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Jurisdictions · 8 min read

How to choose a holding company jurisdiction: legal system, reputation, banking and substance

Choosing where to put a holding company is a decision a group lives with for years. This guide sets out the factors that matter in general terms and compares the jurisdictions covered in this series, with particular attention to how each affects banking and payments.

Start with what the company will do

A holding company can do many things: hold shares in operating subsidiaries, hold investments, own property, receive and pass on dividends, lend to group companies, act as a joint venture vehicle or sit under a trust as the company that actually holds the assets. The right jurisdiction depends heavily on which of these it will do, where the subsidiaries and owners are, and who else will need to deal with the company.

Before comparing jurisdictions, write down a short brief. It should record where the owners are resident, where the subsidiaries trade, whether there will be outside investors, lenders or a future buyer, whether the company will have staff, which currencies it will receive and pay, and which regulators or counterparties in particular countries will need to deal with it. A brief of half a page saves a great deal of time later, and it is exactly the kind of description a payments provider will ask for at onboarding.

The factors below are the ones groups commonly weigh. Tax is clearly one of them, but this article does not discuss tax treatment, which depends on the facts and on the laws of several countries at once. That part needs specialist advice.

Reputation and how counterparties react

Reputation is hard to measure but easy to feel. It shows up in how banks, payments providers, investors, auditors and tax authorities react when they see the company's name and jurisdiction.

A few factors shape reputation:

  • International listings. Whether the jurisdiction appears on lists maintained by international bodies, such as the EU list of non-cooperative jurisdictions for tax purposes or the FATF lists of jurisdictions under increased monitoring. These lists change, and positions should be checked at the time.
  • Regulatory reputation. Whether the local regulator is seen as competent and active.
  • History. Whether the jurisdiction's entities appear often in enforcement cases and public leaks.
  • Use by institutions. Whether major funds, listed groups and financial institutions use the jurisdiction routinely.

Reputation can cut both ways. Asset protection jurisdictions such as Nevis and the Cook Islands are respected for the strength of their laws, and for the same reason some counterparties look at entities from those places more carefully.

Registries and transparency

Different jurisdictions make different information available. Some, such as Poland, Cyprus and Hong Kong, have public company registers that show directors and, to varying degrees, shareholders and financial statements. Others, such as the Cayman Islands, the BVI, Nevis and Seychelles, keep shareholder and beneficial ownership information with registered agents or in secure systems available to authorities rather than the public.

Groups sometimes value privacy, and that is a legitimate preference. The trade-off is that less public information means more documents at onboarding. A Polish company can often prove much of its position with a KRS extract and a CRBR printout. A Nevis LLC needs certified documents from its registered agent and a full copy of its operating agreement. Neither is wrong, but the amount of paperwork differs, and that difference repeats every time the company opens an account or undergoes a review.

Banking and payments access

For many groups, the practical question that decides everything is whether the company can open and keep accounts. A holding company that cannot receive dividends or pay its service providers is of little use.

Banking access depends on more than jurisdiction. The provider looks at the owners, the business, the countries involved and the quality of the documents. Jurisdiction still matters, though, because most providers set their risk appetite partly by country of incorporation. In general terms, EU and Crown Dependency companies, and companies from large financial centres such as Cayman and Hong Kong, are accepted by a wider range of providers than companies from jurisdictions that are newer to international standards or have appeared on international lists.

Ask potential banks and payments providers early, before the company is formed, whether they would accept an entity from the jurisdiction you are considering. The answer can change your choice.

Substance and where the company is run

Since 2019, economic substance rules in Cayman, the BVI, the Crown Dependencies and other centres have required entities carrying on certain relevant activities to show substance locally. Pure equity holding companies usually face a lighter test, but a holding company that lends, provides services or holds intellectual property may be held to a stricter standard. See our explainer on economic substance rules.

Separately, the countries where the owners and managers live may treat a company as resident or as having a permanent establishment there if it is in fact run from there. That is a tax question for advisers, but it has a practical side: if a group wants its holding company to be run from Cyprus or the Isle of Man, it needs directors there who take real decisions. Groups that want the company run where the owners live may be better served by a jurisdiction where that is consistent with the structure.

Treaty networks and international recognition

Some jurisdictions have extensive networks of double tax treaties and, for EU members, access to EU directives that affect payments between group companies. Cyprus and Malta are examples of EU members with treaty networks. Poland, as an operating jurisdiction, also has a wide treaty network. Classic zero tax jurisdictions such as Cayman, the BVI and Nevis generally have few or no comprehensive double tax treaties, though they participate in information exchange arrangements.

Whether a treaty helps any particular structure is a technical question. Treaties often contain anti-abuse rules, and the countries on the other side may look closely at whether a holding company has real substance before granting benefits. This is one of the areas where specialist tax advice is essential. For payments purposes, the main relevance is that groups using treaty jurisdictions tend to have more local substance, which in turn makes them easier to onboard.

Jurisdictions compared

The table below compares the jurisdictions covered in this series. It is qualitative, simplified and general. It is not a ranking, and it says nothing about tax.

JurisdictionLegal systemTypical vehiclePublic registry informationCommon useOnboarding notes
Cayman IslandsCommon lawExempted companyLimitedFunds, group holding, finance vehiclesWidely recognised, documents via registered office provider
BVICommon lawBVI business companyLimited, directors filedPrivate group holding, joint venturesVery familiar, purpose and ownership closely examined
NevisCommon lawLLC or corporationLimitedAsset holding, trust underlying companiesOperating agreement central, asset protection questions
Cook IslandsCommon lawInternational trustLimitedFamily wealth and asset protectionTrustee company leads, source of wealth detailed
Isle of ManCommon law1931 or 2006 Act companyModerateHolding, gaming, insurance, private wealthCrown Dependency, often real local presence
CyprusCommon law basedPrivate limited companyGood, with audited accountsEU holding companyEU member, EUR, audited accounts help
PolandCivil lawsp. z o.o. or S.A.Good, KRS and CRBROperating subsidiariesPublic records do much of the work
Hong KongCommon lawPrivate limited companyGood, with auditAsian trading and regional holdingTrading evidence important
MaltaMixedLimited liability companyGoodGaming groups, EU holdingLicences and group flows reviewed
SeychellesMixedIBCLimitedLow cost holding and tradingOften treated as higher risk, file quality decisive

Each entry is expanded in its own guide: the Cayman exempted company, the BVI business company, the Nevis LLC, Cook Islands trusts, Isle of Man companies, Cyprus holding companies, Polish companies, Hong Kong companies, Malta gaming companies and the Seychelles IBC.

Currency and day to day running

Finally, think about the money itself. A holding company's base currency, the currencies of its subsidiaries and the currency its owners spend all affect how often it will need to convert. A Cyprus parent with euro accounts and subsidiaries paying dividends in dollars and zloty will convert regularly. A Cayman fund vehicle in US dollars with mainly dollar investments may rarely convert at all.

Running costs, the availability of directors and secretaries, audit requirements and filing calendars all add to the practical burden. A jurisdiction that looks simple on paper can become hard work if the group has no one nearby who knows how to keep the company in good order.

General information only

This article provides general information on factors groups consider when choosing a holding company jurisdiction. It is not legal or tax advice, and no jurisdiction is recommended here. Take advice from qualified lawyers and tax advisers before forming or moving a company. CCYFX does not form companies. It regularly onboards entities from the Cayman Islands, the BVI, Cyprus, Nevis, the Cook Islands, the Isle of Man and Poland for FX and international payments, and considers other jurisdictions case by case. Our international companies page explains how.

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