European Holding Companies

Many international organizations choose as a common tax strategy the use of a holding company structure abroad, as it provides certain global tax benefits. Tax differences have become a very significant factor in commercial decisions and hence the development of numerous financial centers in the world. While tax is very important when choosing the country in which the holding company will be located there are a number of key factors that are taken in consideration:

 

 

A number of European Union member states are recommend for the formation of holding companies since they have double taxation treaty agreements. One thing is certain - there is not just one optimal holding company jurisdiction to suit all investors or investment profiles. A number of tax and non-tax factors are taken into account by investors before they finally decide on a holding company jurisdiction. It is necessary to summarize countries one by one by in order to pinpoint key elements for consideration.

 

 

Cyprus Holding Companies

 

Cyprus has developed into a popular international business, financial and commercial centre, where international investors and multinational companies hold and manage their trans-border investments. While Cyprus is no longer an offshore jurisdiction the island does have some considerable advantages, including its geographical location, its network of double tax treaties(especially those with the CIS and Eastern Europe), and its relatively sophisticated, European business environment.

 

Cyprus has a transparent legal system, excellent communications and world-class professional and banking services. It is a member of the EU and it applies fully all the EU Directives.

 

While there are a number of company forms available in Cyprus, the most commonly used for a Cypriot holding company is the private limited liability company. When a company is 100% foreign-owned, it is commonly referred as an International Business Company (IBC). The minimum share capital of a Cyprus company is 1.000 Euros. This money does not have to be paid in a bank account of the company. Furthermore in Cyprus, unlike in some other jurisdictions, no share capital amounts are blocked and, in any case, if the fees that are paid for the registration and set-up of the company exceed the share capital amount, this automatically means that the share capital has been paid.

 

Reasons for Choosing Cyprus :

 

Favourable Taxation

 

Cyprus Holding Company is a company fully subject to tax at a normal rate of 10% on its worldwide income which is the lowest in the European Union. The more than 40 double tax treaties that Cyprus has in force offer ample opportunities for international tax planning to legitimately reduce the overall tax burden for businesses and their shareholders. The general effect of these treaties is that Cyprus-registered offshore entities that have tax exemptions in Cyprus will have the same exemptions in the treaty countries. The use of a Cyprus entity in International tax planning can mitigate or eliminate completely the overall tax liability arising from an international activity. Furthermore in Cyprus there is a broad tax exemption system for dividends from overseas subsidiaries and a general tax exemption for profits from the sale of securities, which includes gains from the sale of shares in other companies.

 

Strategic Business and Commercial Center

 

Cyprus enormous potential has emerged and it is now an ideal base for international business and investment activities. The economy of Cyprus is based on the free market system with the private sector forming the backbone.. The development of the commercial infrastructure in Cyprus is mainly attributed to the rapidly expanding role of the services sector in the economy. Cyprus prides itself as regards its modern and efficient banking systems and the high educational level of its manpower This reflects the island's success in moving away from economic activities dependent on agriculture and traditional manufacturing onto a high-growth path based on the provision of high value added professional services. Currently there are currently approximately 30 foreign banks , 100 shipping companies and over 1200 International Business Companies (IBCs) with fully-fledged offices in Cyprus which all together make a significant contribution to the national gross domestic product.

 

Social Economical and Legal Infrastructure

 

Cyprus has a transparent legal system, and an advanced telecommunications network and infrastructure . It has a dynamic and flexible economy and has proven its capacity to adjust to continuously changing conditions. Cyprus enjoys a strong economy despite the recent worldwide economic downturn and its growth was less affected than most thanks to conservative government fiscal management and industry focus on financial services and tourism.  The labor force is largely multilingual and highly qualified and the labor costs are low compared to the EU average. 

 

Strategic Location

 

Cyprus has always played a major role as a trading and business centre due to its strategic location at the crossroads of three continents. Located at the crossroads of Europe, Asia and Africa , Cyprus can be used for routing investments within the European Union but also as a portal for investment outside the European Union, particularly into the growing economies of Central and Eastern Europe . Cyprus has become a major international transit station for commercial air transportation with efficient connections for the Middle East and the rest of European Countries.

