Setting up a holding company abroad: strategies and tips

Setting up a holding company abroad is attracting growing interest from entrepreneurs and investors. The reasons are legitimate: optimising dividend flows, facilitating cross-border investments, preparing for wealth transfer. But between the promises of certain online providers and the actual legal and tax reality, the gap can be significant. This guide explains what actually works, the conditions that must be met, and the jurisdictions worth considering.

What a holding company is for

The basic structure

A holding company is a company whose primary purpose is to hold stakes in other companies. It does not directly produce goods or services: it owns shares in subsidiaries that carry out operational activities.

The practical advantages of a properly structured holding are several:

Dividend flow and reinvestment. Dividends paid by subsidiaries to the holding can benefit, depending on the country, from a partial or full exemption (parent-subsidiary regime). The cash stays within the holding, available for reinvestment in new participations, without being taxed at the individual shareholder level as long as it is not distributed.

Risk compartmentalisation. Each operational subsidiary carries its own risk. If one subsidiary runs into difficulty, assets held in the holding (or in other subsidiaries) remain protected, provided the entities are properly distinct in legal and accounting terms.

Wealth and business succession. A holding structure makes it easier to transfer a group of companies, via dedicated succession mechanisms. Transferring holding shares is often more flexible than transferring assets directly.

Centralised financing. A holding can borrow and on-lend to its subsidiaries (subject to regulatory conditions), centralise group cash management, or hold intangible assets (brands, patents) and charge licensing fees.

For more on the legal structures available, see our guide on starting a company abroad and the entrepreneur abroad page.

The key concept: economic substance

What “having substance” means

This is the point where many structures fail, and where tax authorities have focused their attention for over a decade. A holding company is not a letterbox. To be recognised as a tax resident of a country and benefit from its advantages, it must have genuine economic substance there.

In practice, this requires:

• An effective registered office, not simply an address at a service provider
• Directors who make strategic decisions from that country (board meetings held on-site, with minutes as evidence)
• Local staff or competent local service providers (management, accounting, key functions)
• Active bank accounts in the country
• A genuine activity of managing participations (monitoring subsidiaries, distribution decisions, budget approvals)

The OECD’s work on economic substance, within the BEPS framework, is explicit on this point. A state may refuse to apply the benefits of a tax treaty or directive if the interposed company lacks sufficient substance in the treaty country.

The core question: where are decisions actually made?

Tax authorities (French, but also European) focus primarily on the place of effective management. If a holding is registered in Cyprus but all decisions are made in Paris, it will be treated as a French tax resident. The Cypriot tax advantages disappear.

This question of effective management is central. It requires the shareholder or director to actually reside in the holding company’s country, or for the holding to be managed by local directors with a genuine mandate, not a nominal one.

Anti-abuse rules to understand

ESR — Economic Substance Regulations

Economic Substance Regulations were introduced in many low- or zero-tax jurisdictions (BVI, Cayman Islands, Bahamas, Bermuda, Jersey, Guernsey, etc.) under pressure from the OECD Global Forum and the EU. They require companies exercising certain activities (including holding participations) to demonstrate local substance: personnel, expenditure, on-site management.

A company that fails to meet the ESR faces local penalties and automatic reporting to the tax authorities of partner countries.

CFC rules — Controlled Foreign Companies

CFC rules allow a tax authority to tax the income of a foreign company controlled by a domestic resident, even if that income is not distributed. In France, this is governed by Article 209 B of the Tax Code (CGI).

In practice: if you control a holding in Malta or Estonia but remain a French tax resident, the French tax authorities can tax the undistributed profits of that holding in France, as if you had received them directly.

The rule applies when the foreign company benefits from a preferential tax regime (tax below half the French rate) and is controlled by more than 50% by a French resident. This is why the pairing of a foreign holding and genuine expatriation is inseparable: if you do not leave France fiscally, the structure does not produce the intended effect.

ATAD and BEPS

The EU’s ATAD directive (Anti-Tax Avoidance Directive), transposed by all member states, strengthens CFC rules, rules on hybrid arrangements, and interest deduction limitations. It therefore applies to holdings in Estonia, Cyprus, Malta and the Netherlands, as in any EU member state.

The OECD’s BEPS work (Base Erosion and Profit Shifting) has produced minimum standards on substance, abusive tax treaties, and transparency. The 15 BEPS actions are integrated into modern tax treaties and into the legislation of signatory countries.

