is predictability, which is guaranteed through rule of law. Weak rule of law can create uncertain business conditions and may discourage investment, leading to low access to capital for startups and new businesses. With that said, let’s now move on to the 25 best countries to start a business.
Our Methodology
We have defined ‘best countries to start a business’ as ones that have lower than average corporate tax rates, less government regulations, good fiscal health, high trade and business freedom, high access to capital, healthy contract enforcement and strong rule of law.
We find that a sum of countries’ rankings on different indexes satisfy the above definition. In this regard, we first selected the top countries on The Heritage’s Economic Freedom Index, and the World Bank’s Ease of Doing Business Index. Although the two indexes account for corporate taxation, we selected the top common countries on the two indexes and ranked them in a descending order of low corporate tax rates separately.
Finally, we calculated the average rankings for the countries based on their rankings on the economic freedom index, ease of doing business index and our own rankings based on corporate tax rates. For our list, we then adjusted their rankings based on their average rankings and ranked the countries in a descending order of high business friendliness.
For countries with the same averaged-out rankings, we’ve used their rankings on ease of doing business index as the tiebreaker.
Note: Hong Kong is not listed on the economic freedom index for political reasons. However, Hong Kong is known to have strong free market institutions. Therefore, we have ranked it solely on the basis of its rankings in corporate tax rates and the ease of doing business index.
Here are the 25 best countries to start a business:
25. North Macedonia
Economic Freedom Index Ranking: 53
Ease of Doing Business Ranking: 17
Corporate Tax Rate Ranking: 3
Average Ranking: 24.3
North Macedonia is located in Southeast Europe, and the country has business-friendly policies in place. The regulations pertaining to the market are generally low and not overly rigid, and North Macedonia has a low corporate tax rate of 10%.
Moreover, improvement in the cadaster system has resulted in enhanced security and speed in property registration. However, North Macedonia still has some weaknesses in rule of law and judicial system.
24. Malaysia
Economic Freedom Index Ranking: 42
Ease of Doing Business Ranking: 12
Corporate Tax Rate Ranking: 15
Average Ranking: 23
Malaysia is located in Southeast Asia. It ranks twelfth on the World Bank’s ease of doing business index, and has a corporate tax rate of 24%. The country has a strong mechanism for protection of property rights and its tilting system is considered reliable by the economic freedom index. However, the judicial independence in Malaysia is, at times, compromised by the executive.
23. Canada
Economic Freedom Index Ranking: 15
Ease of Doing Business Ranking: 23
Corporate Tax Rate Ranking: 18
Average Ranking: 18.6
Canada ranks 23rd on the ease of doing business index and 15th on the economic freedom index but the country has a corporate tax rate of 28%, moderately higher than other countries on the list.
22. United Arab Emirates
Economic Freedom Index Ranking: 33
Ease of Doing Business Ranking: 16
Corporate Tax Rate Ranking: 2
Average Ranking: 17
United Arab Emirates has one of the lowest corporate tax rates on the list, at just 9%. However, it ranks relatively low on the economic freedom index because of lack of transparency and independent judiciary. Regardless, rule of law of is generally well-maintained in the country.
21. Iceland
Economic Freedom Index Ranking: 13
Ease of Doing Business Ranking: 26
Corporate Tax Rate Ranking: 10
Average Ranking: 16.3
Iceland is located in the Scandinavian region of Europe. The country has a corporate tax rate of 20% like most countries on the list. The laws that govern businesses in Iceland are consistent with OECD standards and the country has 32 preferential trade agreements in place.
20. Mauritius
Economic Freedom Index Ranking: 30
Ease of Doing Business Ranking: 13
Corporate Tax Rate Ranking: 5
Average Ranking: 16
Mauritius is one of the best countries to start a business in 2023. The country has a low corporate tax rate of 15%. The infrastructure in the country is well developed and the regulatory framework is lax. Further, Mauritius has preferential access to a market of more than 600 million consumers.