Austria Holding Companies

The Austrian Holding Company is an ordinary company which falls within the scope of general tax law and may benefit from the double taxation treaties concluded by Austria and the European tax directives. The most common type of company in Austria is a company with limited liability. A limited liability company ( Gmbh) is a legal entity. Shareholders are not personally responsible for the liabilities of the company, except for the obligation to pay up their capital contributions. The minimum share capital is €35,000, of which at least half, €17,500, has to be paid up in cash. The other requirements for Limited Liability Company are; at least one shareholder, at least one managing director, who does not have to be an Austrian citizen or resident in Austria audit and disclosure requirements, may be necessary. Resident and non-resident companies are taxed at a flat rate of 25%. The Minimum tax payable is €1,750 for a Gmbh and €3,500 for an AG.

 

Besides the common advantages of a holding company, the Austrian Holding Company may also enjoy from the following:  Exemption from Withholding Tax on Payment of Dividends and Exemption from Withholding Tax on Payment of Interest and Royalties.

Switzerland Holding Companies

Switzerland is undoubtedly one of the most attractive countries in the world in which to live, work, and run a company. It offers a combination of political and economic stability, a clean and safe environment, and comparatively low personal and company tax rates. But the tax regime, whilst relatively benign, is quite complex. The Swiss Holding Company is a company whose main purpose and activity is to manage long term financial investments in affiliated companies. There are two major types of business entity for foreign investors, and they are as follows: Limited Liability Company (Sàrl) and Corporation (SA). Limited Liability Company (Sàrl) mainly used for small to medium sized businesses and minimum share capital is 20,000 Swiss Francs. There are no restrictions on foreign ownership and minimum of two people are required to establish the company. One of the directors must be a Swiss resident. Corporation (SA) mainly used for medium to large sized businesses and minimum share capital is 100,000 Swiss Francs. At least 50% of share capital to be paid up and majority of board directors must be Swiss residents.

 

A Swiss company is subject to tax at a federal level and cantonal level, thus tax rates depend on the canton where the company is established. Resident companies are subject to tax on their worldwide income. The tax rate may range from 4% to 25% depending on canton. The federal corporate income tax rate is 8, 5%, but because tax payments are deductible a 7, 8% maximum effective rate is levied.

UK Holding Companies

The most popular structures for foreign companies entering the UK are private limited company (Ltd), public limited company (Plc) and limited liability partnership. The minimum share capital for incorporation of a UK company is £50.000 for a public limited company of which at least 25% must be paid up, but no minimum is applied to a private limited company. A UK company is fully subject to tax at a normal rate of 30%.

 

The United Kingdom has one of the most successful economies in the EU and as a result it attracts more inward investment from Asia and the United States than any other EU country. Investors have cited a number of reasons for choosing the UK .

 

Reasons for Choosing UK :

 

 

Nevertheless, it should be noted that the UK doesn't have a particularly attractive tax regime as the corporate income tax is currently at 30% and at the same time there are not many attractive incentives for foreign investors.

Denmark Holding Companies

Denmark’s liberal approach to life in general is mirrored in its attitude to companies coming in from abroad. The business climate is benign, notwithstanding high labour costs. Opening a company in Denmark is straightforward; thanks to a streamlined regulatory regime and more than 2,500 foreign companies already operate in the capital, Copenhagen. The Danish Holding Company is an ordinary company which falls within the scope of general tax law and may benefit from the double taxation treaties concluded by Denmark and the European tax directives.

 

There are two main kinds of business entity in Denmark: public limited company and private limited company. Resident and non-resident companies are taxed at a rate of 25% .A company is deemed resident if it is managed and controlled in Denmark and it is taxed on its worldwide income.

Belgium Holding Companies

Belgium lies at the political heart of the European Union and it is the most cosmopolitan of all EU states. This may go some way to explaining its strongly free-market approach to businesses wishing to set up a company in Belgium . The authorities impose relatively few restrictions on foreign companies operating within the country. The Belgian Holding Company is an ordinary company which falls within the scope of general tax law and may benefit from the double taxation treaties concluded by Belgium and the European tax directives. There are no limitations on the activities of the company. The most common types of company in Belgium are company limited by shares (S.A./N.V.) and private limited liability company (S.P.R.L./B.V.B.A.). For a subsidiary, minimum share capital is €61,500, which must be fully subscribed and paid up. For a branch, no minimum capital is required. A Belgian company is fully subject to tax at a normal rate of 33.99% (including a 3% crisis surcharge) being eligible to benefit from the double tax treaties concluded between Belgium and third countries and from EU directives.