Running a business in more than one country can open doors to international customers, reduce costs, and offer the benefits of different legal and tax systems. But operating across borders must be done carefully. If your business structure looks unclear or suspicious, it may attract unwanted attention from tax offices, banks, and regulators.
In this article, we explain how to build a multi-jurisdictional structure that is legal, practical, and easy to understand. We include examples and focus on the transparency, compliance, and efficiency required.
Why Open A Multi-Jurisdictional Business
The phenomenon of globalization is leading more people to opt for a multi-jurisdictional business, and it has become far more feasible to do so. Expanding in other countries offers real advantages:
- Lower costs for manufacturing or service delivery
- Better access to regional markets
- Improved tax outcomes through treaties and incentives
- Access to skilled labor in various time zones
These benefits are real, but they only make sense when your structure reflects actual business activity. Thus, setting up companies without proper reasons or using hidden ownership can trigger legal issues, tax investigations, and banking problems.
In order to avoid problematic situations, it is necessary to consider the principles to follow when planning a future business structure in another jurisdiction.
Build your structure on solid principles
1. Focus on economic substance
Tax authorities today are more concerned with what your company actually does than with legal paperwork. For example, if you claim to have a holding company in Malta, but it has no staff, no meetings, and no real decision-making, then it may be seen as a shell company.
Your company must show real signs of life, like hiring employees, renting an office, running operations, or conducting board meetings in the jurisdiction where the company is registered.
A good example might be a European software company trying to route income through a small company in Cyprus. In this case, it is likely that during a routine tax inspection, it will be clear that the Cyprus company has no staff and does not make any decisions locally. This structure may be immediately rejected in Cyprus for tax purposes.
2. Keep ownership transparent
Too many layers of holding companies, especially in offshore zones, raise questions. Authorities and banks want to know who owns the business and who benefits from its profits. Unclear ownership can block banking relationships and trigger investigations under anti-money laundering laws.
In 2022, a real case involved an e-commerce group with entities in Belize, Panama, and Hong Kong. The group faced frozen accounts when a European bank requested ownership documents and couldn’t verify who controlled the company. Revenue authorities soon became involved.
To avoid such issues, keep your corporate chain short and clear. If you do use multiple layers, make sure the ownership trail is fully documented and easily available.
3. Use holding companies for real purposes
Holding companies can help with investment management, profit distribution, and group control. Some jurisdictions, such as Luxembourg or the Netherlands, offer strong legal protections and tax treaty access. But simply placing profits in a holding company without real activity can cause problems.
A holding company should have documented functions. For example, it may manage intellectual property, sign contracts, or invest in subsidiaries. It should not be just a “pass-through” tool.
Understand how your entities interact
Apply fair transfer pricing
If your companies in different countries sell services or goods to one another, the prices must reflect market conditions. This means you can’t shift profits by undercharging or overcharging across borders. Authorities use transfer pricing rules to prevent abuse.
A US tech startup with a development team in Romania charged very low fees from the Romanian company to the US parent. Romanian tax authorities flagged this as artificial profit shifting and imposed back taxes and penalties.
Romanian tax authorities are known to closely examine intra-group transactions that do not respect the arm’s length principle. If transfer prices between related parties are not set at market value, the Romanian tax authorities have the right to adjust the taxpayer’s income or expenses to reflect market value. This may result in additional tax liabilities, interest, and penalties.
To avoid this, document how you set your internal prices. Use benchmarks where available, and always be prepared to explain your reasoning.
Step-by-Step guide to a clean setup
Start with a reputable parent company
Begin with a company in a stable, respected jurisdiction. This becomes the central point of control and sets the tone for how others view your group. Countries like Ireland, the UK, and Germany are often used for this purpose because of their legal strength and treaty networks.
This parent company should make actual decisions, hold board meetings, and have records to prove its leadership role.
Add local entities where you have operations
When your business is active in a country, selling to customers, employing staff, or renting warehouses, you usually need a local presence. This might be a subsidiary or a branch, depending on the nature of the activity.
For example, a Polish company that opens a warehouse in Germany sets up a German company to manage local operations, pay local VAT, and employ warehouse staff. This helps avoid issues with German authorities and allows smoother relations with suppliers.
Local companies must follow local rules, including accounting, employment, and tax reporting.
Be open with banks
Opening bank accounts is often the hardest part of running a cross-border business. Banks want to see clean structures and will ask questions about your group. If they suspect something is hidden or unclear, they may refuse service.
To improve your chances:
- Explain your group structure in simple terms
- Provide ownership documents without delay
- Show contracts, invoices, and business activity
One useful step is to prepare a “group overview” document: a short PDF showing the company structure, activities of each entity, and ownership details.
Stay compliant in every country
Every company in the group needs to:
- Keep records of income and expenses
- File annual financial reports and tax returns
- Declare cross-border payments if required
- Follow anti-money laundering laws, especially for shareholder disclosures
Consider the example of a company working across Estonia, the US, and Switzerland that fails to file required forms in Switzerland, leading to a temporary blacklisting by financial institutions. Simple errors in one country can impact your entire structure.
The solution? Work with local professionals. Use a reliable accountant or lawyer in each country to make sure deadlines are met and documents are filed correctly.
Bottom line
A successful multi-jurisdictional structure is based on good planning, legal clarity, and real business needs. It should reflect how the business actually works, not just where tax rates are lowest. Avoid tricks, shortcuts, and fake companies. Instead, focus on building value in each country where you operate.
Keep ownership transparent, set fair prices for services within the group, and always comply with local laws. These steps will not only keep your business legal but also make it more efficient and respected in the long term.
If you’re planning to expand across borders, get professional advice early. A solid structure can now save you from serious issues later. Always remember: transparency is not a weakness, it’s a smart business choice.
Read our latest article: “What Do Banks Really Look at During KYB Reviews in 2025?” for more industry insights.
If you need support in creating a multi-jurisdictional growth and expansion strategy, you can book a consultation with our experts now.
Disclaimer
Widelia and its affiliates do not provide tax, investment, legal or accounting advice. Material on this page has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, investment, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. Please consult https://widelia.com/disclaimer/ for more information.
