• Downshifting is a smart way to cut costs and live a better lifestyle.
  • There is no corporate tax in Estonia; instead, they have shifted the traditional taxation of profits to the moment they are redistributed as dividends.
  • Poland has shown excellent potential regarding economic development in the past decade.

Globalization and virtualization have turned the world into one fluid network where distance is as much of an obstacle as an opportunity. For the emerging generation of telecommuting programmers and information technology startups, downshifting is a smart way to cut costs and live a better lifestyle.

Here are the top five European countries that want your business and will help you turn a profit.

Portugal: preferential tax and golden visas

Average property prices,

EUR/sq m

City centre 1,600
Suburbs 1,085
Source: Numbeo

Portugal is one of the cheapest countries for business in Western Europe, and it packs a whole load of extracurricular perks such as great food, stunning weather and water sports. The country’s attraction is in its Golden Visa program and the preferential tax regime (NHR) for affluent foreign investors.

Non-nationals can get residency by transferring €1M in capital or creating 10 jobs among many other options, including refurbishing architectural heritage or funding artistic initiatives.

Wages in Portugal are understandably more expensive than in Eastern Europe, for example, ranging from €618 per month (minimum wage) to €1,124 per month (average nominal salary). Not only is it easy to live in Portugal, but also it’s a good place to find staff: the young workforce is educated, well-traveled and dedicated.

Prime office space in the capital, Lisbon, has been stable since 2013 and ranges from €14.00 per square meter in the historic and riverside zones to €18.50 in the Central Business District.

Corporate tax is applied to any company registered in Portugal or those companies that are centrally controlled from the country. Companies are taxed 12.5 percent on the first €12,500, then 25 percent for all profit above that.

Self-employed foreign nationals can get a 20 percent flat tax during the first 10 years of residence according to the NHR regime. Asset-light companies that don’t require meeting in person should consider Portugal’s Azores archipelago in the Atlantic Ocean where companies are taxed at a general rate of 17.5 percent.

Estonia: digital capital of the East

Average property prices,

EUR/sq m

City centre 2,100
Suburbs 1,390
Source: Numbeo

This Baltic country has a certain aura of attraction, at least for IT companies, thanks to its forward-thinking approach to technology. Its citizens have digital ID cards that give them access to 4,000 state services online.

By 2025 it plans to have a complete e-residency program attracting new entrepreneurs to set up websites using the Estonian domain. In early 2015, virtualization market leader Parallels opened offices here.

Estonia is one of the easiest places to set up a business: it takes a maximum of five days (much of the process is online) and only costs €145. Interestingly, there is no corporate tax in Estonia; instead, they have shifted the traditional taxation of profits to the moment they are redistributed as dividends.

Furthermore, profit is tax exempt if the dividends distributed to shareholders originated from a company established in another country.

Office rental rates for Class A and B property range from €7.40 to €16.00 per square meter per month, but it’s worth noting that vacancy rates for prime office property were just above 0 percent in 2015. Gross average wages are about €1,044 and come with a pool of qualified local specialists. The minimum wage as of January 2016 was €430 per month.

Romania: business hub of the Balkans

Average property prices,

EUR/sq m

City centre 1,120
Suburbs 800
Source: Numbeo

Romania is a beautiful country with warm summers and winters perfect for skiing. The country’s young, educated and multilingual workforce has attracted many major companies to its shores recently.

Romania is now a fast-developing hub for major tech, financial and advisory groups such as IBM, Microsoft, Oracle, HP, Accenture, Huawei, Ericsson, PwC and more that have set up major operations, headquarters and call centers.

Gross wages are some of the lowest in Europe at about €658 per month on average, and corporate tax is just 16 percent. Bucharest, the capital, has been the main destination for incoming businesses but companies are now also branching out toward Cluj-Napoca (Transylvania).

Office property rentals are the most expensive in the centre of Bucharest at €18.50 per square meter per month, compared to €11.00 in the suburbs and €12.50 in Cluj-Napoca according to a recent report by Cushman & Wakefield. This is well below rates in London’s city district, which range from £225 to £800 per square meter per month (€289 to €1,027).

It’s worth knowing that Romania has one of the fastest internet networks in the world, and nine of its towns ranked in the top 15 worldwide for the speed and quality of this service. Both Bucharest and Cluj have international airports and internal flight connections.

Poland: rising star of Europe’s East

Average property prices,

EUR/sq m

City centre 1,805
Suburbs 1,205
Source: Numbeo

Poland has shown excellent potential regarding economic development over the past decade or so. Low living and business costs have led many companies to open subsidiaries and even headquarters. Recent reports indicate that Samsung could be moving its headquarters to Warsaw, Poland’s capital, where it already has a research center.

Corporate tax is 19 percent and even though setting up a business can take up to a month, it only costs about €140.00.

Office rental rates are forecast to fall in Warsaw as property development activity continues to rise. Currently, renting an office in downtown Warsaw costs €22 to €23 per square meter per month and just €14–15.50 in non-central locations.

The average gross salary in Poland is just €939 per month, with minimum wage anchored at €431. The country’s young workforce has earned an excellent reputation for commitment and hard work but also the level of education and English language skills.

Czech Republic: Central Europe’s fastest growing economy

Average property prices,

EUR/sq m

City centre 2,010
Suburbs 1,350
Source: Numbeo

The Czech Republic is an ideal destination for just about anyone. The country’s economy ranked among the best in Europe for GDP growth (4.3 percent) in 2015, but it’s also the top place for trade across borders according to the Doing Business Index.

Relocating to the Czech Republic comes with perks such as magnificent architecture, friendly (multilingual) locals and low living costs.

Registering a business takes seven days and costs just less than €900 while corporate tax the same as in Poland– 19 percent. Prime office rental rates in Prague vary from €14 to €19 per square metre per month.

Salaries in the Czech Republic are still well below those of Western Europe and its neighbors Germany and Austria. The average monthly wage is about €965 per month and €366 on minimum wage.

The workforce is modern, innovative and well-educated thanks to the country’s many universities, including the renowned Charles University in Prague that was founded in 1348.

Downshifting your business is great way to reduce operating costs and explore a new lifestyle, especially since the internet has opened up so many extraordinary opportunities in terms of communication, work and profit structures.

If you are thinking about pursuing this option, look at how much your property is worth at home. Downshifting doesn’t necessarily require a lot of money. In fact, it can also be a source of revenue if you rent out your property at home and buy or lease at a lower cost in your new destination.

Leigh Stewart is the international real estate editor at Tranio. Follow Tranio on Twitter or Facebook.

Email Leigh Stewart.

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