Best Jurisdictions for Holding Companies: Where to Structure Your Group

The right holding company jurisdiction depends on where your subsidiaries are, where profits flow, and what treaties you need. Here's how to evaluate the options.

A holding company sits between operating companies and ultimate shareholders, providing consolidated ownership, liability separation, and (historically) tax efficiency. The choice of jurisdiction affects withholding taxes on dividends, capital gains treatment on exits, and access to tax treaty networks. Post-BEPS and with Pillar Two implementation, the calculus has changed but hasn't eliminated the value of proper structuring.

What a holding company does

Holding companies serve several functions:

Ownership consolidation: One entity holds shares in multiple operating subsidiaries, simplifying group structure and enabling consolidated management.

Liability separation: Problems in one subsidiary don't directly affect others or the holding company's assets.

Exit facilitation: Selling shares in a holding company can be simpler than selling individual operating companies, particularly for multi-jurisdictional groups.

Tax efficiency: Dividends flowing up from subsidiaries, and eventual sale proceeds, can benefit from favorable treatment in the right jurisdiction. This is where location matters most.

The Netherlands

The Dutch tax authority administers a participation exemption that makes the Netherlands the most common holding company jurisdiction globally.

Participation exemption: Dividends received and capital gains on qualifying participations (generally 5%+ ownership) are fully exempt from Dutch corporate tax. This means profits can flow up from subsidiaries without Dutch taxation.

Treaty network: 90+ tax treaties reduce withholding taxes on dividends paid from subsidiaries to the Dutch holding company.

Substance requirements: Post-BEPS, Dutch holdings need genuine substance. Real office, real employees making real decisions. The days of purely paper structures are over. Budget for meaningful Dutch operations.

Withholding on exit: The Netherlands doesn't levy withholding tax on dividends paid to most treaty partners. Recent changes introduced conditional withholding taxes for certain low-tax jurisdictions.

Luxembourg

SOPARFI structure: Luxembourg's Société de Participations Financières provides participation exemption similar to the Netherlands. Dividends from qualifying subsidiaries (10%+ holding or EUR 1.2 million cost) are exempt.

Investment funds: Luxembourg excels for fund structures beyond simple holding companies. If your group includes investment fund activities, Luxembourg's fund regimes (SICAV, SIF, RAIF) provide flexibility the Netherlands doesn't match.

Private equity preference: PE and VC firms often prefer Luxembourg for fund and holding structures due to regulatory familiarity and specialized service providers.

Costs: Higher than Netherlands. Formation, maintenance, and substance requirements run 20-40% more. Justified for complex structures, overkill for simple holdings.

Ireland

Ireland offers 12.5% corporate tax on trading income with participation exemption for qualifying dividends and gains.

Participation exemption: Dividends from EU and treaty country subsidiaries can be exempt. Capital gains on share disposals exempt if conditions met.

IP holding: Ireland's knowledge development box offers 6.25% effective rate on qualifying IP income. For groups with significant IP, Ireland provides holding and IP benefits in one jurisdiction.

Substance: Ireland requires meaningful presence. The Central Bank and Revenue have tightened requirements. Nominal Irish boards with actual management elsewhere face challenge.

US connectivity: Strong ties between Irish and US business communities. Many US multinationals use Irish structures. Banking and professional services are well-developed for US groups.

Singapore

Singapore provides a participation exemption and territorial system attractive for Asia-Pacific holding structures.

Participation exemption: Dividends from foreign subsidiaries are exempt if certain conditions are met (subject to tax in source country, beneficial ownership). Capital gains are generally not taxed.

Treaty network: Comprehensive treaties across Asia-Pacific, though thinner coverage than Netherlands for European subsidiaries.

Regional headquarters: Singapore works as both holding company jurisdiction and operational regional HQ, combining tax efficiency with genuine business presence.

Limitations: The exemption has conditions that don't always apply. Foreign income must have been "subject to tax" abroad, which can complicate structures involving low-tax subsidiaries.

UAE

UAE introduced corporate tax in 2023 but holding structures can still benefit:

Participation exemption: Dividends and capital gains from qualifying participations (5%+ for 12 months) are exempt from the 9% corporate tax.

Free zone option: Free zone entities can potentially access 0% rate on qualifying income, though conditions are tightening.

Treaty network: Growing but still limited compared to European alternatives. About 80 treaties, but coverage gaps exist.

Substance: FTA requirements now include genuine economic activity. Free zone 0% rate requires qualifying activities with substance.

The Pillar Two impact

The OECD's 15% global minimum tax affects holding company planning for groups above EUR 750 million consolidated revenue. Pure tax arbitrage through low-rate jurisdictions becomes less effective when top-up taxes apply.

For smaller groups below the threshold, holding company benefits remain available. For larger groups, the planning shifts: holding jurisdiction choice still matters for treaty access and exemption structures, but the pure rate arbitrage diminishes.

Choosing a jurisdiction

For European subsidiaries: Netherlands offers the best combination of treaty network, participation exemption, and established practice. Luxembourg for more complex structures.

For Asia-Pacific subsidiaries: Singapore provides regional coverage with territorial benefits. Hong Kong as an alternative for China-focused groups.

For groups with significant IP: Ireland combines holding benefits with IP regime advantages.

For Middle East and Africa: UAE provides growing treaty network with favorable rates for qualifying structures.

Substance requirements mean holding companies need genuine local presence. Budget for directors, office space, and actual decision-making wherever you incorporate. The days of holding companies that exist only on paper ended years ago.