When does it make sense to move your company to another jurisdiction?

A company may outgrow the jurisdiction where it was originally incorporated. Entering a regulated market, attracting investment or relocating management may require a new corporate structure. However, moving solely for a lower tax rate often creates additional costs and risks. Assets, employees, licences and contracts do not automatically move with the company. Before starting the process, businesses should compare redomiciliation, cross-border conversion, merger and the creation of a new entity. In this article, we explain when relocation is justified and when retaining the existing structure is safer.

What does moving a company to another jurisdiction mean?

Moving a company does not always involve the same legal procedure. The appropriate mechanism depends on the laws of both countries, the business form and the need to preserve the existing legal entity.

Four main options are commonly used:

1. Redomiciliation. The company moves its registered office and becomes subject to the law of another country while retaining its legal personality, assets and liabilities.
2. Cross-border conversion. The company changes its national legal form without liquidation. In the EU, this procedure is governed by Directive (EU) 2019/2121, subject to the requirements of the participating states.
3. Cross-border merger. The existing company merges with a new or existing foreign entity. Its assets and liabilities transfer to the successor.
4. Creating a new company. The business transfers its assets, contracts, personnel and operations to a new entity, while the original company remains or is liquidated.

Direct redomiciliation is possible only if permitted by both the departure and destination jurisdictions. It may also require shareholder approval, creditor notification, confirmation of no outstanding debts and registration in a new legal form.

Corporate relocation must be distinguished from a change in tax residence. Re-registration does not guarantee that tax residence in the former country will end. According to the OECD, tax residence is determined under each jurisdiction’s domestic law, so a company may meet the criteria of several countries.

If management, personnel and key decisions remain in the former country, tax residence or a permanent establishment may remain there. Corporate relocation therefore requires a separate review of management, operations and tax consequences.

When does moving to another jurisdiction make sense?

Relocation is justified when the current jurisdiction limits business growth and the new country offers a proven advantage that cannot be achieved through a branch, subsidiary or operational changes. A lower tax rate alone is insufficient.

Changing jurisdiction may be practical if the company:

• Moves its main operations, management and employees to another country;
• Enters a market requiring a local entity or regulatory authorisation;
• Cannot maintain banking or payment infrastructure in its current country;
• Seeks a licence allowing cross-border services or passporting;
• Attracts investors requiring clear company law and a specific holding structure;
• Moves IP, technology or operational functions closer to its key team;
• Faces unstable regulation or disproportionate compliance costs;
• Prepares for M&A, a funding round or a future sale;
• Needs more predictable governance, shareholder protection and dispute resolution.

Market access is often decisive for a regulated company. EU freedom of establishment makes it easier for companies from Member States to operate across the Union. 

Relocation can also align registration with actual operations. If directors, employees, customers and infrastructure are already in another country, matching the corporate structure to the business may simplify substance, payroll, tax reporting and regulatory supervision.

The benefit must be measurable. Before proceeding, the company should confirm access to the required licence, bank accounts, personnel and tax status. If these remain uncertain, relocation may only add another jurisdiction and increase costs.

What legal routes are available?

The relocation method depends on whether both countries allow the legal entity to continue and which assets must move. There is no universal procedure.

Redomiciliation

The company changes its country of registration without liquidation and retains its legal personality. Its assets, debts and corporate history usually remain with it. The procedure requires compatible laws in both jurisdictions and may involve shareholder approval, creditor protection and confirmation of tax status.

Cross-border conversion or merger

Through a conversion, the company adopts a legal form available in the destination country without ceasing to exist. A cross-border merger transfers all assets and liabilities to an acquiring or newly formed company.

EU rules provide for cross-border conversions and mergers involving most limited liability companies from different Member States. The process includes preparing draft terms, disclosures and protections for shareholders, employees and creditors.

New holding or operating company

If redomiciliation is unavailable, the owners may create a foreign holding or operating company. The new entity acquires shares in the existing company or receives its assets, contracts and operations.

This option preserves the existing entity for local activities but creates additional reporting, transfer pricing and governance obligations. Assets and IP must be transferred at a supportable value and may trigger tax.

Business transfer and closure

A company may transfer its business to a new entity, settle its liabilities and then liquidate. This requires separate arrangements for:

• Transferring contracts and obtaining consents;
• Transferring employees;
• Selling assets and IP;
• Reissuing licences and registrations;
• Notifying customers and providers;
• Settling debts and taxes.

This model is suitable when preserving the existing entity is impossible or undesirable. However, it often disrupts operational continuity because licences, accounts and contracts do not transfer automatically. The chosen mechanism should reflect legal continuity, tax cost and required approvals.

What are the tax consequences of relocation?

Corporate relocation may create a tax liability before the company earns any proceeds from selling assets. A tax model should therefore cover the departure country, destination jurisdiction and owners.

Exit tax and asset transfers

Exit tax may apply when a state loses the right to tax future gains after the transfer of assets, tax residence, business or a permanent establishment. It is generally based on the difference between the assets’ market value and tax value.

Article 5 of Directive (EU) 2016/1164 sets exit tax rules for certain transfers within the EU and to third countries. For eligible transfers to another EU or EEA state, payment may be made in instalments over five years. However, the departure state may require guarantees and terminate the deferral in specified circumstances.

Separate analysis is required when transferring:

• IP, software and trademarks;
• Shares in subsidiaries;
• Customer contracts and goodwill;
• Inventory and equipment;
• Intra-group loans;
• Functions, risks and personnel.

