Companies incorporated in one of the member states of the European union hold passporting rights. This allows the company to act in any of the member states as if it is a local company. It follows that holders of a residence permit, both individuals and legal persons, have the right of establishment in any of the member states of the European Union. This is furthered by Article 56 of the TFEU discussing the freedom to provide services. The borderless and single market has a substantive and institutional dimension. As such, the combination of social, consumer and environmental issues, leads to a mix of legislative, administrative and judicial initiatives.
Not all European countries participate in the European Union and the European Economic Area. Yet, all countries have their own legal framework and company laws. As such, European company formation and incorporation follows interpretation via common law or codification via civil law legal systems. Therefore, overlap and gaps may lead to exclusions but also arbitrage.
Most countries separate self employed persons as sole traders from companies with corporate legal personality. The latter considers the shareholders and controlling persons as separated persons from the legal entity. As such, liability for corporate debt and misconduct cannot be attributed to the individuals running the company. Only in exceptional circumstances individual conduct can lead to personal responsibility and liability.
Professionals willing to set up a company in Europe must comply with a variety of rules. These rules include administrative procedures, legal norms, and financial obligations. International and cross-border transactions enter different countries and legal systems. As such, international business leads to inconvenient and at times difficult processes that, like most procedures, force business owners to focus on non-commercial and this indirect side-activities.
In an international setting, businesses may find markets and buyers in several European countries. Sometimes no further questions are asked and fiscal charges like VAT and import duties might be imposed and passed on to the consumer. For companies formed and incorporated in the European Union, sales tax is governed at a cross-country level and therefore minimizes the administrative and tax burden for EU companies.
Efforts to exclude abuse and improper use of local infrastructures are implemented. An example of repair legislation on a community level relates to data protection and privacy and unfair tax avoidance or even impermissible tax evasion. Common reporting standards enable authorities to automatically exchange financial information with tax authorities in other member states. Following this standard, the DAC6 directive indicates hallmarks to prevent detrimental intercompany transactions and systemic disruption of the European corporate and financial system. Even though traditional offshore jurisdictions are not part of the European Union, the outflow of money and intangible assets is mitigated.