Where to establish a holding company? An overview of international jurisdictions
Holding companies are a core component of many international corporate structures. They enable efficient ownership of subsidiaries, management of profit flows, and protection of assets. However, choosing the right jurisdiction is crucial — it impacts not only tax effectiveness but also operational stability and the overall reputation of the group.
In this article, we explore some of the most common jurisdictions for setting up a holding company and explain why Estonia stands out as a balanced, secure, and transparent choice.
Consult on the best jurisdiction for your holding company
Estonia – a holding company in a digitally advanced and tax-friendly environment
Estonia offers a unique combination of fully digital administration, low operating costs, and one of the most transparent and stable tax systems in Europe. It is an ideal jurisdiction for holding structures — both simple and complex.
Key advantages include:
- The EU Parent-Subsidiary Directive allows full tax exemption on dividends received from EU subsidiaries, provided that the Estonian holding owns at least 10% of shares for a minimum of two years.
- When dividends originate from outside the EU and have already been taxed at source, Estonia does not impose additional taxation, regardless of whether the recipient is a legal entity or individual.
- There is no withholding tax on distributions made to an Estonian holding company — unlike many jurisdictions where outbound payments are taxed when sent to non-EU entities.
- Corporate income is not taxed until distributed, enabling full reinvestment of profits within the group without immediate tax impact.
- Operating costs are low, and audit requirements apply only to larger companies (e.g. turnover over €4 million or more than 50 employees).
- Estonia’s e-Residency program allows full remote company management, while corporate data is secured in so-called Data Embassies (e.g. in Luxembourg), ensuring business continuity even in cases of geopolitical threats.
Cyprus – a traditional tax optimization hub losing appeal
Cyprus has long been a popular holding jurisdiction due to its low CIT rates and access to EU tax directives. However, in practice:
- Dividend payments often require proof of economic substance (such as physical office, local staff, expenses),
- Cypriot structures are increasingly questioned by banks and compliance departments,
- The country is under pressure from the EU and OECD to tighten its tax framework.
In summary, Cyprus may still be suitable for complex corporate groups, but it carries reputational and compliance risksthat are harder to mitigate today.
Malta – Complicated Tax Refund System and Procedural Burden
Malta uses a tax refund system, where the company pays 35% CIT and shareholders can reclaim most of it. While this results in a low effective tax rate, the process involves:
- Time-consuming and bureaucratic procedures,
- Mandatory full audits, even for small entities,
- A growing perception of Malta as a tax haven, making it less attractive for transparent corporate structures.
The Netherlands – Stable but Costly
The Netherlands has traditionally been a go-to jurisdiction for European holding companies due to its extensive tax treaty network and favorable dividend treatment. However:
- Administrative and compliance costs are among the highest in the EU,
- Substance requirements have become more stringent in recent years,
- Dutch structures are frequently audited and scrutinized by tax authorities.
While it remains a viable option for large international groups, it is increasingly impractical for medium-sized businesses due to its cost and regulatory load.
Luxembourg – Prestige with Limitations
Luxembourg is known for its financial sophistication, political stability, and strong regulatory framework. Many funds and holding structures are based there. That said:
- It is one of the most expensive jurisdictions to operate in,
- Holding companies are often subject to CFC (Controlled Foreign Company) regulations,
- Past tax scandals have damaged its reputation, leading to more intense scrutiny from financial institutions.
Estonia – The Smart Compromise Between Efficiency and Transparency
Compared to the above jurisdictions, Estonia offers a modern, secure, and tax-efficient solution. Its core strengths include:
- A clear and investor-friendly tax regime,
- No tax on inbound dividends, whether from the EU or third countries (if already taxed),
- No tax on undistributed profits – companies pay CIT only upon actual distribution,
- No withholding tax on dividend payments to the Estonian company,
- Low running costs and high audit thresholds,
- Full digital governance and remote company management,
- Not listed on any tax blacklists by the EU or OECD.
Estonia’s legal environment promotes efficiency while complying with the highest international transparency standards.
Estonia as the New Standard for International Holding Companies
As global tax transparency increases and international regulations tighten, Estonia emerges as a practical, modern, and reliable jurisdiction for setting up holding companies. It offers everything a forward-thinking business needs: tax efficiency, regulatory compliance, and operational security — without the stigma of traditional tax havens.
If you’re planning to create or restructure your group’s holding structure, get in touch with Thompson&Stein advisors. We’ll help you design a legally sound and future-proof holding strategy based in Estonia.
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