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Starting a Business in Europe: Part 1
Financial, Legal, and Visa Requirements for Setting Up a Business in Europe
An introduction to starting a business in Europe for non-European investors, entrepreneurs, and the self-employed.
By Volker Poelzl
Under the current economic conditions in Europe (2009-2010), such as slow growth, government spending cuts, etc., this is not the best time to set up a business in Europe. But with most of Europe notorious for its slow growth even during good economic times, this might be as good a time as any to establish your business in Europe.
One of the most important things to know is the fact that each European country has its own unique rules and laws regarding foreigners from outside the EU who want to set up a business. Although the European Union has a joint immigration policy, known as the Schengen agreement, there are as many different laws relating to working and setting up a business as there are member countries. Some countries make it fairly easy to obtain a residency permit and open a business, while others make it virtually impossible for non-Europeans to establish residency and start a business.
Requirements for Setting up a Business in Europe
Despite the different laws regarding business permits for foreigners, there is one regulation most European countries share: foreigners intending to open a business do not need a work permit or any other type of visa. They simply need a residency permit in the country they intend to establish their business in. These residency permits are temporary at first, but after few years, depending on the success of your business venture, you might be able to obtain long-term residency permit. There are several types of businesses you can set up to qualify for a residency permit. You can set up your business as a sole trader, a partnership, a branch or office of a foreign company, or a company registered in your host country.
To determine if your application for residency is truly with the intent to start a business, each country’s national and economic interests are taken into consideration, in addition to other factors. Unless your self-employment or business activity is likely to make a significant contribution to the, economy, culture, and/or sciences of your chosen destination, there is only a slim chance that your business proposal will be approved and that you will be granted a residency permit. To be able to obtain a residency permit for the purpose of starting a business, some countries require a business plan, which is then examined by labor and immigration authorities to determine if it suits the economic needs of the country. In essence, your business plan needs to show that you will make investments and provide services for which there is a need in the country of your interest.
Some countries require that you to have a certain amount of money available to fund your start-up. If you want to set up a business in the UK, for example, you need to have at least 200,000 pounds to invest in your business, as well as additional funds to support yourself and your family until your business is profitable. Laws in most European countries also require that you have a controlling or equal interest in your business (in the case of a partnership), that you have to be involved full-time, and that you cannot seek public assistance or take on employment while operating your business.
Some countries do not specify how many jobs your business needs to create to be allowed to operate, while others require a certain amount of jobs created. The UK, for example, requires that two new full-time jobs for UK residents or citizens be created by your business.
In addition to legal requirements to be able to set up a business as a foreigner from outside Europe, each country as its own regulations regarding business permits, registrations, etc. To operate your business, you must register your business with the local authorities (the jurisdictions and responsible government agencies vary from country to country), get a business tax identification number, and register with the respective social security administration. Some countries also require business owners to be registered members of a chamber of commerce or other governing business organization. In many countries chambers of commerce are not just regulatory institutions but also provide useful information, business plan advice, training, support, and resources for business start-ups.
What are your chances of obtaining a residency permit for the purpose of starting a business?
With the ongoing expansion of the European Union is it becoming increasingly difficult for citizens of countries outside Europe to obtain a residency permit to start a business. This is in part related to the fact that the EU requires that all citizens of member countries be treated the same way as nationals. This means that for example, a Greek entrepreneur starting a business in France is entitled to the same support, services, training, and loans, as a French citizen. Consequently, there is much less demand for entrepreneurs and business people from outside Europe to introduce innovative ideas, services, and products. Although the overall business climate is not particularly friendly toward non-Europeans, each EU member country has its own laws governing residency permits for business purposes. Below I am offer an overview of the residency requirements for Europe’s most popular destinations for expatriates.
Foreigners wishing to set up a business or work self-employed need to obtain a professional card, which entitles them to carry out their economic activity in Belgium. You may have to prove your qualifications (relevant education, knowledge and experience) and demonstrate success in your professional field to obtain the card. It may also be necessary to show that you have sufficient capital to fund your business start-up and support yourself. To set up a business or pursue self-employment in Belgium you have to register with the Banque-Carrefour des Entreprises (BCE), a government business registry for small enterprises and the self-employed. All across Belgium there are numerous guichets d’entreprises (business centers), which are private government-approved consulting firms that will help you register your business with the BCE, obtain the necessary permits and tax numbers, and help you with any other needs you may have to open a business or start your self-employment activity.
