{"id":36514,"date":"2025-05-20T16:37:11","date_gmt":"2025-05-20T14:37:11","guid":{"rendered":"https:\/\/www.thompsonstein.com\/?p=36514"},"modified":"2026-01-29T14:49:57","modified_gmt":"2026-01-29T13:49:57","slug":"where-to-establish-a-holding-company-an-overview-of-international-jurisdictions","status":"publish","type":"post","link":"https:\/\/www.thompsonstein.com\/en\/where-to-establish-a-holding-company-an-overview-of-international-jurisdictions\/","title":{"rendered":"Where to establish a holding company? An overview of international jurisdictions"},"content":{"rendered":"\t\t
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Holding companies<\/b> 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 \u2014 it impacts not only tax effectiveness but also operational stability and the overall reputation of the group.<\/span><\/p>

In this article, we explore some of the most common jurisdictions for setting up a holding company and explain why <\/span>Estonia stands out as a balanced, secure, and transparent choice<\/b>.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t

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Consult on the best jurisdiction for your holding company<\/p>\n\t\t\t\t<\/div>\n\t\t\t<\/div><\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t

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Estonia \u2013 a holding company in a digitally advanced and tax-friendly environment<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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Estonia<\/b> offers a unique combination of fully digital administration, low operating costs, and <\/span>one of the most transparent and stable tax systems in Europe<\/b>. It is an ideal jurisdiction for holding structures \u2014 both simple and complex.<\/span><\/p>

Key advantages include:<\/span><\/p>

  • The <\/span>EU Parent-Subsidiary Directive<\/b> 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.<\/span><\/li>
  • When dividends originate from outside the EU and have already been taxed at source, <\/span>Estonia does not impose additional taxation<\/b>, regardless of whether the recipient is a legal entity or individual.<\/span><\/li>
  • There is <\/span>no withholding tax<\/b> on distributions made to an Estonian holding company \u2014 unlike many jurisdictions where outbound payments are taxed when sent to non-EU entities.<\/span><\/li>
  • Corporate income is not taxed until distributed<\/b>, enabling full reinvestment of profits within the group without immediate tax impact.<\/span><\/li>
  • Operating costs are low<\/b>, and audit requirements apply only to larger companies (e.g. turnover over \u20ac4 million or more than 50 employees).<\/span><\/li>
  • Estonia\u2019s <\/span>e-Residency program<\/b> allows full remote company management, while corporate data is secured in so-called <\/span>Data Embassies<\/b> (e.g. in Luxembourg), ensuring business continuity even in cases of geopolitical threats.<\/span><\/li><\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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    Cyprus \u2013 a traditional tax optimization hub losing appeal<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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    Cyprus<\/b> has long been a popular holding jurisdiction due to its low CIT rates and access to EU tax directives. However, in practice:<\/span><\/p>

    • Dividend payments often require proof of <\/span>economic substance<\/b> (such as physical office, local staff, expenses),<\/span><\/li>
    • Cypriot structures are increasingly questioned by banks and compliance departments,<\/span><\/li>
    • The country is under pressure from the EU and OECD to tighten its tax framework.<\/span><\/li><\/ul>

      In summary, Cyprus may still be suitable for complex corporate groups, but it carries <\/span>reputational and compliance risks<\/b>that are harder to mitigate today.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t

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      Malta \u2013 Complicated Tax Refund System and Procedural Burden<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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      Malta uses a <\/span>tax refund system<\/b>, 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:<\/span><\/p>

      • Time-consuming and bureaucratic procedures<\/b>,<\/span><\/li>
      • Mandatory <\/span>full audits<\/b>, even for small entities,<\/span><\/li>
      • A growing perception of Malta as a <\/span>tax haven<\/b>, making it less attractive for transparent corporate structures.<\/span><\/li><\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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        The Netherlands \u2013 Stable but Costly<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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        The <\/span>Netherlands<\/b> has traditionally been a go-to jurisdiction for European holding companies due to its extensive tax treaty network and favorable dividend treatment. However:<\/span><\/p>

        • Administrative and compliance costs are <\/span>among the highest in the EU<\/b>,<\/span><\/li>
        • Substance requirements<\/b> have become more stringent in recent years,<\/span><\/li>
        • Dutch structures are <\/span>frequently audited<\/b> and scrutinized by tax authorities.<\/span><\/li><\/ul>

          While it remains a viable option for large international groups, <\/span>it is increasingly impractical for medium-sized businesses<\/b> due to its cost and regulatory load.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t

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          Luxembourg \u2013 Prestige with Limitations<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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          Luxembourg<\/b> is known for its financial sophistication, political stability, and strong regulatory framework. Many funds and holding structures are based there. That said:<\/span><\/p>

          • It is <\/span>one of the most expensive jurisdictions<\/b> to operate in,<\/span><\/li>
          • Holding companies are often subject to <\/span>CFC (Controlled Foreign Company) regulations<\/b>,<\/span><\/li>
          • Past tax scandals have <\/span>damaged its reputation<\/b>, leading to more intense scrutiny from financial institutions.<\/span><\/li><\/ul>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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            Estonia \u2013 The Smart Compromise Between Efficiency and Transparency<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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            Compared to the above jurisdictions, <\/span>Estonia offers a modern, secure, and tax-efficient solution<\/b>. Its core strengths include:<\/span><\/p>

            • A <\/span>clear and investor-friendly tax regime<\/b>,<\/span><\/li>
            • No tax on inbound dividends<\/b>, whether from the EU or third countries (if already taxed),<\/span><\/li>
            • No tax on undistributed profits<\/b> \u2013 companies pay CIT only upon actual distribution,<\/span><\/li>
            • No withholding tax<\/b> on dividend payments to the Estonian company,<\/span><\/li>
            • Low running costs<\/b> and <\/span>high audit thresholds<\/b>,<\/span><\/li>
            • Full <\/span>digital governance and remote company management<\/b>,<\/span><\/li>
            • Not listed on any tax blacklists<\/b> by the EU or OECD.<\/span><\/li><\/ul>

              Estonia\u2019s legal environment promotes efficiency while complying with the highest international transparency standards.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t

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              Estonia as the New Standard for International Holding Companies<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t
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              As global tax transparency increases and international regulations tighten, <\/span>Estonia emerges as a practical, modern, and reliable jurisdiction for setting up holding companies<\/b>. It offers everything a forward-thinking business needs: tax efficiency, regulatory compliance, and operational security \u2014 without the stigma of traditional tax havens.<\/span><\/p>

              If you’re planning to create or restructure your group\u2019s holding structure, <\/span>get in touch with Thompson&Stein advisors<\/b>. We\u2019ll help you design a legally sound and future-proof holding strategy based in Estonia.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t

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