19. Latvia
Economic Freedom Index Ranking: 18
Ease of Doing Business Ranking: 19
Corporate Tax Rate Ranking: 10
Average Ranking: 15.6
Latvia is located in the Baltic region of Europe, and since market reforms, the country has become one of the most open to business countries in the world. Latvia has a decent tax regime for startups and access to capital in the country is easy. Latvia has a corporate tax rate of 20%.
18. Germany
Economic Freedom Index Ranking: 16
Ease of Doing Business Ranking: 22
Corporate Tax Rate Ranking: 6
Average Ranking: 14.6
Germany has a low corporate tax rate of 15.8%. It ranks number one on the aggregate logistics performance index, indicating strong infrastructure. The capital markets in Germany are already among the best in the world, but the country intends to improve them further, for instance, by reducing the minimum capital amount for companies to go public, from $1.34 million to $1.08 million.
17. United States
Economic Freedom Index Ranking: 25
Ease of Doing Business Ranking: 6
Corporate Tax Rate Ranking: 12
Average Ranking: 14.3
United States is one of the best countries to start a business, with a corporate tax rate of 21%, and an ease of doing business ranking of six. It has the one of the largest capital markets in the world, accounting for 41% of the global equity. Contract enforcement is also strong in the country, enforced by an independent judiciary.
It is home to some of the biggest companies in the world, including Alphabet Inc. (NASDAQ:GOOG), Amazon.com, Inc. (NASDAQ:AMZN) and Apple Inc. (NASDAQ:AAPL).
16. Australia
Economic Freedom Index Ranking: 12
Ease of Doing Business Ranking: 14
Corporate Tax Rate Ranking: 16
Average Ranking: 14
Australia is the largest economy in Oceania, and its strong rule of law and infrastructure, efficient regulatory framework and strong access to capital make it one of the best countries for businesses.
15. United Kingdom
Economic Freedom Index Ranking: 24
Ease of Doing Business Ranking: 8
Corporate Tax Rate Ranking: 9
Average Ranking: 13.6
The UK ranks eighth on ease of doing business index, and has a low corporate tax rate of 19%, making it one of the best countries to start a business. The UK is home to several of the world’s biggest companies like Unilever. In addition, it is also a host country for corporations like Amazon.com, Inc. (NASDAQ:AMZN) and Apple Inc. (NASDAQ:AAPL).
14. South Korea
Economic Freedom Index Ranking: 19
Ease of Doing Business Ranking: 5
Corporate Tax Rate Ranking: 16
Average Ranking: 13.3
South Korea is located in the far east. It ranks fifth on the World Bank’s ease of doing business index. The country has a skilled workforce, with a corporate tax rate of 25%.
13. Switzerland
Economic Freedom Index Ranking: 2
Ease of Doing Business Ranking: 36
Corporate Tax Rate Ranking: 1
Average Ranking: 13
Switzerland is one of the best countries to start a business, owing to one of the lowest federal corporate tax rates in the world, at 8.5%. However, Cantonal-level corporate taxes are more burdensome than the federal tax.
12. Finland
Economic Freedom Index Ranking: 9
Ease of Doing Business Ranking: 20
Corporate Tax Rate Ranking: 10
Average Ranking: 13
Finland is another Scandinavian country on the list. It has a corporate tax rate of 20% and the country has one of the best human capitals in the world.
11. Georgia
Economic Freedom Index Ranking: 26
Ease of Doing Business Ranking: 7
Corporate Tax Rate Ranking: 5
Average Ranking: 12.6
Georgia is located in Eurasia, and has one of the lowest federal corporate tax rates in the world, at 15%. In recent years, the country has made huge changes to its policies to attract investment and foreign companies in a bid to boost the economy.
10. Norway
Economic Freedom Index Ranking: 14
Ease of Doing Business Ranking: 9
Corporate Tax Rate Ranking: 14
Average Ranking: 12.3
Norway ranks ninth on the World Bank’s ease of doing business index, and 14th on The Heritage’s economic freedom index. The country has an independent judiciary and contracts are enforced reliably. Moreover, Norway’s workforce is highly educated and skilled.
