In any cross-border merger transaction, an early question will often be where the holding company for the merged group should be located.  This is not just a tax question - the location of the business, stock market requirements and practical issues for the management team all come into play - but tax can be an important consideration.

At the peak of the US inversion transactions, the three jurisdictions that came to the top of the list for consideration were usually the UK, the Netherlands and Ireland.  Tax havens were out of fashion, often because of the withholding tax imposed on dividends that would be paid to the holding company from the US and other important subsidiaries.  By locating the holding company in a jurisdiction with a strong network of tax treaties (and, within the EU, the benefit of the Parent-Subsidiary Directive), this withholding tax could be reduced or avoided entirely.

Time does not stand still, and, as Guillermo Canalejo's recent post reveals, there is now a new kid on the block - Spain - with a revised treaty with the US.  But this is not the only development that needs to be considered.

Corporate income tax rates still differ, but these are generally only imposed on domestic profits. Therefore,  they are not a significant distinguishing feature when looking at holding company taxation.  It is more important whether the jurisdiction has a territorial basis of taxation - with a tax exemption for dividend income from subsidiaries and for capital gains arising on the sale of shares in subsidiaries.

The UK still stands out as it does not impose a withholding tax on dividends paid, but Brexit (with the potential loss of the benefit of the Parent-Subsidiary Directive) and political uncertainty needs to be considered.  The Netherlands has considered and then decided against abolishing its withholding tax on dividends paid by Dutch companies, and Ireland continues to impose a dividend withholding tax (although it is not, in practice, payable if shareholders are based in treaty jurisdictions).  

Across the EU, the effect of ATAD1 and ATAD2 has been to harmonise tax regimes - no EU regime can claim not to have a CFC regime, for example.  And the introduction of formal (and informal) economic substance requirements in a number of jurisdictions needs to be considered carefully.

A holding company has to be located somewhere, but where? Companies and their tax advisers cannot rely on previous answers, without first considering the impact of these developments, as well as the other non-tax implications of locating in a particular jurisdiction.