Relocating Within the EU: How Businesses Are Saving Big by Shifting East
In recent years, a significant trend has emerged across the European business landscape: companies from Western Europe are increasingly relocating their operations eastward. This strategic migration is driven primarily by substantial cost differentials and tax advantages that directly impact bottom lines. With streamlined incorporation processes now available through specialized service providers like GO-EU, establishing business entities in Eastern European countries has become remarkably accessible, even for entrepreneurs who choose to manage their operations remotely.
The financial incentives behind this eastward shift are compelling. Western European businesses face challenging economic pressures: rising operational costs, significant tax burdens, and increasing regulatory compliance expenses. Meanwhile, Eastern European EU member states offer a distinct competitive advantage through their combination of EU single market access, substantially lower cost structures, and often significantly more favorable tax regimes.
Tax Advantages Driving Relocation Decisions
The corporate tax differential between Western and Eastern European countries represents one of the primary motivations for business relocation. While Western European nations typically impose corporate tax rates between 20-30%, many Eastern European countries have implemented substantially lower rates:
- Bulgaria: 10% flat corporate tax
- Hungary: 9% corporate tax
- Romania: 16% corporate tax (with 3% micro-enterprise option for businesses with turnover under €250,000)
- Poland: 19% corporate tax (with 9% rate for small taxpayers)
- Croatia: 18% corporate tax (12% for small businesses)
This tax differential creates immediate financial impact. For a company with €1 million in taxable profit, relocating from France (25% corporate tax) to Bulgaria (10%) can represent an annual tax saving of €150,000—funds that can be reinvested in growth initiatives or improved profitability.
Operational Cost Reductions
Beyond tax advantages, the operational cost structure in Eastern European countries provides additional financial benefits:
- Office Space: Commercial real estate costs in Eastern European capitals average 60-70% lower than in Western European counterparts. Prime office space in Sofia, Bulgaria or Bucharest, Romania typically ranges from €12-16 per square meter monthly, compared to €65-120 in Paris, Amsterdam, or Munich.
- Labor Costs: Skilled labor costs present significant differentials while maintaining high quality. Information technology specialists in Eastern Europe typically command salaries 50-65% lower than their Western European counterparts, while accounting, administrative, and customer service positions show similar cost advantages.
- Professional Services: Legal, accounting, and consulting services in Eastern Europe generally cost 40-60% less than equivalent services in Western markets.
- Compliance Costs: Many Eastern European countries have simplified their regulatory frameworks to attract foreign investment, reducing the administrative burden and associated compliance costs.
Digital Infrastructure Supporting Remote Operations
The feasibility of eastward business relocation has been significantly enhanced by Eastern Europe’s robust digital infrastructure development:
- Widespread high-speed internet access across the region
- Advanced digital banking infrastructure
- Comprehensive e-government services
- Digital tax filing and compliance systems
These technological capabilities enable Western European entrepreneurs to establish Eastern European entities while maintaining operational control from their home countries. Many business functions can be managed remotely, with periodic in-person visits as needed.
Specific Cost Advantage Sectors
While businesses across various sectors can benefit from eastward relocation, certain industries demonstrate particularly compelling advantages:
- Information Technology: Software development, IT consulting, and digital services benefit from Eastern Europe’s skilled technical workforce available at competitive salaries.
- Shared Services Centers: Back-office operations, customer support centers, and business process outsourcing functions achieve substantial cost reductions while maintaining EU legal framework alignment.
- Manufacturing: Light manufacturing operations benefit from lower facility costs, reduced utility expenses, and competitive labor rates, particularly in industries requiring skilled technical workers.
- E-commerce: Online retail operations gain advantages through lower fulfillment costs while maintaining EU single market access and standardized shipping frameworks.
Legal Structuring Considerations
Businesses implementing eastward relocation strategies typically employ one of several common legal structures:
- Complete Relocation: Transferring the entire corporate entity and operations to an Eastern European country.
- Subsidiary Establishment: Maintaining the Western European parent company while establishing an Eastern European subsidiary that handles specific functions or operations.
- Operational Split: Strategically dividing business functions between Western and Eastern entities to optimize tax efficiency and operational costs.
Each approach requires careful consideration of EU cross-border tax regulations, transfer pricing requirements, and local compliance obligations. Professional guidance is essential to ensure proper structuring and compliance.
Potential Challenges
While the financial benefits of eastward relocation are substantial, businesses should account for certain challenges:
- Language Considerations: Despite increasing English proficiency across Eastern Europe, language differences may require additional coordination efforts, particularly for customer-facing operations.
- Cultural Adaptation: Business practices and workplace expectations vary across European regions, requiring thoughtful management approaches.
- Regulatory Familiarity: While operating within the EU’s harmonized framework, country-specific regulations still require navigation and compliance.
- Banking Relationships: Establishing effective banking relationships may require additional documentation and time compared to Western European jurisdictions.
Outlook and Future Trends
The eastward migration of Western European businesses appears poised to continue as cost pressures in Western markets persist. Financial analysts project that the cost advantages of Eastern European operations will remain substantial for at least 5-7 years, though gradual economic convergence will occur over time.
For businesses considering this strategy, timing presents strategic importance—early movers gain maximum financial advantage while establishing market position ahead of competitors who delay.
As this trend progresses, Eastern European countries continue enhancing their business environments through infrastructure investments, regulatory streamlining, and targeted incentives for specific industry sectors, further strengthening their competitive position within the EU business landscape.
For Western European businesses facing margin pressure or seeking improved profitability, the financial mathematics of eastward relocation increasingly demand serious consideration—a reality reflected in the accelerating migration of corporate operations toward the EU’s eastern regions.
