Suggestions on European country for a holding company

[22kay]

Hi,

I'm looking to incorporate a holding company in Europe which would be able to receive (no taxed) dividends from other corporations in other countries. It has to be a EU country that can receive/transfer dividends to other corporation in other countries in Europe to omit the dividend tax.
Also a more "clean" country, or to say more legitimate is preferred, a country that might not be considered shady or blacklisted by other countries government or banks.
I am myself not living in EU right now and have no intention of maximizing any profit from the holding company as of today, eg. I'm actually not planning on withdrawing any profit as of now. I only want a good country for the holding company.

I am considering Netherlands, is that still a good option?

 

[JustAnotherNomad]

NL has very strict anti-avoidance laws.

Cyprus seems to be the gold standard, Malta is also quite popular. Luxembourg (expensive), UK and Ireland as well.
If it's only about dividends and not capital gains, Estonia might be a good choice as well. At least that's what my own research has shown so far.

What you need to look at is where you will receive money from and where you will send it to. Especially with intermediary holding companies, the rules are often very strict. If you have a Dutch operative business, they may not allow to send dividends to a Cypriot holding company, unless there is a lot of substance, for example. And then the company where your holding company is resident may again charge withholding tax, unless other rules are fulfilled.
So you need to look at the structure as a whole.

 

[Marzio]

22kay said:
Also a more "clean" country, or to say more legitimate is preferred, a country that might not be considered shady or blacklisted by other countries government or banks.
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Spanish ETVE could be perfect for that

 

[JustAnotherNomad]

marzio said:
Spanish ETVE could be perfect for that
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I didn't know about that, sounds interesting. I see only two main downsides:
1. Communication with authorities probably has to be done in Spanish and Spain isn't exactly known for lean processes.
2. There are some restrictions on distributing dividends to “tax havens” - would be interesting to know details here.

 

[Marzio]

Of course you will need to deal with a spanish accountant but that's not a problem.

Regarding tax heavens you can distribute dividends tax free in any of the countries which Spain has a treaty with: Panama, UAE, HK, Cyprus are all there.

 

[JustAnotherNomad]

Amazing. Thanks for sharing!
Any idea how much the accounting for such a company would cost? Do you need a local director?

Edit: Seems like you need a local director, an office and another employee for the Spanish authorities to accept the substance. Probably even more expensive than Cyprus then.
But as I mentioned, always check the requirements of the countries paying the dividends to the holding company, they may also require a certain amount of substance.

Last edited: Oct 20, 2020

 

[Marzio]

JustAnotherNomad said:
Any idea how much the accounting for such a company would cost? Do you need a local director?
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Yes you will need to hire somebody and pay him salary and social security but if the holding is doing just that meaning is not trading and only receives dividends from subsidiaries i guess the accounting will be less than 1000€ year because basically there are no taxes to calculate.

 

[JustAnotherNomad]

I still think Cyprus is probably superior.
Here's a nice comparison of holding regimes in different European countries. Unfortunately Spain isn't on the list:
https://www.co-handelszentrum.com/why-switzerland/swiss-holding-company/
Latvia could also be good:
https://www.offshorecorptalk.com/threads/latvian-holding-company.30203/
But I would not go for Estonia if you plan to sell the shares, since Estonia doesn't apply the participation exemptions to the sale of qualifying shares, as far as I know.

 

[Marzio]

Cyprus could be superior (not sure) but the perception is that it's a shady country.

 

[22kay]

JustAnotherNomad said:
I still think Cyprus is probably superior.
Here's a nice comparison of holding regimes in different European countries. Unfortunately Spain isn't on the list:
https://www.co-handelszentrum.com/why-switzerland/swiss-holding-company/
Latvia could also be good:
https://www.offshorecorptalk.com/threads/latvian-holding-company.30203/
But I would not go for Estonia if you plan to sell the shares, since Estonia doesn't apply the participation exemptions to the sale of qualifying shares, as far as I know.
Click to expand...

When it comes to dividends between companies in the same group, that are tax free distributed within EU companies, how would that work for Switzerland (since Switzerland is not in the EU)?

 

[22kay]

Spain looks actually quite interesting. Does anyone know how much it cost's to incorporate a holding company in Spain? Anyone with experience - any advice?

 

[JustAnotherNomad]

22kay said:
When it comes to dividends between companies in the same group, that are tax free distributed within EU companies, how would that work for Switzerland (since Switzerland is not in the EU)?
Click to expand...

As far as I know, like with most other things, Switzerland has negotiated their own agreement that is basically the same thing. So it should work just like with an EU holding company.

 

[Altamone]

You could also consider Hungary : no taxation of foreign dividends, no capital gain tax on sales of shares of a subsidiary, no withholding tax for outgoing dividends even for non-treaty countries (as long the recipient is a company) aned even no CFC rules for foreign owned hungarian companies. In addition, if the holding also has some commercial income, the profit tax is only 9%.
Below a link with detailed description of the hungarian holding regime (last sentence is no onger accurate, profit tax has lowered to 9% since).
https://www.hg.org/legal-articles/t...-it-offers-everything-and-a-little-more-28460

 

[JustAnotherNomad]

Very interesting! If I remember correctly, Hungary also has just 10% US WHT on dividends.

 

[22kay]

Nice bonus, but would most probably be taxed higher in the US due to new tax rules as of 2017 for foreign us tax residents but not citizens. Still, would be a great option if settling down in for example Panama (utilizing friendly nation) until US tax residency is mitigated, then have the dividend paid out.

Does anyone know if the Spanish ETVE(?) model is more expensive over time then the Hungarian holding company? What I am asking for is the maintenance/running costs that would be different or in favor for either country?

 

[JustAnotherNomad]

22kay said:
Nice bonus, but would most probably be taxed higher in the US due to new tax rules as of 2017 for foreign us tax residents but not citizens.
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Are you sure? I meant the case where you just hold some Apple, Tesla, Microsoft stocks in your holding company.

 

[22kay]

JustAnotherNomad said:
Are you sure? I meant the case where you just hold some Apple, Tesla, Microsoft stocks in your holding company.
Click to expand...

Sorry, what I was replying on was on "Hungary also has just 10% US WHT on dividends".

If the company is only holding stocks and can prove it's a strict holding company it should be fine.

 

[CaptK]

Altamone said:
You could also consider Hungary : no taxation of foreign dividends, no capital gain tax on sales of shares of a subsidiary, no withholding tax for outgoing dividends even for non-treaty countries (as long the recipient is a company) aned even no CFC rules for foreign owned hungarian companies. In addition, if the holding also has some commercial income, the profit tax is only 9%.
Below a link with detailed description of the hungarian holding regime (last sentence is no onger accurate, profit tax has lowered to 9% since).
https://www.hg.org/legal-articles/t...-it-offers-everything-and-a-little-more-28460
Click to expand...

Hungary is a nightmare for moving money out, like Poland is. The Spanish option looks like a good option.

 

[JustAnotherNomad]

Seems like Hungary requires 30% ownership for the sale of shares to be exempted from capital gains tax. 10-20% would be much better.

 

[Altamone]

CaptK said:
Hungary is a nightmare for moving money out, like Poland is. The Spanish option looks like a good option.
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I am using 2 hungarian banks (OTP and Sberbank) and never had any trouble moving money out, even to somewhat uncommon countries.