The underlying message: the era of letterbox holding companies in remote islands is coming to an end. Serious jurisdictions have adapted their regimes to attract genuine structures, with competitive taxation but real substance requirements.

Serious jurisdictions: advantages, constraints, costs

Here are five jurisdictions most relevant for a holding company in 2026. They are not the most exotic, but they offer a credible combination of competitive taxation, treaty network, and international reputation.

Estonia

Estonia is often cited for its deferred taxation regime: profits are not taxed until distributed. The rate is 20% on distributed dividends (14% for regular distributions). For a holding whose purpose is to reinvest dividends received from subsidiaries, this is a genuine advantage.

The Estonian parent-subsidiary regime exempts dividends received from EU-resident subsidiaries, subject to conditions. Dividends from third-country subsidiaries may be exempt if the subsidiary is subject to corporate tax.

Substance: Estonia is in the EU, so ATAD applies. Local substance is required to benefit from the regime. A director residing in Estonia, meetings held on site, a real address — all of this is achievable if you live in Estonia.

Cost to set up: €400-800 via notary plus business register fees. Annual maintenance (accounting, statutory audit if required): €2,000-5,000/year depending on complexity.

Cyprus

Cyprus is one of the most widely used holding jurisdictions in Europe. Corporate tax rate of 12.5%. Exemption of dividends received from subsidiaries (subject to participation and activity conditions). Exemption of capital gains on share disposals (except Cypriot real estate). Extensive treaty network.

The Cypriot parent-subsidiary regime is attractive: dividends received from EU-resident subsidiaries or subsidiaries in normal-tax countries are generally exempt from all tax.

The Cyprus risk: the island was marked by the 2013 banking crisis. The banking system has since recovered, but Cypriot banks remain demanding on KYC/AML (anti-money laundering) documentation. Opening an account takes time (2 to 6 months) and requires solid documentation of the holding’s genuine activity.

Cost to set up: €1,500-3,000. Annual maintenance: €3,000-8,000/year. Requires a locally licensed director if the shareholder does not reside in Cyprus. More practical details at living in Cyprus.

Malta

Malta offers a unique EU tax refund system. The nominal corporate tax rate is 35%, but shareholders receive a refund of 6/7 of the tax paid on distribution, bringing the effective rate to approximately 5% on trading income and 0% on passive income (dividends, capital gains).

For a holding receiving dividends from subsidiaries, the effective rate can be very low. The condition: shareholders must submit a refund claim, which is generally processed within 14 days of distribution.

Substance: Malta is in the EU, ATAD applies. The Maltese tax authority has a reputation for being cooperative with structures that have genuine substance. The presence of a qualified Maltese director is commonly recommended.

Cost to set up: €2,000-4,000. Annual maintenance: €4,000-10,000/year (higher than Cyprus, due to reporting obligations). For practical details, see living in Malta.

Netherlands

The Netherlands is the most widely used holding jurisdiction in the world for large structures. The main reason: the participation exemption (deelnemingsvrijstelling), which exempts almost all dividends and capital gains received from subsidiaries held at more than 5%.

Corporate tax rate of 19% up to €200,000 of taxable profits, 25.8% above that. But with the participation exemption, a Dutch holding that receives dividends from its subsidiaries is only taxed on its own operating costs.

Treaty network: the Netherlands has one of the most extensive networks in the world (over 90 treaties). For a holding with subsidiaries in several countries, this is a structural advantage.

Note: since 2021, the Netherlands has tightened its anti-abuse rules. Holdings without genuine substance (staff, offices, local management) no longer benefit from treaty advantages for flows to third countries.

Cost to set up: €1,500-3,000. Annual maintenance: €5,000-15,000/year (higher, but suited to groups of a certain scale).

United Arab Emirates (Dubai)

The UAE introduced corporate tax in 2023 (9% on profits exceeding AED 375,000, roughly €100,000). Free zones offer exemptions if activities remain within the free zone or are international in scope.

For a holding whose revenues come from dividends of foreign subsidiaries, the effective rate can remain very low. However: the UAE has signed BEPS standards and has introduced its own ESR requirements. A UAE holding must have genuine local substance.

A specific advantage: no withholding tax on outgoing dividends. The treaty network is expanding (over 130 treaties signed). For entrepreneurs setting up in Dubai, a UAE holding can fit into a coherent overall structure.

