30-Second Summary
What you'll learn from this article
- Tax advantages of offshore and onshore structures vary by country and business model.
- Dubai, Singapore, Estonia, and Delaware are popular company formation locations.
- Tax optimization is legal, tax evasion is illegal — know the line.
- Pay attention to transfer pricing and substance (real activity) requirements.
- Holding structures and double taxation agreements can reduce tax burden.
'Set up a company in Dubai, pay no taxes' — you've probably seen this advice all over social media. Reality is more complex. Yes, there are legal tax advantages. But improper structuring can result in serious penalties, double taxation, or even criminal liability. In this guide, you'll learn the real advantages and risks of international company formation, from a Turkish perspective. Disclaimer: This content is for general information purposes and does not replace professional tax/legal advice.
International company formation means establishing a legal entity in another country for international trade, tax optimization, asset protection, or market expansion. There are two main categories: offshore (low/zero tax jurisdictions) and onshore (normal tax jurisdictions).
As the global search for tax optimization intensifies, countries are tightening substance (genuine activity) requirements. The OECD BEPS (Base Erosion and Profit Shifting) initiative makes aggressive tax planning increasingly difficult. Successful international structuring in 2025: Legal compliance + genuine business purpose + substance.
Why Set Up a Company Abroad? Motivations and Realities
Motivations for international company formation: Tax optimization, market expansion, asset protection, attracting investors, payment system access. Each motivation requires a different jurisdiction and structure.
Tax optimization: Reducing tax burden within legal frameworks. Important: Tax evasion is illegal, tax planning (avoidance) is legal but has limits. Aggressive planning: Legal but carries ethical/reputation risks. Conservative planning: Safe but limited advantages. The right balance: Depends on your business model and risk tolerance.
Market expansion: Local presence in target markets. Selling to US customers? Delaware LLC makes sense. For EU markets: Ireland or Netherlands. For MENA region: Dubai. Local company means: Trust, banking convenience, regulatory compliance. With this motivation, think onshore, not offshore.
Asset protection: Holding assets in different jurisdictions in high-litigation sectors (healthcare, construction). US LLCs offer charging order protection. Some countries (Nevis, Cook Islands) have strong asset protection laws. Note: Transferring assets earned in Turkey abroad can be problematic.
Investor and payment access: US VCs typically invest in Delaware C-Corps — not Turkish companies. Stripe, PayPal, Wise Business — access restricted for some country-based companies. For global SaaS businesses, a US or EU company is nearly mandatory. With this motivation, Delaware or Estonia stands out.
Critical Warning: This content is for general information purposes and does not replace professional tax or legal advice. International company formation is a complex matter — always seek expert consultation.
Offshore vs Onshore: Key Differences
Offshore: Zero/low taxes, minimal reporting (BVI, Cayman, Panama). Onshore: Normal taxes but treaties, reputation, banking advantages (Delaware, Ireland, Netherlands). Modern trend: Onshore structures are preferred.
Offshore characteristics: Zero or very low corporate taxes. Minimal reporting requirements (privacy). Fast and cheap setup. Traditional examples: British Virgin Islands (BVI), Cayman Islands, Panama, Seychelles. Problems: Opening bank accounts has become harder, reputation risk, CRS/OECD transparency pressure.
Onshore characteristics: Normal or low (but non-zero) tax rates. Double taxation avoidance treaties (DTT). Strong banking and payment access. Good reputation (customer/investor trust). Examples: Delaware (USA), Ireland, Netherlands, Singapore, Dubai (hybrid). Modern preference: Onshore structures.
Substance requirements: Critical post-OECD BEPS. Substance means: The company's genuine economic presence. Office address, employees, board meetings, local decision-making. Paper-only company (shell company) → tax benefits may be denied. EU jurisdictions especially require substance proof.
2025 trend: Pure offshore (zero-tax shell company) is outdated. Hybrid structures are rising: Low-tax onshore (Ireland 12.5%, Dubai 0% free zone) + real substance. Goal: Tax efficiency + banking access + reputation + regulatory compliance. One size doesn't fit all — design according to your business model.