9. Estonia
Economic Freedom Index Ranking: 7
Ease of Doing Business Ranking: 18
Corporate Tax Rate Ranking: 10
Average Ranking: 11.6
Estonia has 46 preferential trade agreements, being a member of the EU. Undistributed profits are not taxed in the country and commercial codes are applied with reliability, making Estonia one of the best countries to start a business.
8. Lithuania
Economic Freedom Index Ranking: 17
Ease of Doing Business Ranking: 11
Corporate Tax Rate Ranking: 5
Average Ranking: 11
Lithuania is one of the best countries for business, owing to a low corporate tax rate of 15%. The workforce is skilled, yet the wages are low relative to the EU average but employment regulations are comparatively stricter. A number of industries in the country are highly subsidized including transportation and energy.
7. Sweden
Economic Freedom Index Ranking: 11
Ease of Doing Business Ranking: 10
Corporate Tax Rate Ranking: 11
Average Ranking: 10.6
Sweden is one of the best countries to start a business in Europe. It ranks highly in almost all economic indicators and is positioned at the top third spot on the aggregate logistics performance index, indicating sophisticated infrastructure. The environmental industries are well positioned in the country, whose subsidies increased by 20% in 2020.
6. Ireland
Economic Freedom Index Ranking: 3
Ease of Doing Business Ranking: 24
Corporate Tax Rate Ranking: 4
Average Ranking: 10.3
Ireland has one of the lowest corporate tax rates in the EU, at just 12.5%, making it one of the most business-friendly countries in the world. Ireland also has an efficient regulatory framework. However, the cost of doing business is high, with high labor cost.
5. Taiwan
Economic Freedom Index Ranking: 6
Ease of Doing Business Ranking: 15
Corporate Tax Rate Ranking: 10
Average Ranking: 10.3
Taiwan is located in Southeast Asia. The country has a corporate tax rate of 20%, with the country ranking sixth on the economic freedom index. The government subsidizes R&D industries to boost industrial transformation.
4. Denmark
Economic Freedom Index Ranking: 10
Ease of Doing Business Ranking: 4
Corporate Tax Rate Ranking: 13
Average Ranking: 9
Denmark is another Scandinavian country on the list of best countries for business. It has a highly innovative market, and a highly skilled labor force. Moreover, Denmark is one of the least corrupt countries in the world, with a strong rule of law.
Denmark has a low corporate tax rate of 22%, and it is one of the top destinations for foreign capital investments. Copenhagen is also considered the logistics hub for Nordic countries, allowing for shipment of goods to 100 million Nordic consumers within 24 hours, making it the go-to place for shipping businesses in Northern Europe.
The country’s labor force is highly skilled, cost-efficient and flexible, and Denmark’s judicial, regulatory and bureaucratic frameworks are exceedingly friendly to entrepreneurs. For example, the World Bank ranks Denmark as the fourth best country when it comes to obtaining construction permits, the best country for cross-border trade and the sixth best country for resolution of insolvencies.
3. New Zealand
Economic Freedom Index Ranking: 4
Ease of Doing Business Ranking: 1
Corporate Tax Rate Ranking: 18
Average Ranking: 7.6
New Zealand has 13 preferential trade agreements, making the country one of the most open to business in the world. It ranks on the first position on the ease of doing business index of the World Bank.
2. Hong Kong
Ease of Doing Business Ranking: 3
Corporate Tax Rate Ranking: 7
Average Ranking: 5
Hong Kong is one of the best places to run a business in Asia. It is considered a financial hub and is a strategic gateway to the growing Chinese market. When it comes to corporate profits, Hong Kong has adopted a two-tier tax system.
The first $0.25 million in profits is taxed at 8.25%, while the outstanding profit is taxed at 16.5%, making Hong Kong highly attractive to small businesses. Further, being a global financial hub, access to capital in Hong Kong is considerably easy.
1. Singapore
Economic Freedom Index Ranking: 1
Ease of Doing Business Ranking: 2
Corporate Tax Rate Ranking: 8
Average Ranking: 3.6
Singapore is the best country to start a business according to our review of the different indexes. It is also the fifth best country in infrastructure. It has a low corporate tax rate of 17%.
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Disclosure: none. 25 Best Countries to Start a Business is originally published on Insider Monkey.
