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How to choose a holding jurisdiction?
Holding companies are used widely around the world for asset protection and establishing foreign headquarters. Let us review briefly the most popular holding regimes in EU and the reasons for their popularity.
The primary requirements for the any Holding Company are:
- Tax efficiency (preferably 0% tax)
- Flexibility of the corporate law
- Efficient costs of incorporation and maintenance
We have advised many clients on the proper use of Holding Companies and helped to incorporate and maintain such companies in the most efficient manner.
Take advantage of our fee advice on structuring your holding company. Contact us now!
Here below you will find a summary of the most wanted holding jurisdictions in Europe.
Incoming dividends are exempt from tax in Cyprus. Outgoing dividends paid to non-resident private and legal persons for use of rights outside of Cyprus are exempt of withholding tax. Capital gains are not taxed neither. Despite all sake ups in banking and economics segments, Cyprus companies maintain the most favorable tax regime and most flexible fiscal policy among EU states. Nominee services of directors and shareholders are widely use. IBCC can always provide within just couple of days a ready-made company including all required services, i.e. nominee director/shareholder, registered office and complete set of apostilled documents. Ask us as well about most stable banks in Cyprus for opening corporate account for your company.
Holding Regime in Latvia was introduced in January 2013, and it once gained extreme popularity among foreign investors. Without any doubts, Latvia offer the most convenient, easy to understand and easy to manage Holding Companies. Income derived from worldwide subsidiary companies is not taxed according to the Corporate Tax legislation. Outgoing dividends paid to worldwide legal entities are not taxed neither. The exceptions are made only to heaven companies, i.e. incoming and outgoing dividends from and to offshore companies (as Panama, BVI, Belize, etc.) are charged at 15% tax rate. Dividends paid to private persons are imposed by 10% withholding tax.
IBCC experts’ team in Latvia will not just guide you through the Latvian Holding regime, but will also help you set up proper structure, insuring confidentiality and firm substance of the company according to all modern requirements.
The Dutch B.V. is still one of the most desired holding locations. The main reason for this is excellent reputation of the jurisdiction coupled with efficient exit for profits of the subsidiaries. The notion of Participation Exemption applies for Dutch Holding Companies. It means the in order to achieve 0% tax on incoming dividends, the Dutch Holding Company must comply with the following rules:
- Dutch Holding Company holds at least 5% of subsidiary’s shares, AND
- Subsidiary is a trading company or subsidiary is not held as a portfolio investment
- OR, Subsidiary is subject to “tax test” – f.e. standard corporate tax rate is at least 10%
- OR, Subsidiary is subject to “asset test” – passive assets must be less than 50%
Yet the Irish Holding Regime is not the easiest in Europe, we receive plenty of requests for establishing an Irish Holding Company. The Irish company must have at least 2 resident directors and must establish good substance in Ireland. Ireland has not yet moved to a full exemption relief of dividend income. Outgoing dividends are as well taxed: withholding tax rate on dividends is now 20%. However, dividend payments are exempt from withholding tax if they are paid to individuals or companies resident in EU or tax treaty countries. In addition dividends can also be paid gross to companies in non-EU or non-tax treaty jurisdictions if the company in question is ultimately controlled by individuals who are resident in an EU or tax treaty.
IBCC Irish office can provide you with full structure set-up of the Holding Company.
We hope that the above information will help you determine which jurisdictions are the most suitable for your business. For any questions on the listed and not listed countries that interest you, do not hesitate to contact IBCC advisors for a free of charge First Step Advice.