Cost to set up: €3,000-8,000 (depending on the free zone and licence type). Annual maintenance: €4,000-10,000/year.

Comparison table

Criterion	Estonia	Cyprus	Malta	Netherlands	UAE
Effective rate on dividends received	0% while undistributed	0% (parent-sub exemption)	0-5% (refund)	0% (participation exemption)	0-9%
Nominal corporate tax rate	20% on distribution	12.5%	35% (refunded)	19-25.8%	9%
Treaty network	Medium (65+)	Medium (65+)	Medium (75+)	Very extensive (90+)	Extensive (130+)
Setup cost	€400-800	€1,500-3,000	€2,000-4,000	€1,500-3,000	€3,000-8,000
Annual maintenance	€2,000-5,000	€3,000-8,000	€4,000-10,000	€5,000-15,000	€4,000-10,000
In the EU	Yes	Yes	Yes	Yes	No
Substance requirement	Moderate	Moderate	Moderate	Strong	Strong (ESR)

The trap: offshore structures sold as turnkey solutions

This is where many projects go wrong. Dozens of providers offer to set up a holding in the Bahamas, BVI, or Seychelles in a few days for a few hundred euros, with a registered address included.

These arrangements have several structural problems:

No substance. A registered address is not an effective head office. A nominee director who signs documents without making real decisions is not effective management. The French tax authority, if you remain a French resident, will reclassify the company as a French tax resident.

EU blacklists. The European Union regularly publishes a list of non-cooperative jurisdictions for tax purposes. Financial flows from entities in these jurisdictions can trigger audits, higher withholding taxes, or refusal to deduct expenses linked to those entities.

Criminal risk. Beyond tax reclassification, a fictitious structure designed to conceal income can constitute tax fraud and failure to disclose foreign assets (mandatory declaration of foreign accounts and companies applies to French residents under Articles 1649 A and 1649 bis C of the CGI). Penalties are severe.

The rule is straightforward: a foreign holding only produces legitimate effects when you have a real economic presence in its country, or when the group has genuine international activities that justify the structure. For more on how dividends are taxed in this context, read our article on dividends abroad.

Frequently asked questions

Is it essential to leave France as a tax resident for a foreign holding to be effective?

Not necessarily in every case, but in most. If you remain a French tax resident, CFC rules (Article 209 B of the Tax Code) allow France to tax the undistributed profits of a foreign holding you control that benefits from a preferential tax regime. A foreign holding can still have utility for complex multi-country structures even with French residency, but only with specialised tax counsel and economically justified arrangements.

What is the difference between a holding company and a simple foreign company?

A holding company’s primary purpose is to hold participations in other companies. An operational foreign company carries out direct commercial activity (sale of services, e-commerce, consulting). Both can be useful to an entrepreneur living abroad, but their purposes, constraints, and tax regimes differ. Confusion between the two is common in commercial presentations.

Does a local director alone create economic substance?

A local director is a necessary but often insufficient condition. They must exercise genuine decision-making authority, make real decisions, and not simply sign documents prepared elsewhere. Tax authorities analyse economic substance holistically: staff, expenditure, premises, decision flows. A nominee director without real authority does not create substance.

What is the realistic total cost of setting up and maintaining a serious foreign holding?

Depending on the jurisdiction, expect €1,500 to €8,000 to set up, then €3,000 to €15,000 per year in maintenance costs (accounting, audit if required, local director, registered address, licence renewals). These costs are only justified if the tax savings enabled by the structure are significantly higher. For annual revenues below €100,000-150,000, the calculation is often unfavourable.

---

Setting up a holding company abroad is a legitimate and effective tool, provided it is used for what it genuinely is: a real asset management structure, in a country where you have a substantial presence. It is not a tax avoidance technique, and tax authorities are very capable of distinguishing between the two.

For practical details by destination:

• Moving to Estonia (e-Residency, taxation, cost of living for entrepreneurs)
• Moving to Cyprus (banks, residency, IP Box regime)
• Moving to Malta (residency, refund system, visas)

For the foundations of an entrepreneurial structure abroad, see our entrepreneur abroad page and our guide on dividends abroad.

The tax and legal information presented in this guide reflects the state of the law as of Q3 2026. International taxation evolves rapidly. This guide is for informational purposes only and does not constitute tax or legal advice. Consult a tax lawyer or accountant specialising in international taxation before making any decision.