Most trusted place to setup company in Europe?

[benq]

I need a holding company to create subsidiaries, and the holding company must be located in a place that is recognized and prestigious, where it won’t be seen as tax evasion or an attempt at it.

Which country in Europe would be suitable for this? Corporate taxes are roughly the same across Europe, except for Cyprus and Malta.

 

[JohnnyDoe]

Why do you need a holding?

 

[Marzio]

holding company must be located in a place that is recognized and prestigious

Netherlands with its tax treaty networks is one of the best places for intermediate holdings.

Also Spain with its ETVE holding regime is worth looking at.

Estonia is the less prestigious but cheaper to setup and maintain

Cyprus and Malta are perceived as shady

 

[Sols]

Many ways to look at this.

Two popular public sources are Basel AML Index (https://index.baselgovernance.org/) and KnowYourCountry (https://www.knowyourcountry.com/ratings-table/).

The Nordics rank very highly but none of them are really well suited for non-resident/international business (Sweden and Denmark aren't too bad). Filter for that requirement, and UK usually ends up being the best choice. Netherlands can also work but is a lot more complicated than a UK company. Ireland, Luxembourg, and Switzerland are also popular for similar uses.

But 9 times out of 10, Cyprus and Malta work fine despite their reputations. Both offer high, reasonable costs, and are (in theory/on paper) fully compliant with all relevant EU directives.

 

[EliasIT]

(Sweden and Denmark aren't too bad).

stay far far far away from Denmark, I warn you, this country isn't friendly to any local or foreign entrepreneur! Check my threads about this country, stay damn out of it og don't be surprised if you get raped and taken hostages in fabricated tax evading cases.

 

[Sols]

stay far far far away from Denmark, I warn you, this country isn't friendly to any local or foreign entrepreneur!

Danish holding companies can be quite attractive for exits. There are special rules you can use to end up paying little to no tax in the event of an exit. I've seen a couple successfully executed.

Don't live in Denmark, though. Having a Danish holding company is a different story entirely from living there or even doing active trading business through a Danish company.

 

[EliasIT]

I know for sure that they are hunting for foreign-owned companies that save on taxes, it’s constantly in the financial news in Denmark, which I still follow even though I no longer live there.

But yes, if you don’t live in Denmark or the EU, then it doesn’t matter to you. However, all I can say is BE careful, very careful. They are targeting companies with even the smallest amount of wealth.

 

[JohnnyDoe]

It would be useful to know what OP needs a holding for. There are 27 countries to choose from, all of them being EU are very risky in general terms, but some might be better for specific needs. For example, in addition to those mentioned by @Sols and @Marzio, Austria, Hungary, Belgium; for different reasons Poland, Czechia, Lithuania, Slovakia, Romania, Bulgaria, Greece.

 

[Don]

Many ways to look at this.

Two popular public sources are Basel AML Index (https://index.baselgovernance.org/) and KnowYourCountry (https://www.knowyourcountry.com/ratings-table/).

The Nordics rank very highly but none of them are really well suited for non-resident/international business (Sweden and Denmark aren't too bad). Filter for that requirement, and UK usually ends up being the best choice. Netherlands can also work but is a lot more complicated than a UK company. Ireland, Luxembourg, and Switzerland are also popular for similar uses.

I think Sweden stands out for its banking.
Sweden is also consistently ranked as (one of) the most reputable countries in the world.
https://si.se/en/sweden-ranked-third-best-country-in-the-world-according-to-new-study/
One of the top countries also in the basel list.

Its worth noting that there is a capital gains tax exemption for Swedish corporate entities on gains related to the disposal of shares held for business reasons. Unquoted/unlisted shares will always be considered as held for business reasons.

But 9 times out of 10, Cyprus and Malta work fine despite their reputations. Both offer high, reasonable costs, and are (in theory/on paper) fully compliant with all relevant EU directives.

Cyprus is great if you get residency there.

 

[benq]

I currently have an operating company in Poland that generates around 5 million in profit each year. Right now, everything is taxed as it should be, and there are no advantages or optimization opportunities. The plan is to gradually move the activity out of the current Polish company into a new one, which will be owned by this holding company. This way, dividends and so on can be channeled into the holding company tax-free for reinvestment in other projects.

Additionally, I am about to invest approximately 2 million euros in a software development company. Before doing so, I plan to establish my holding company with a share capital of around 8 million euros, which I will contribute from my personal, already-taxed wealth.

I have been considering Switzerland and Luxembourg as potential locations, but I would like some additional input on my plan.

 

[Sols]

I think Sweden stands out for its banking.
Sweden is also consistently ranked as (one of) the most reputable countries in the world.
https://si.se/en/sweden-ranked-third-best-country-in-the-world-according-to-new-study/
One of the top countries also in the basel list.

Its worth noting that there is a capital gains tax exemption for Swedish corporate entities on gains related to the disposal of shares held for business reasons. Unquoted/unlisted shares will always be considered as held for business reasons.

