Starting a company abroad as an IT consultant: 7 questions to ask yourself before leaving.
Summary
Introduction
Setting up a company abroad is often seen as the first step in an IT consultant's expatriation. In practice, it's almost always the last. A foreign structure is only valuable if the issues of residency, effective management, and substance have been resolved before registration , not after.
We've already examined the income level at which an IT consultant should question their tax residency . Once this threshold is reached, another question immediately arises: should a company be created outside of France, and under what conditions can this company withstand scrutiny by the tax authorities? The two issues are related, but they are not addressed in the same order.
The seven questions that follow do not constitute a compliance questionnaire. They are the seven points where structures often fall apart when they have been built backwards, that is, based on the rate published by a jurisdiction rather than the consultant's actual operating situation. None of these questions, moreover, concerns the corporate tax rate .
This guide is for developers, cloud architects, cybersecurity experts, data engineers, and DevOps consultants who bill between €100,000 and €400,000 per year, often working fully remotely, sometimes via an intermediary platform. It describes what Coreway Consulting systematically verifies before rejecting or accepting a company formation proposal, jurisdiction by jurisdiction .
Why registration is never the first step
Registering a company in a free zone or a European register now takes just a few days. This ease creates an illusion of simplicity: the consultant obtains a registration extract, a bank account, sometimes a residence visa, and considers the operation complete. However, the difficulty only begins later, when it becomes necessary to demonstrate that the company actually operates in the location where it is registered .
A foreign company owned and managed from France remains subject to French taxation. French tax law does not stop at the place of registration: it considers the place of effective management, the place where the business is conducted, and the place of residence of the manager. A consultant who creates an entity in the Emirates but continues to manage their projects from Lyon has not relocated their business; they have simply added a layer of complexity .
This is why we treat company formation as a consequence of a residency decision, never as its trigger. When a client considers relocating their business to Dubai , the first set of checks focuses on their actual lifestyle, family ties, and travel schedule, not on the choice of free zone.
Question 1: Where will the company actually be run?
This is the fundamental question, and the one that eliminates the most projects. Effective management refers to the location where strategic decisions are made: contract signing, project selection, financial allocations, and banking relationships. If these decisions continue to be made from a French trade show, the company remains subject to French taxation regardless of its original registration.
The criterion of the seat of effective management
Bilateral tax treaties concluded by France generally use the place of effective management as the decisive criterion for resolving a residency dispute between two states. In practice, the tax authorities look for tangible evidence: email addresses used to log in to banking services, the location where contracts were signed, timestamps of communications, and travel schedules. This evidence is much easier to reconstruct than one might think .
The case of the leaders who remained in France
Some consultants consider setting up a foreign company while remaining French residents, believing they can limit the issue to corporate tax. This scheme is the most risky of all. It carries the combined risk of the registered office being reclassified, the risk of deemed distributions of income, and, in the most extreme cases, a finding of tax avoidance . We never recommend this approach.
Question 2: Does your personal tax residence follow?
A company and its director are two separate taxpayers, but their tax situations remain linked. Moving one without the other almost always results in double taxation or a dispute. In France, the tax residence of individuals is determined by alternative criteria, meaning that meeting only one criterion is sufficient to establish your connection to the country.
The three criteria to verify are the permanent home, the main residence (assessed around the 183-day threshold), and the center of economic interests. Many consultants think they can resolve the issue by counting their days, whereas the family home takes precedence: a spouse and children remaining in France maintain the home in France, even if the consultant spends most of the year elsewhere .
Next, a coherent network of relationships must be re-established in the host country: lease or purchase, local bank accounts, health insurance, subscriptions, and any schooling. This process typically takes six to twelve months and is a prerequisite for obtaining a tax residency certificate, a document without which no agreement can be invoked .
Question 3: What economic substance can you install?
Economic substance is the bridge between accounting and reality. It answers a simple question: what is physically happening in this country that justifies taxing profits there? International standards stemming from the BEPS project have strengthened this requirement, and jurisdictions themselves now impose substance tests on their own companies.
