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Good Q. No easy answer. Germany (GmbH) ain't that bad, however, you need Euro 25.000 to incorporate, can't show explicit previews, and the tax man there is worse than the holy inquisition. You need to look into the double taxation treaty.
Switzerland is great, tax-wise, but no pee-porn there. It's very expensive to set up a Swiss corporation, complicated too. Unless you come with lots of money, the Swiss don't really care having you there. If I say "lots" I mean "lots", you are competing with people who own billions... Switzerland is non-EU.
If you set up a corporation in typical tax heavens like Gibraltar, etc. you might raise red flags, and piss off the tax man at home in Canada.
It's fairly easy to incorporate in the UK, cheap too, but make sure you to NEVER import ANY porn into the UK, HM Customs & Excise don't like that. Let's not get into the definition what "importing" by UK laws means.
Good old Holland is not a bad choice. Incorporating there costs too, but there are ways around; you can incorporate and take the share capital back out after, which makes you personally liable, but you can care less, because you won't be there anyway.
In that line of biz, I'd look into NL. I know a good hosting company, and a billing company that takes VISA too, with no extra charge.
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Jenny Seemore
Pornography is the bloody gladiator who stands guard over the First Amendment
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