Designing a Holding Structure That Survives Jurisdictional Drift
Tax and regulatory regimes move. Structures should be built to bend, not break. A short note on the design choices that age well.
Holding structures designed to be optimal under today's tax code are by definition fragile. The regimes will move; the structure will not. The design objective should be resilience, not optimality.
Three principles age well. First, prefer treaty-based jurisdictions with broad bilateral networks and a long history of upholding treaty obligations — even where headline tax rates are higher than alternatives. The cost of an unfavourable rate is finite; the cost of being stranded by a treaty rewrite is not.
Second, separate operational entities from holding entities cleanly, and avoid back-to-back arrangements that depend on continued treaty access between two specific jurisdictions to function. If the design only works under one specific treaty pair, it is not a design — it is a bet.
Third, build optionality into beneficial ownership. Trust structures with broad, well-drafted powers of variation, and corporate structures with genuine substance that can be relocated without triggering exit charges, both preserve the ability to respond to regime change without dismantling the underlying arrangement.
We periodically encounter elegant, perfectly optimised structures designed in 2014 that are now badly broken. The structures we have helped design that have aged best are the ones that left some basis points on the table in exchange for the optionality to adapt.
- Prefer broad, durable treaty networks over the lowest headline rate.
- Avoid designs that only work under a single, specific treaty pair.
- Build genuine substance and meaningful powers of variation into the structure from day one.