Popular Jurisdictions: Comparison
Popular jurisdictions in 2025: Delaware (US startup standard), Ireland (EU + low tax), Netherlands (holding structures), Dubai (MENA + zero tax), Estonia (digital nomad friendly). Each fits different use cases.
Delaware, USA: Startup/VC standard. LLC or C-Corp. Advantages: Investor familiarity, strong corporate law, privacy, Stripe/banking access. Taxes: Federal + state (low state tax if no Delaware sales). Disadvantages: US tax complexity, FATCA reporting. For whom: Tech startups targeting VC.
Ireland: EU access + 12.5% corporate tax (EU's lowest). Popular for IP holding structures. Advantages: EU market, English-speaking, strong legal system, tech hub. Disadvantages: Strict substance requirements, 'Double Irish' is closed. For whom: Mid-to-large companies targeting EU markets.
Dubai, UAE: 0% corporate tax in free zones (for now). Advantages: MENA market, strong banking, luxury lifestyle, close to Turkey. Disadvantages: 9% corporate tax introduced in 2023 (outside free zones), substance expectations rising. For whom: MENA-focused trade, e-commerce, consulting.
Estonia: e-Residency program for digital setup. 0% tax on undistributed profits (no tax if profits stay in company). Advantages: Fully digital, EU access, low cost. Disadvantages: Banking can be difficult, 20% tax on distribution. For whom: Digital nomads, small SaaS businesses, freelancers.
Turkish Perspective: CFC Rules and Risks
International company formation by Turkish residents is subject to Controlled Foreign Corporation (CFC) rules. Profits from companies in low-tax countries may be taxable in Turkey. Professional planning is essential.
Controlled Foreign Corporation (CFC): Foreign companies controlled 50%+ by Turkish-resident individuals/corporations. If CFC conditions are met: Foreign company profits are taxed in Turkey (even if not distributed). Conditions: Total tax burden below 10%, passive income-heavy (interest, royalties, dividends). Active trading exemption may apply — detailed analysis required.
Double taxation risk: Foreign company tax + Turkey CFC tax + dividend tax on distribution = triple taxation possible. Double taxation avoidance treaties (DTT) partially protect. Careful structuring is essential — otherwise the tax 'advantage' becomes a disadvantage.
Reporting obligations: International company formation must be reported to Turkey (within certain thresholds). Bank accounts: Automatic information exchange through CRS (Common Reporting Standard). Don't hide, don't conceal — tax authorities will find out anyway. Transparent structuring + correct declaration = safe position.
Legal risks: Tax evasion (hiding income) means serious penalties and criminal liability. Tax planning (legal structuring) is legitimate. The line: Substance, business purpose, transparency. 'Set up company in Dubai, pay no taxes' isn't that simple — if you're not a professional, we don't even recommend trying.
Important Advice: Before setting up an international company: 1) Consult with a tax advisor in Turkey, 2) Get local counsel in target country, 3) Calculate total tax burden, 4) Evaluate CFC rules. Fixing structures after they're built is expensive.
Conclusion: Right Structure for Right Purpose
International company formation is a powerful tool but not suitable for everyone. Motivation must be clear, total costs calculated, legal compliance ensured. Professional consultation is mandatory.
Decision framework: 1) What's your motivation? (tax, market, investor, payments). 2) Which jurisdiction fits this motivation? 3) What's the total cost? (setup, maintenance, consulting, taxes). 4) How do CFC and other local rules affect you? 5) Can you meet substance requirements? If you can't answer these questions, you're not ready yet.
Makes sense for: Those with $100K+ annual international revenue, serious US/EU market sellers, VC seekers, international team managers. Too early for: Those without revenue yet, those who just want to 'evade taxes', those who can't provide substance, those without consulting budget.
Cost reality: Setup: $500-5,000 (varies by jurisdiction). Annual maintenance: $1,000-10,000 (accounting, registered agent, taxes). Consulting: $2,000-20,000+ (initial structuring). Total annual: Minimum $3,000-5,000. It makes sense if your tax savings exceed this cost.
Final words: International company formation isn't a 'get rich quick tactic' — it's a tool for doing business internationally. Used correctly, it's an advantage; used incorrectly, it's a risk. Not every structure suits every business. Clarify your motivation, get professional support, stay legal. No shortcuts — but proper structuring creates value.