In the digital age, companies don’t have to operate in the same country as their target market. In most industries, it’s just as easy to run a business from an offshore location as it is from a nearshore location. Plus, operating your tech business offshore comes with a host of additional benefits.
Specifically, tech businesses choose to operate offshore due to it being more cost-effective, providing access to more talent, and offering more tax breaks, amongst other reasons. This guide will explore the main reasons why tech businesses decide to migrate elsewhere.
Fewer regulations
Many business owners decide to take their businesses offshore to take advantage of a different regulatory environment. Perhaps they feel that the regulations that their industry must face in the UK are too restrictive – so much so that it impacts the success rate of their company.
In this case, it makes sense for businesses to move their operations to a country that has fewer restrictions in place. For example, they may find an alternative country that offers easier company registration or fewer employee onboarding requirements.
Fewer restrictions often also mean that the tech company can offer more benefits to the customer. With more money saved and fewer rules to adhere to, the customer often finds offshore companies to provide a fuller and more rewarding service.
For example, many digital casinos operate offshore to avoid UK Gambling Commission (UKGC) regulations. To prove this point, Nick Pappas has identified the best international online casinos accepting UK players. These sites can offer higher welcome bonuses, lower deposits, and bigger payouts because they’re not UK-based. You’ll also find that they offer other benefits such as crypto gambling.
Fewer regulation requirements also mean that companies can target a wider audience. Instead of only being able to adhere to a single market, offshore companies can construct a business model that fits the rules and regulations of several countries.
Cost-effective
With fewer regulations and restrictions comes significant financial benefits. For example, companies can save on labour by operating in a country that has a relatively weaker economy. By employing local talent from this country, companies can build a team of quality coders, data analysers, and website designers for a fraction of the price they’d have to pay in the UK.
This doesn’t necessarily mean that offshore companies are paying their employees less than what they’re worth, but an amount suitable for their country’s economy – which will be, in most cases, less than the wage they’d have to pay for the same standard of talent in the UK. For this reason, many start-up companies decide to build their business from offshore countries as it allows them to create a robust team for less.
If the tech company needs to rent a physical office space, they’re also likely to find cheaper rent in offshore countries. This benefit extends to utilities and operational expenses – they’re generally better affordable abroad than they are in the UK.
Tech companies that are registered in offshore countries are also likely to receive greater tax benefits. Lower corporate tax rates are mostly a guarantee, while some companies may also benefit from tax breaks, tax holidays, and profit exemptions.
Overall, tech companies are likely to achieve higher revenues and bigger turnovers when operating abroad.
Better tech infrastructure
Some offshore countries simply have a better tech infrastructure than the UK does. For example, the governments in certain foreign countries have invested more in tech – i.e., more money has been put into data centres, connectivity, and other tech facilities.
By moving business operations to the likes of India, China, or Pakistan, businesses can benefit from better tech infrastructure than back home.
While Monaco currently holds the fastest internet speed, Singapore, Hong Kong, and Romania are in second, third, and fourth place. According to Data Pandas, the internet speed in Romania is currently 232.17 Mbps. Based on this same data, the UK currently has an internet speed of 102.24 Mbps, placing it in 48th place overall.
Given how far the UK is behind more affordable countries with better tech infrastructure, it makes sense that an increasing number of tech companies are deciding to move elsewhere.
Government incentives
Many foreign governments actively encourage businesses to move to their country and set up their businesses. While operating offshore works massively in favour of the company, the chosen country also benefits in terms of employment, tax, and the reputation they gain as an international tech hub. Given these benefits, many foreign governments offer cash incentives to foreign businesses.
For example, Mauritius offers 20,000 Mauritian Rupees (£337) to startup businesses that move there. Not only that but if your company hires a Mauritian graduate, the local government will pay their wages for one year.
Ireland and Chile offer similar incentives to start-up businesses.
Final thoughts
Tech businesses are setting themselves up offshore for a myriad of reasons. The main reasons include the fewer regulations, lower cost of living, and better tech infrastructure found in offshore locations. Additionally, some foreign governments have realised the economic benefits of businesses setting themselves up in their country, so offer financial incentives to encourage more to do so.