What the word substance actually covers
For an IT consultant, the minimum requirements include a physical location rather than a registered office, documented physical presence, an active local bank account, accounting records kept on-site, and decisions dated and signed in the country. Depending on the jurisdiction, a local employee or resident director may be necessary. These requirements explain why some destinations are poorly suited to single-partner structures, while relocating a business to Singapore presupposes a more advanced level of organization.
The local provider does not constitute a substance
A registered office provider, a shared secretarial service, or a token administrator produces no tangible substance. They provide an address, not a business activity. When the consultant themselves generates the bulk of the added value, the substance depends primarily on their personal presence: it is their time that must be spent traveling , not just their invoices.
Question 4: Do your French customers change the equation?
Maintaining a French client base is perfectly possible, and it's actually the most common situation among the consultants we work with. The key point to consider isn't the client's nationality, but rather the location where the services are performed. A consultant who regularly returns to work at their Parisian client's offices is gradually establishing a permanent presence in France .
Fully remote work protects against this risk, provided it is real. Assignments must be carried out from the country of residence, reports must reflect this, and travel to France must remain occasional and documented. Regarding value-added tax, services between taxable persons are subject to the reverse charge mechanism, which simplifies intra-Community invoicing but has no bearing on the issue of permanent establishment .
Intermediation platforms add their own constraints. Some require a European VAT number, others do not accept service providers established outside the agreement zone, and still others apply withholding taxes. This factor must be checked before choosing a jurisdiction, as it alone can disqualify an otherwise attractive destination .
Questions 5 and 6: which jurisdiction, and at what operating cost?
The choice of jurisdiction only comes into play now, once the first four questions have been resolved. It is never simply a matter of the nominal corporate tax rate: what matters is the combination of corporate taxation, taxation of distributions to the director, substance requirements, and physical presence constraints. The table below summarizes the applicable legal regimes , as published by the relevant tax authorities.
Jurisdiction | Corporate tax | Distributions to the executive | Expected substance | Attendance required |
United Arab Emirates | 9% above a threshold | No personal tax | Locals, visa, local bank | High |
Cyprus | 12.5% | Favorable non-dom regime | Office and local management | Average |
Malta | 35% with cashback | According to shareholder structure | Local Management and Accounting | Average |
MAURITIUS | 15% with partial exemptions | No withholding tax | Resident office and administrators | Average |
Andorra | 10% | Personal tax capped | Actual residence required | High |
Georgia | Taxation on distribution | According to the chosen regime | Office and local activity | Average |
Singapore | 17% with allowances | Tax-free dividends | Local management and staff | High |
Territorial schemes and reduced-rate schemes
Two types of tax regimes coexist. Territorial regimes, found notably in Panama, tax only locally sourced income and therefore presuppose an entirely foreign clientele. Reduced-rate regimes, such as the one chosen when a company relocates to Cyprus , tax all profits but at a moderate level, offering valuable European legal certainty for a consultant retaining clients within the European Union.
The Maltese system operates differently, as tax is paid at the full rate and then refunded to the shareholder. Relocating a business to Malta therefore requires sufficient cash flow to absorb the gap between payment and refund, which is significant for a sole proprietorship.
The annual cost of compliance is often underestimated
Statutory audit, filing of accounts, license renewal, resident director, statutory secretariat, declarations of substance: these obligations recur annually and do not disappear over time. They must be weighed against the expected tax savings over a five-year horizon, not just the first year. Below a certain business volume, the structure costs more than it generates . Coreway Consulting provides this projection as part of a customized study upon request.
Question 7: What have you planned for leaving France?
Leaving requires just as much preparation as settling in. Relocating your residence outside of France triggers a series of reporting obligations and, in certain situations, immediate taxation of unrealized capital gains. This aspect imposes the most restrictive timeline of the project, generally requiring twelve to eighteen months of advance planning .
Exit tax and sale schedule
The exit tax targets unrealized capital gains on securities held by residents transferring their tax residence outside of France, beyond the holding thresholds set by law. A consultant who has accumulated several years of profits in their French company frequently falls under this tax regime. A deferral of payment exists depending on the country of destination, but it requires rigorous annual filing and meticulous monitoring .
