Scotland, capital of foreign business

Scotland is an ideal destination for setting up a company abroad, as it has many assets to offer. Why is it called the capital of foreign business? What you need to know

Why Scotland?

The UK is one of the world’s leading financial and business centers, renowned for its brand image and particularly attractive tax rate.

It is the destination of choice for investors, small and medium-sized businesses and many multinationals who have chosen to set up their subsidiaries or headquarters here.

When it comes to setting up a Company incorporation across the Channel, Scotland is not necessarily the first destination that springs to mind.

Yet it’s the capital of foreign business, a prime jurisdiction with many advantages.

It forms the United Kingdom with England, Northern Ireland and Wales. Edinburgh is its administrative and financial capital, the sixth-largest financial center after London, Paris, Frankfurt, Zurich and Amsterdam.

How do I choose a foreign jurisdiction?

Choosing a destination country for foreign business is not a matter of chance.

There are a number of factors to consider, including the benefits to be gained and the objectives to be achieved.

You need to study the various opportunities beforehand, in order to target the most advantageous destinations.

For example, London is the perfect destination for financial arrangements. For import-export, Hong Kong is a perfect choice.

Secondly, the image conveyed by the jurisdiction should not be overlooked.

In the case of the UK, this is a prestigious jurisdiction that offers a brand image to customers and employees alike.

Next, it is essential to find out about the various agreements in place between the foreign country and other countries, particularly the country of tax residence.

In concrete terms, what you need to check is the existence of an information exchange agreement between the two jurisdictions.

Scotland's foreign business capital: what are the advantages?

A flexible legal and tax system

The United Kingdom, and Scotland in particular, have the advantage of unquestionable seriousness and credibility in the business world.

Scotland is a very competitive place to do business, where the law allows you to set up a company tax-free under certain conditions.

The most common type of company is the Scottish Limited Partnership (the name of the company must end in LP), created under the company’s own legislation, the Partneship Act 1890, governing the rights and duties of natural or legal persons bound by a business partnership.

The company is registered with the Registrar of Companies of Scotland, and there are very few requirements for this type of legal structure :

  • payment of a minimum share capital of 2 GPB ;
  • registered office in Scotland;
  • the minimum number of shareholders is 2, one of whom is the company director. There is no residency or nationality requirement;
  • the possibility of appointing a secretary;
  • a certified copy of passport or identity card, together with proof of residential address less than 3 months old.

Tax and financial benefits

An LP that carries on no economic activity in the UK and receives no income in the UK is tax-exempt.

Tax on the LP’s profits is paid by the partners in their territory of residence, in proportion to their interests in the partnership.

For example, a Scottish partnership with a company in the British Virgin Islands, whose income comes from abroad, benefits from 0% taxation in Scotland.

The partners are taxed in the country where they are registered as taxpayers, according to the provisions of the law of the country of tax residence.

Here, in the case of the British Virgin Islands, the tax rate is 0%.

As a result, the LP is not subject to any taxation, making it a perfect business solution.

Non-residents do not have access to double taxation treaties.

There are no accounting requirements, no annual reports, no audits – all financial advantages combined with the absence of taxation.

A stable jurisdiction for long-term business

Scotland is an economically and socio-politically stable jurisdiction.

Indeed, the UK maintains its position as the world’s 5th most powerful country by 2020, and is described by the media as “a highly developed nation with considerable international influence in the economic, political, scientific and cultural spheres”.

The currency used is the Pound Sterling, the fifth strongest currency in the world after the Jordanian Dinar, not to mention the abundance of natural resources: particularly fishy British waters, oil, mines and so on.

As a result, an LP has every opportunity to generate sales in just a few months, and Scotland boasts a reputation as an economic paradise.

A company created remotely in a short space of time

The economy is an important part of the country’s development, which is why Scotland has signed trade agreements with many countries.

For example, one agreement stipulates that foreign companies can be incorporated without having to travel to Scotland.

In practice, this is highly efficient, as partners can come from many different countries.

In addition to the possibility of doing it remotely, it takes an average of 48 to 72 hours to set up a foreign company.

Although Scotland is a jurisdiction with some similarities to a tax haven, it is not considered one.

What's the point of foreign business?

For entrepreneurs, setting up a foreign company is first and foremost a way of paying less tax.

In effect, it’s an opportunity to escape the tax pressure of your country of residence, optimize your income and grow your business.

Each foreign jurisdiction has its own tax policy, but generally speaking, investors pay little or no tax on business profits.

In general, it’s not necessary to invest a large sum of money to start a business or set up a company.

Foreign countries are particularly permissive, and the management of such an infrastructure is simplified: no minimum capital is required at creation, bookkeeping is not required, confidentiality of activities and confidentiality of real beneficiaries thanks to Nominee’s service.

The notion of a tax haven

While everything may look perfect on paper, in practice this is not always the case.

The concept is closely linked to the notion of tax havens, those countries or islands where taxation is particularly attractive and legal rules are flexible.

Even if, from a legal point of view, setting up business in a tax haven is not a crime, they are often at the heart of financial scandals.

According to the Organization for Economic Cooperation and Development (OECD), a territory is considered a tax haven if :

  • taxes are low or non-existent, especially for non-residents;
  • there is no exchange of information, and banking secrecy is strictly protected;
  • conditions for setting up a company and opening a bank account are advantageous;
  • it is a territory that does not cooperate with other countries on tax and legal matters.

The OECD has drawn up 3 types of lists of tax havens:

  • the black list for countries that do not cooperate fiscally;
  • the grey list for countries that have promised to comply with OECD standards;
  • the White List for countries making a real effort to comply with OECD standards.

Who can set up a foreign company in Scotland?

Overseas Scotland is a destination that attracts entrepreneurs and business leaders, consultants, artists, service providers, freelancers, financial market operators and more.

The list is not exhaustive, and there are many possible activities, as long as they do not fall outside the legal framework. For example

  • financial trading ;
  • trading activities ;
  • intellectual services ;
  • information technology ;
  • consulting ;
  • commerce;
  • banks and lending institutions.

Foreign Scotland and Brexit

A company in Scotland benefits from an advantageous geographical location, with access to the UK, European and Commonwealth markets.

A foreign company in Scotland can be managed from anywhere in the world.

Even partner meetings can take place whichever country they choose.

However, the Brexit could have consequences for these advantages.

Indeed, the UK’s exit from the Eurozone puts the debate about Scottish independence back on the table.

With Brexit now a fact, 62% of Scots want to remain in the European Union, but are forced to leave against their will.

However, there’s no point in speculating, as the terms of the UK’s exit from the EU are still to be negotiated between now and at least the end of 2020.