An international holding company is a parent company that holds stakes in operating companies in different countries and receives dividends, interest or proceeds from the sale of stakes from them. It is registered both in offshore jurisdictions such as the British Virgin Islands and in jurisdictions with a network of tax treaties. The choice depends on how much tax will be withheld when dividends are paid, where the holding company will be tax resident and what investors and banks expect.
When a holding company is justified
A holding company adds a layer with its own accounting and reporting, so it needs a specific purpose:
- several operating companies in different countries and unified management of the stakes;
- a joint venture of partners with a shareholders’ agreement, options and an exit procedure;
- preparation for bringing in an investor or selling the whole business;
- separating assets (a trademark, real estate, stakes) from operating risks.
If there is only one operating company and there are no plans to sell it, a holding company often just increases costs. This is worth checking with a calculation before registration.
Withholding tax on dividends
The main cost item of a holding company is the tax withheld by the subsidiary’s jurisdiction when dividends are paid. Its amount is set by local law and by the tax treaty between the subsidiary’s country and the holding company’s country. If there is no treaty, the rate from the subsidiary country’s domestic law usually applies.
Within the European Union, Directive 2011/96/EU on parent companies and subsidiaries applies:
- dividends paid by a subsidiary to its parent company from another EU country are exempt from withholding tax;
- parent company status requires a holding of at least 10% in the subsidiary’s capital;
- an EU state may require the holding to be held continuously for at least two years;
- the relief is not granted to arrangements put in place for a tax advantage without genuine commercial reasons (amendment by Directive 2015/121).
Tax treaties contain a similar rule. Under the OECD BEPS Action 6 minimum standard, states include a principal purpose test in their treaties, and the multilateral instrument (MLI) extends it to the treaties it covers. A holding company without people, an office and decisions taken in its country of registration risks losing treaty relief.
Tax residency and CFC rules
The tax residency of a holding company is determined under each country’s rules. In the United Kingdom, any legal entity incorporated in the country is a UK tax resident by law (Corporation Tax Act 2009, section 14). In Singapore, residency is determined by the place of control and management of the business. If the directors actually make decisions in another country, that country may treat the holding company as its resident. More details are in the article corporate tax residency.
The owner’s country of residence may tax the holding company’s undistributed profits under controlled foreign company rules. The mechanics are described in the article CFC rules.
The global minimum tax for large groups
Pillar Two (GloBE) rules apply to groups with consolidated revenue of €750 million or more in two of the four preceding financial years. If the group’s effective tax rate in any country is below 15%, the group pays the difference. The rules began to apply from 2024; in the EU, they are enshrined in Directive 2022/2523. For small and medium-sized businesses this threshold is usually out of reach, while investors in large groups take it into account when choosing a holding country.
What popular options look like
| Option | What attracts | What to check |
|---|---|---|
| BVI | Holding company and SPV for stakes and joint ventures | Tax treaties are checked for each subsidiary’s country; since 2025, beneficial ownership information has been filed with a government register, and the annual financial return is filed with the agent within 9 months |
| Hong Kong | Regional holding company for Asian companies | The FSIE regime since 2023: foreign dividends and gains on the sale of stakes are taxed if the exemption conditions are not met |
| EU country | Parent-Subsidiary Directive, tax treaties | Real presence and anti-abuse rules |
Details on the island option are on the BVI offshore company page. If the holding company is needed for European subsidiaries, compare the terms in the article company in Cyprus.
Transferring stakes into a new holding company
Transferring stakes in existing companies to a holding company is a separate transaction. It may be subject to capital gains tax or stamp duty, require the consent of lending banks, partners and regulators, and a valuation of the stakes. Before the reorganization, draw up:
- the ownership chart now and after the change;
- a table of cash flows: dividends, loans, royalties, management services;
- a list of consents under loan and corporate agreements;
- a calculation of taxes at each step in each country affected.
Budget
The estimate includes registration and annual maintenance of the holding company, accounting for each link, an audit where it is mandatory, tax returns, legal documentation of the transfer of stakes and banking services. Calculate the budget for two years, plus the cost of liquidating the structure if plans change.
Next step
If the holding company is also meant to separate the risks of different businesses, read the guide to offshore asset protection. The economic substance test for holding companies is covered in the guide to economic substance, and the choice of island for a holding company in Cayman Islands or BVI. The tasks a foreign company is set up for are reviewed in why a business needs a foreign company.
Send us the current ownership chart, the countries of the operating companies, the owners’ residency and plans for investment or a sale. Offshora will prepare 2–3 holding company options with a calculation of dividend taxes and costs for two years. Send a request. Maintenance of the finished structure is covered by the offshore company formation and maintenance service.
Tell us about your task, and we will propose a jurisdiction, the scope of services and the order of work.
Send a request →