Added to this are the closing of the French financial year, the departure declaration, the management of foreign bank accounts, and coordination with the automatic exchange of information. CRS standards and FATCA agreements make banking transparency between administrations almost total, which means that a structure must be robust by design, not by discretion .
Answer the seven questions in the correct order.
The order is as important as the answers. Addressing the issue of jurisdiction before that of residence invariably leads to restarting the case from scratch, with expenses already incurred and sometimes a structure to dissolve. We therefore proceed in three stages: verification of personal feasibility, definition of the realistic substance, and only then selection of the jurisdiction .
This method quickly eliminates unsuitable destinations. A consultant with young school-aged children will struggle to meet the residency requirements of some Gulf jurisdictions, while a completely nomadic profile will find it difficult to accommodate the obligations of a resident director. Therefore, a business relocation to Mauritius cannot be compared to a European relocation based on the same criteria.
The final step involves calculating the complete five-year trajectory: corporate tax, distribution tax, compliance costs, cost of living, relocation costs, and any exit costs. It is this calculation, and not the stated tax rate, that determines the outcome for the courts. Sometimes, the court concludes that the French structure should be maintained, and this is a perfectly legitimate response .
Testimony: A DevOps consultant who left too soon
A freelance DevOps consultant, with an annual turnover of approximately €210,000, had created a company in a free zone in the first quarter, alone and without support. He kept an apartment in the Paris region, his partner lived there, and he continued to manage his three projects from France between two short stays of a few weeks.
The case was entrusted to us following an initial request for information from the administration. The problem was neither the jurisdiction nor the tax rate: it was the lack of a genuine transfer of residence and the effective management remaining in France. The structure was correct on paper but completely ineffective in practice .
The regularization process required addressing all seven questions in order, establishing a permanent residence on the premises, documenting presence, and accepting an eighteen-month timeline. The consultant's lesson can be summed up in one sentence: the six months he thought he would save by registering quickly ultimately cost him two years .
Frequently Asked Questions
Can I create a company abroad while remaining a French tax resident?
Legally, yes, but fiscally it almost never produces the desired effect. The company risks being considered as managed from France and taxed in France, with an additional risk of reclassification. The transfer of the manager's residence remains the condition for the effectiveness of the arrangement.
How long does it take to structure a company creation abroad?
Allow six to twelve months for the residency and setup process, and twelve to eighteen months when unrealized capital gains require an exit tax schedule. Registration itself represents only a fraction of the total timeframe.
Can my French clients continue to entrust me with assignments?
Yes, provided that the services are actually performed from your country of residence and that your trips to France remain occasional. A recurring presence on the client's premises can constitute a permanent establishment in France.
Is a local employee required to validate the economic substance?
It depends on the jurisdiction and the volume of business. Some jurisdictions accept a sole proprietorship with premises and the owner's physical presence, while others require a resident director or a local employee. This point should be verified before choosing a country.
Which jurisdiction is best suited for a freelance IT consultant?
There is no one-size-fits-all answer. Family profile, travel volume, customer base, and capitalization level influence the choice far more than the tax rate. A personalized study allows for comparison of scenarios over a five-year period.
What happens if the arrangement is challenged by the administration?
The tax authorities can reclassify the registered office, tax profits in France, apply penalties, and, in the most serious cases, invoke tax avoidance. A robust documentary file provides the best protection, which means building it from the outset.
Key takeaways
Setting up a company abroad as an IT consultant is not a simple administrative act; it's the culmination of a personal and professional reorganization. The seven questions addressed here form a logical order: effective management, personal residence, substance, French clients, jurisdiction, operating costs, and exit timeline. Considering them in this order eliminates most potential pitfalls .
Three ideas summarize this article. Registration is the last step, not the first; economic substance is measured by actual presence, not address; and the exit schedule from France often dictates the entire project. The tax rate, however, only comes in sixth place .
Are you considering setting up a company abroad as an IT consultant and want to verify your answers to the seven key questions before making any commitments? You can request a personalized study from Coreway Consulting to compare your situation with the ten jurisdictions we support.
