May 17, 2024

Corporate and Merchant Accounts for IT Companies: Where to Open in 2024?

IT entrepreneurs who operate internationally frequently encounter difficulties in selecting a suitable jurisdiction for bank account establishment. Banks typically approach this industry cautiously since it is considered high-risk. Admittedly, businesses in sectors like brokerage, gambling, forex, and dating services face similar challenges.

Conditions for banking services differ significantly from one country to another, influenced by each bank’s internal policies. High-risk businesses are generally subject to elevated fees and stringent checks. Although there is some degree of flexibility, the range of available options remains limited by the banks’ apprehension about the high-risk nature of these clients.

Bank account for IT business

Why do banks refuse to open accounts for IT businesses?

It is for several reasons that banks may decline account applications from IT firms:

  • Common Errors in Applications and Documentation: Mistakes such as providing incorrect information, submitting incomplete documents, or encountering restrictions based on the business’s registered country often lead to rejection.
  • Banking Policies: Certain banks’ internal policies may disallow them from engaging with IT companies and individual entrepreneurs.
  • IT Sector’s Perceived Risk: The IT field, which encompasses software development, mobile apps, and other tech services, is seen as high-risk. Banks often struggle to authenticate these businesses’ clientele, which may include sanctioned individuals or entities.
Notice blue

The best approach to secure an initial response from banks is to apply to multiple financial institutions. Offshore Pro seasoned professionals will certainly guide you through the above application process. We will also help register your IT company in a foreign country.

Where can you open a bank account for your IT company?

The IT industry is experiencing rapid growth, and banks in numerous countries are open to collaborating with IT firms. Yet, for international or offshore IT companies that operate in multiple jurisdictions, it may be challenging to get access to the financial instruments they need.

IT companies, whether they are private entities or large corporations, have the option to open accounts with state-owned banks, commercial financial institutions, or payment systems, depending on their country of incorporation. When choosing where to register your company, it’s important to consider the taxes you’ll have to pay, how complex the reporting rules are, and whether you can easily set up an account with a foreign bank.

Here’s what the banking options for IT companies across different regions include in 2024:

  • Europe: European banks are open to serving IT businesses from abroad, though they enforce strict requirements and conduct detailed documentation reviews. Preference is often given to companies with European headquarters.
  • United Kingdom: Recognized for its investment potential, the IT industry in the UK benefits from conducive conditions. In the United Kingdom, payment systems are known to facilitate account openings for IT companies and other businesses considered high-risk.
  • CIS Countries and Former Soviet Republics: Kazakhstan, Georgia, and Armenia welcome foreign IT entrepreneurs, allowing them to establish companies and open bank accounts locally.
  • Asia: Financial institutions in Asian regions, including Mauritius and Singapore, are ready to cooperate with IT firms in search of banking services.

For international IT companies, offshore accounts are a perfect option. Payment systems appear to be a viable alternative for IT businesses that operate in multiple states and are not confined to one jurisdiction only.

However, setting up an account for a high-risk business requires careful deliberation. For those contemplating this idea, it is wise to consult a financial expert with the corresponding sector experience who will assist in choosing an appropriate bank and facilitate the account opening for your firm.

Merchant accounts for IT businesses

Merchant or processing accounts are specialized bank accounts utilized by IT companies to process online payments via customer bank cards and accounts. They enable web-based transactions and come with a web interface that integrates into the company’s website, allowing direct customer payments for products and services.

For IT firms, merchant accounts remain the most straightforward method to handle card payments. For everything to go without a hitch, it’s essential to have a well-designed website and choose a bank that offers the right services for these transactions. Often, this bank is different from the one holding the company’s corporate account.

Similar to corporate accounts, merchant ones are not universally offered to high-risk businesses by financial institutions. The only way for an IT company to find a suitable banking partner is to apply to a variety of banks, neobanks, or payment systems to see which one will agree to establish a merchant account.

Several factors influence a financial institution’s decision:

  • Founder’s Residence: The country where the founder resides.
  • Business Registration: The legal address where the business is registered.
  • Revenue Source: The origin of the business’s income.
  • Service Category: The type of services the business offers.
  • Additional Factors: Other pertinent details that may affect the decision.
Notice blue

FYI: IT companies can open accounts remotely with a select few financial institutions, mainly through payment systems.

Top jurisdiction choices for your IT business in 2024

The choice of country for setting up an IT company should align with the client base and the company’s strategic objectives. The United States continues to be a frontrunner in the IT sector. Yet, please take into account the tax responsibilities and corporate regulations that are pivotal for the establishment and fiscal efficiency of any business.

A local IT firm becomes a tax resident in the country where it generates income. Sometimes, creating an offshore IT company may result in tax advantages and certain privileges. Note that before you start your IT business, it’s a good idea to talk things over with your consultant or agent. They will help you find great options you might otherwise miss and make the right decisions for your company’s future. 

Below, you will find the list of preferred countries for IT company registration in 2024:

  • United States: Known for its business-friendly environment, the US allows IT companies to register and enjoy tax benefits, especially in states like Delaware. Access to the efficient local banking system is an added advantage.
  • Hong Kong: Ranking fifth in global startup development, Hong Kong comes with a supportive environment for IT firms, all thanks to its status as a special administrative region of China.
  • Canada: With a reputation for promoting growth, Canadian IT businesses are well-positioned for expansion.
  • United Kingdom: The UK government’s backing for startups, especially in cybersecurity, AI, and SaaS, coupled with its position as a top-three global tech investment hub, makes it a prime location for IT companies.
  • Malta: IT startups find Malta appealing for its tax benefits and security measures.
  • Portugal (Madeira): Attracting new IT startups with a low tax rate of 5% and a D7 visa program, Madeira also offers a tax-efficient and easy relocation option.
  • Singapore: This nation maintains its forefront position in IT business formation and offers tax incentives to IT entrepreneurs via programs like the Startup Tax Exemption Scheme (STES).
  • United Arab Emirates: The UAE, despite tax policy revisions, continues to draw IT entrepreneurs with its IT-centric free trade zones. It offers tax advantages for offshore or foreign company setups and the possibility for obtaining UAE residency.

In 2024, you can open a bank account for an IT company in many countries. However, how fast and safe this process is may vary depending on whether the company is a local or foreign entity.

Would you like to understand the banking rules and legal details in the countries you’re interested in and get the right advice? Consider using the expert help and practical support only Offshore Pro Group can offer!