For trading in the EU the Netherlands is usually the best default: no business permit, capital from EUR 0.01 and a B.V. that banks and marketplaces trust. For holdings Cyprus has the lowest tax and pays dividends out at 0%, but every company is audited and some banks and source countries ask more questions. Luxembourg is the choice when investors, funds or lenders are involved.
Three EU countries, three different bargains
Luxembourg, the Netherlands and Cyprus are the three EU countries most often compared for international companies. All three are full EU members with the directives, all three have broad treaty networks, and all three exempt most dividends and gains from subsidiaries. They differ in what they charge, what they demand and how the rest of the world sees them.
Cyprus raised its corporate tax to 15% from January 2026 and reformed dividend taxation for residents. Luxembourg cut its rate to 23.87% and plans another point from 2027. The Netherlands stayed at 19% and 25.8%. The gap is smaller than it used to be, and the other differences matter more.
Investors and funds
The standard for funds, co-investors and financing; fixed yearly minimum tax; EUR 12,000 capital.
Groups and trading
5% participation exemption with no holding period, about 100 treaties, lean B.V., strong with banks and clients.
Lowest headline tax
15% tax, no withholding on most outbound payments, common law in English; more questions from banks and source countries.
Luxembourg, the Netherlands and Cyprus in 2026
| Luxembourg | Netherlands | Cyprus | |
|---|---|---|---|
| Corporate tax | 23.87% (Luxembourg City) | 19% up to EUR 200,000, 25.8% above | 15% (from 2026) |
| VAT | 17% | 21% | 19% |
| Minimum capital | EUR 12,000 (payable within 12 months) | EUR 0.01 | None |
| Dividends and gains from subsidiaries | Exempt at 10% or EUR 1.2m / 6m, 12 months | Exempt from 5%, no holding period | Dividends exempt (anti-avoidance for passive low-tax payers); share gains exempt except Cyprus property companies |
| Withholding on dividends paid out | 15%; 0% to qualifying EU and treaty companies | 15%; 0% to qualifying EU and treaty companies | 0%; 17% to related companies in EU-blacklisted countries, 5% to low-tax countries |
| Tax treaties | 88 | About 100 | About 65 |
| Fixed yearly tax | Minimum net wealth tax from EUR 535 | None | None (annual levy abolished in 2024) |
| Audit | Above EUR 7.5m / 15m / 50 staff | Medium and large companies only | Every company: audit, or a review if very small |
| IP regime | About 5.2% | 9% innovation box | About 3% |
| Legal system and language | Civil law; French, German, English | Civil law; Dutch, English widely used | Common law; Greek, English widely used |
For trading and services in the EU
- The Netherlands is the default. No business permit for most activities, capital from EUR 0.01, a VAT number that EU customers and marketplaces trust, banks used to international B.V.s.
- Luxembourg needs a permit and premises. Every trading company needs a business permit, a manager who runs it and a real place of business; domiciliation is not enough.
- Cyprus is cheaper, with conditions. 15% tax and lower running costs, but every company is audited or reviewed, and some EU banks and large clients ask more questions about Cyprus companies.
Cyprus wins the spreadsheet. The Netherlands and Luxembourg win the bank meeting. Decide which one you will have more often.
For holding companies
- Cyprus pays out at 0%. No withholding tax on dividends to non-residents, except related companies in blacklisted or low-tax countries. Share gains are exempt without a minimum stake or holding period.
- The Netherlands is the flexible holding. 5% stake, no holding period, 0% withholding to qualifying parents in the EU and treaty countries, the widest treaty network of the three.
- Luxembourg is the investor holding. The SOPARFI is what funds, co-investors and lenders expect; the participation exemption needs 10% or EUR 1.2m and 12 months.
- Source countries look at you. Withholding relief from the countries where the subsidiaries sit depends on treaties and substance. Some tax offices scrutinise Cyprus holdings more closely, and the principal purpose test applies everywhere.
Which of the three fits you?
Five questions. The scores are a starting point for a conversation, not advice.
Luxembourg, the Netherlands or Cyprus?
Five questions. You see how the three score for your case, and why.
Reputation and banking in 2026
Cyprus has done much since 2022: banks have cut high-risk business, sanctions circumvention became a crime in 2025, and MONEYVAL upgraded several ratings. It is on no EU or FATF list. But the 2023 US and UK sanctions on Cypriot service providers and the Cyprus Confidential investigation still shape how some banks and tax authorities react to a Cyprus company with non-EU owners.
Luxembourg and the Netherlands carry less of that baggage, at the price of higher tax and stricter substance expectations. For owners from Russia or with sanctions-sensitive links, all three are now demanding, and none is a workaround.
15%, 0% withholding out, exempt share gains, audit for all.
Lean B.V., 5% exemption, about 100 treaties, trusted by banks.
Funds, co-investors and lenders know the SOPARFI.
A company run from abroad fails in all three.