Foreigners from outside Europe can open a business or pursue self-employment activities in Denmark, provided that they meet certain conditions. There must be particular Danish business interests related to the establishment of your business in Denmark, and you must present documentation that you have access to sufficient financial means to run your business. As a self-employed person you will normally be granted a residence permit for one year with a possibility for extension. After two years' residence, you may be granted a residence permit for a longer period of time.
To facilitate the residency permit process for foreign self-employed professionals, the French government has created the “Skills and Talents" permit (Compétences et Talents), a new program for people that can make a considerable cultural, scientific, artistic or economic contribution to the country. The “Skills and Talents Card” for the self-employed allows foreigners from outside Europe to open a business or work as a highly skilled self-employed professional. If you fall under this category, you don’t need a job offer. All you need is to demonstrate exceptional professional skills and enough funds to get started. Here are some examples of eligible applicants: University graduates, qualified professionals regardless of their academic level, investors in an economic project, independent professionals such as artists, authors, athletes, etc., senior managers, and high-level executives.
If you would like to open a business in Ireland, you need business permission from the Department of Justice, Equality and Law Reform. To be approved you need to invest at least 300,000 Euros and employ at least two people from the European Economic Area (EU countries plus Switzerland, Iceland, Norway, Liechtenstein). You also have to prove your skill level to run your business and submit a business plan that is endorsed by an accounting firm. As outlined in the conditions, your business also “must add to the commercial activity and competitiveness of the State” and provide you with sufficient income to support yourself and your family.
Foreigners intending to open a business in Germany can obtain a residence permit if there is an overriding economic interest or a regional demand, if the activity can be expected to have a positive impact on the economy and if the funding is ensured. The Immigration Act of 2005 reduced the required investment amount to 500,000 Euros and the required number of created jobs to five. Foreign entrepreneurs may be granted a settlement permit after three years if their business is successful and their livelihood is assured.
The self-employed and entrepreneurs do not need a work permit for the Netherlands, but they need a residence permit to work as a self employed person (verblijf voor het verrichten van arbeid als zelfstandige). To obtain this permit you need to show that your business activity makes a positive contribution to Dutch society and/or the Dutch economy.
Instead of a work permit you need to apply for a residency permit and provide documentation that outlines your qualifications, business plan, start-up capital, and intended self-employed activity. To determine your eligibility for a residency permit as a self-employed person or entrepreneur, the Dutch immigration service uses a point system that takes into account the benefits of your activity to the Netherlands. As a self-employed person or entrepreneur you are required to register as a business with the Netherlands Chamber of Commerce (Kamer van Koophandel).
The Dutch American Friendship Treaty, established in 1956, gives preferential treatment to American citizens who want start a business or work on a self-employed basis in the Netherlands. Americans applying under the treaty do not need to satisfy the points-based test which is applied to non-EU businesses.
Citizens of countries outside the EU who want to pursue self-employment or establish a business need to obtain a residence card before being able to legally live and work in Spain. Your residency application may be approved if you can show that you have enough capital to get started and that the business will be able to support you. You also need to show that you have the qualifications required to operate your business.
Foreigners from outside the EU/EEA who would like to establish a business or a business partnership in Sweden first must get a residency permit to be able to legally stay in Sweden. As with all other EU countries, a work permit is not required in this case. To have your residency permit approved you need to own at least 50% of the business, and you need to show that the business will be profitable and that it will support you and your family. You also need to show that you are experienced, that you are qualified to run your business, and that you have enough capital to get started. You need to submit a detailed business plan to be reviewed by the Migration Board. If approved you will be granted a probationary residency permit for two years.
The United Kingdom
If you want to set up a business in the UK, you need to have at least 200,000 pounds to invest in your business, as well as additional funds to support yourself and your family until your business is profitable. Furthermore, you have to have a controlling or equal interest in your business (in the case of a partnership), that you have to be involved full-time and that you cannot seek public assistance or take on employment while operating your business. The UK also requires that two new full-time jobs for UK residents or citizens be created by your business.
For links to embassy/consulate websites and other resources that provide visa information, please visit our Living Abroad in Europe section and go to the “Embassies, Consulates, and Immigration” sections on the pages of the country of your interest.
Part 2 of this column discusses "Economic Conditions and the Business Environment in Europe: What Destination Should You Choose for Your Business?"
He has traveled in over thirty countries worldwide and has lived in ten of them for study, research and work.