Supply chain · 11 October 2016

The best (and worst) countries to start a business in

According to the Doing Business index, New Zealand remains the easiest country in the world to start a business in

Expanding a business overseas is no longer the reserve of the typical corporate giants – entrepreneurs are also spotting new markets and customers in fast-growing economies all across the world.

The UK now has more citizens working abroad than any other European nation – including 1.5m of the nation’s graduate population. But why are so many Brits choosing to go overseas, and how did they manage the process of setting up or moving their business into a foreign country?

Business Advice took a look at some of the nation states that offer entrepreneurs a low barrier of market entry, unpicking the legislative burdens in some of the easiest countries to start a business in across the world, and the not-so-straightforward.

New Zealand

Doing Business 2016 rankings
  • Starting a business: 1
  • Trading across borders: 55
  • Getting credit: 1
  • Paying taxes: 22

According to the World Bank Group’s Doing Business index, New Zealand remains the easiest country in the world to start a business in. The government claims that it’s simplistic online registration portal “can be completed in a matter of hours”, while the country boasts a regulatory environment that is easy to navigate for small business owners.

Reserving a company name in New Zealand costs $10.22 (£5.78), while registering the business itself costs $150 (£84.85).

The ease of starting a business in New Zealand is reflected in the make-up of the economy, where small firms and startups are an active and dominant part. According to the government’s national statistics department, 96 per cent of firms in the country employ 20 staff or fewer.

Official statistics also report that 24 per cent of the nation’s economic output is based on exports, with main trade links with Australia, the US and the European Union. Traditionally an agricultural nation, New Zealand’s economy has expanded with recent investment in telecommunications and information technology.

As well as ranking highly in terms of setting up and conducting business, New Zealand also offers a low-risk environment in which to trade. The Transparency International Corruption Index ranked New Zealand second in the world for a lack of corruption in 2014, and fourth in its 2015 index.

Austria

Doing Business 2016 rankings
  • Starting a business: 106
  • Trading across borders: 1
  • Getting credit: 59
  • Paying taxes: 74

Austria represents the European Union in our study. In 2015, the Doing Business database reported that the Austrian government passed a number of reforms to the legislation for starting a business, opening the door to new entrepreneurs. The minimum capital requirement for starting a new business was reduced, and the government lowered notary fees.

Minimum capital requirements are held up by states as a way to protect creditors and consumers from firms at a risk of insolvency. Research has shown that the higher the minimum capital requirements in a nation, the greater the barrier to entrepreneurship and growth.

The recent reforms in Austria represent a growing trend that has seen governments across Europe in particular reduce the minimum benchmark figures and allow more entrepreneurs to operate.

Austria provides a politically stable environment for new businesses, with a well-educated workforce that offers a strong grasp of the English language. The country’s geographical situation also acts as a strategic link between Western and Eastern European markets.

USA

Doing Business 2016 rankings
  • Starting a business: 49
  • Trading across borders: 34
  • Getting credit: 2
  • Paying taxes: 53

The US ranks only behind New Zealand in the access to credit for enterprise in the World Bank Group’s index. By comparison, the UK ranks 17 places below the US, at the same level as Zambia and the Ukraine.

The 2016 Doing Business database ranked the country of the American dream particularly highly in terms of protection for borrowers and lenders. A score of 11/12 in the legal rights index topped the rankings of the UK and Germany at 7/12 and 6/12 respectively.

The database indicates that access to credit is facilitated through the country’s strong collateral and bankruptcy laws.

The Doing Business index also gave the US full marks when it came to the sharing of credit information, providing a wide availability of credit information among lenders to support access for entrepreneurs.

The US Small Business Association (SBA) is the official national body for business set-up and entrepreneurship, offering a range of financing and loan programmes for enterprise.

In the finance space, the UK government has taken measures to create further transparency and opportunities for entrepreneurs. Earlier this year the UK government launched a new small business credit data sharing scheme to make it easier for lenders to check the creditworthiness of potential new business customers, while improving small firms’ chances of accessing credit.

A Thomas Reuters Foundation poll in September found that the US was the best in the world for facilitating social enterprises, offering a range of financing opportunities for entrepreneurs looking to create social change.

However, the research also revealed that the general public remained confused over the business capabilities of social enterprises, hampering growth in the sector.

Qatar

Doing Business 2016 rankings
  • Starting a business: 109
  • Trading across borders: 119
  • Getting credit: 113
  • Paying taxes: 1

The World Bank Group ranked Qatar as having the most straightforward and business-friendly system of taxation for new firms looking to set up business, and the Doing Business index claims that it takes just a day to register for taxes and obtain a Tax Identification Number (TIN).

For foreign nationals setting up a business in Qatar, they can expect an income on profits tax rate at half that of the 20 per cent paid by firms operating in the UK. The income tax rate at ten per cent for business profits is the only tax that exists for operating businesses in the country.

The Qatari government also reformed its taxation system in 2014, removing certain requirements associated with the corporate income tax return.

And the worst…Brazil

Doing Business 2016 rankings
  • Starting a business: 174
  • Trading across borders: 145
  • Getting credit: 97
  • Paying taxes: 178

Of the major developed economies across the globe, starting a new business in Brazil is reported to be a complicated and arduous process. The country’s ranking in the Doing Business survey for ease of starting a business dropped even further from its standing of 166 in 2015, to 174 in 2016.

The table highlighted a period of 101.5 days to start a business in Brazil’s financial centre of Sao Paolo, including the 90-day application period for the provision of an operations permit.

Starting a business as a foreign national in Brazil carries further legislative burdens than for its own citizens, with either restrictions or full prohibition in forming a business in the sectors of the media, healthcare and security services.

However, the Brazil Business Guide discredits the World Bank data, instead suggesting a “realistic” formation period of three to six weeks for a foreigner starting a new business. Its primary objection is that many of the registration processes can be completed alongside one another. The organisation also doubts that an entrepreneur would attempt to complete the process without professional assistance.

In 2011 the Brazilian government passed reforms that sought to encourage new enterprise in the country, addressing the complicated system of taxation. The reforms saw further enhancement of the electronic synchronisation of federal and state tax authorities.

With advancements in technology and an increasingly globalised world, setting up a new business in a foreign country is an ever-increasing trend for travel-hungry Brits.

Whether entrepreneurs are looking to create a second base for their existing business overseas, or plan to migrate in search of a completely new life, Britain’s expat community of businesses looks set to continue to grow.

Looking to start a business overseas? Don’t miss our top tips for understanding different business cultures.

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ABOUT THE EXPERT

Praseeda Nair is the editorial director of Business Advice, and its sister publication for growing businesses, Real Business. She's an impassioned advocate for women in leadership, and likes to profile business owners, advisors and experts in the field of entrepreneurship and management.

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