Transactions between related companies must follow the arm’s length principle. The OECD Transfer Pricing Guidelines provide the international standard for pricing cross-border related-party transactions.

Residence and continuing tax exposure

Even after redomiciliation, the former country may continue treating the company as tax resident or recognise its remaining operations as a permanent establishment. The review should cover management, employees, offices, contracts and actual decision-making.

Withholding tax, VAT, customs, payroll, CFC rules and the transfer of tax losses must also be assessed. Reliefs and losses do not always survive a conversion or merger. The final structure should show the future tax rate, one-off exit tax, payment timing and total relocation cost.

What happens to licences, contracts and bank accounts?

Retaining legal personality does not guarantee that the entire operational infrastructure will continue without further action. Each licence, contract and registration must be reviewed separately.

Licences and regulatory approvals

A regulated company must determine whether its licence permits redomiciliation, a change of legal form or transfer of its registered office. 

The regulator may require:

• Prior approval or notification;
• Reassessment of shareholders and beneficial owners;
• Evidence of capital, substance and local management;
• An updated business plan and compliance framework;
• A new licence in the destination country;
• A wind-down plan for the former jurisdiction.

Even if a cross-border conversion preserves the legal entity, its authorisation may be territorially limited. Continuing regulated activities before regulatory confirmation is risky.

Contracts and operational infrastructure

In the EU, a cross-border conversion generally preserves the company’s legal personality, assets and liabilities, as confirmed by the official EU portal. However, a contract may contain a clause covering changes in jurisdiction, legal form, tax residence or control. This may allow the counterparty to require consent, revise terms or terminate the agreement.

Banks and payment providers may also repeat KYC checks. They will assess the new country, ownership, directors, source of funds, tax residence and revised business model. Retaining the same company number does not require a financial institution to continue service.

The company should also review:

• VAT, customs and payroll registrations;
• Insurance and security interests;
• Leases and supplier agreements;
• IP registrations and domain ownership;
• Employment arrangements and social contributions;
• Data transfers and local storage requirements.

Before completing the relocation, the company should obtain critical approvals and prepare a continuity plan. If a licence, bank account or key contract remains unconfirmed, closing should be delayed or made subject to an appropriate condition precedent.

When does relocation create more risk than value?

Relocation is not worthwhile if it only changes the country of registration without solving operational or regulatory problems. A more complex ownership structure may increase costs without improving access to markets, banks or tax reliefs.

Key warning signs include:

• The decision is based only on a lower corporate tax rate;
• Directors, employees and core operations will remain in the former country;
• The new jurisdiction requires substance the company cannot provide;
• The existing licence will not continue and a new one is unconfirmed;
• Banks and payment providers will not support the new structure;
• Material contracts require consent that has not been obtained;
• Exit tax and transaction costs exceed expected savings;
• The move restricts tax losses or financing arrangements;
• Unresolved debts, investigations or creditor claims exist;
• The structure is created immediately before a sale or distribution without an independent commercial purpose.

Additional risk arises if relocation is used to avoid creditors, employees, tax authorities or regulatory supervision. Competent authorities may examine the transaction’s commercial purpose and refuse the required pre-conversion certificate where there are signs of abuse or fraud.

Moving the entire company is not always necessary. A subsidiary or branch may be sufficient for a new market, while a local operating entity can obtain the required licence. A holding structure may also accommodate an investor without transferring every contract, employee and asset.

The final decision should include a downside scenario: what happens if the licence, bank account or tax relief is unavailable? If the business cannot operate without them, relocation should not begin before the necessary confirmations are obtained. Keeping the existing company and creating a local entity may be cheaper and better protect operational continuity.

How should a company prepare for relocation?

Preparation should begin before any formal relocation decision. The company must confirm that the selected mechanism is available and will not disrupt business continuity.

Key steps include:

1. Compare redomiciliation, conversion, merger and creating a new entity.
2. Review corporate, tax, licensing and insolvency restrictions in both countries.
3. Calculate exit tax, transfer costs and future compliance expenses.
4. Determine the treatment of assets, contracts, employees, licences and accounts.
5. Obtain consents from regulators, creditors, banks and key counterparties.
6. Prepare corporate approvals, migration documents and statutory filings.
7. Establish management, personnel, premises and substance in the new country.
8. Create a transition plan with responsible persons and deadlines.

The plan should set the relocation date, transfer of records and actions required if a regulator or provider refuses approval. Compliance must continue in the former jurisdiction until the procedure is complete. The company should not stop filings, tax payments or licence obligations merely because migration has begun.

How Key2Law supports company relocation

The Key2Law team advises international businesses on company relocation and corporate restructuring. We align commercial objectives with the requirements of both jurisdictions to preserve operations and avoid relying on unconfirmed tax or regulatory benefits.

When preparing a relocation, Key2Law can:

• Compare available jurisdictions and migration routes;
• Assess whether redomiciliation or cross-border conversion is available;
• Evaluate corporate, tax and regulatory consequences;
• Determine local substance and management requirements;
• Review licences, contracts and banking relationships;
• Prepare corporate approvals and transfer documents;
• Coordinate notifications and registrations;
• Develop a transition and operational continuity plan.

If the current jurisdiction limits your company’s growth, contact Key2Law before creating a new structure or transferring assets. We will help select a lawful mechanism, assess the risks and complete the relocation without losing key contracts, authorisations or control of the business.

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This article is provided for general informational purposes and does not constitute legal, tax or financial advice. Applicable requirements depend on the jurisdiction and specific circumstances; professional advice should be obtained before making legal or business decisions.