Fully agreed. People sleep on the Nordics in general. They are tax hells for natural persons who are tax resident there. But for setting up holding companies or — depending circumstances — are trading entities, they're not too bad once you get over the initial setup burden as it's all heavily catered for residents.

I have been considering Switzerland and Luxembourg as potential locations, but I would like some additional input on my plan.

Both are good options and while both are known for tax planning, they don't have especially problematic profiles.

Based on the additional details, I think we can remove Denmark from the short list. It doesn't sound like you're setting up to exit.

Have a look at UK and Netherlands.

I forgot Belgium earlier (thanks @JohnnyDoe for mentioning). Which is easy to do. There's nothing remarkable about Belgium other than how boring and uninteresting it is. That can be a good thing. It's a popular place for incorporating holding companies, with several tax advantages available.

Austria has some favorable tax quirks you can use but it's quite rare and unusual, which can be a problem for banking. Banks are used to holding companies in UK, Switzerland, Netherlands, and Belgium for non-residents. On the other hand, if you work with a good firm in Austria to set up a company there, getting an Austrian bank account is probably not too difficult.

 

[JohnnyDoe]

I currently have an operating company in Poland that generates around 5 million in profit each year. Right now, everything is taxed as it should be, and there are no advantages or optimization opportunities. The plan is to gradually move the activity out of the current Polish company into a new one, which will be owned by this holding company. This way, dividends and so on can be channeled into the holding company tax-free for reinvestment in other projects.

Additionally, I am about to invest approximately 2 million euros in a software development company. Before doing so, I plan to establish my holding company with a share capital of around 8 million euros, which I will contribute from my personal, already-taxed wealth.

I have been considering Switzerland and Luxembourg as potential locations, but I would like some additional input on my plan.

Do you have in house legal and tax advisors?
Are you aware of cognitive biases?
“Thinking, Fast and Slow” is a good read.

 

[Marzio]

I currently have an operating company in Poland

In your case i'd go for UK

 

[benq]

Do you have in house legal and tax advisors?

Not in-house, but using Deloitte for tax compliance and some unknown lawyers for the legal matters. Both partners have also created a plan for me, which they believe I should follow, after, of course, I’ve invested a fortune into it and had quite a few meetings. However, as I’ve been reflecting on things, I did some Googling and stumbled upon this absolutely wonderful forum that I’d never heard of before.

Your input is a valuable and welcome addition to my already existing setup on my drawing board. I’ve also taken the opportunity to assess the level of expertise on this platform to get an idea of the kind of heavyweights playing here. Overall, I’m genuinely impressed.

A big thank you for your time and the information to all of you who have contributed. Please feel free to share more if you have additional insights!

 

[JohnnyDoe]

using Deloitte

Please feel free to share more if you have additional insights!

Change tax advisor and you will already improve your situation.

 

[Marzio]

Both partners have also created a plan for me

Which you will now share so we can judge what you paid them for

 

[Forester]

Just my 2 cents:

As I see, @JohnnyDoe, @Marzio, @Sols, @EliasIT and @Don are quite well in line and there is not much to add, at this moment. Perhaps just
– I really second @JohnnyDoe on recommendation to change the tax advisor ;
– I would add Liechtenstein to the list; mainly because of the Lugano Convention cannot be enforced there (you are making a sufficiently big money to care about the protection).

Corporate taxes are roughly the same across Europe, except for Cyprus and Malta.

This is, of course, not true; yet it was sufficiently reflected in the posts above.

 

[bountymounty]

Why are you against Deloitte? They have a massive, global tax department that can advise on the strategic placement of companies and how to utilize tax loopholes most effectively.

Which you will now share so we can judge what you paid them for

yeah I would really like to know the amount.

 

[Sols]

Why are you against Deloitte? They have a massive, global tax department that can advise on the strategic placement of companies and how to utilize tax loopholes most effectively.

In my experience, there is no level of advice or type of connections Deloitte can provide that someone cheaper and/or someone more specialized can't do.

You should use Big Four when you want to make a statement with your auditor or external consultants. It's prestigious only because it shows how much money you could afford to waste. If you're a licensed bank and need to show the central bank or other regulator that your books are in good order, you should use Big Four. Not because it's automatically better, but because people who don't know better think it is.

There are good people working at Deloitte and the other Big Four. However, the best ones are ex-Big Four, who have gone on to do other things after building skills and network at Big Four for 5—10+ years.

When you work with companies like Deloitte, they are usually so careful and risk adverse that you can easily miss out on opportunities simply by being overly cautious. This can mean loss of revenue opportunity or simply spending too much money on something that goes above and beyond what's necessary to be compliant.

For those and a few other reasons, I rarely suggest someone go with Big Four. But if your risk appetite is zero or you need to impress someone, they might be the perfect choice.

 

[EliasIT]

This reply might explain why someone with so much money on hand is here on OCT looking for alternative answers, as they mentioned themselves. I was a bit curious about it and wondered if it could really be true.

Great answer, @Sols