Structuring

Holding Structure

Definition

A company which holds shares of another company or many companies (subsidiaries). Often referred to as a parent company. It can also own real estate or other property. A holding company, if from the appropriate jurisdiction, may lower or completely eliminate withholding tax on incoming and outgoing dividends as well as capital gains.

Holding Company benefits

0% tax on incoming dividends

Exemption of Corporate Income Tax on incoming dividends from subsidiary companies is available in many European jurisdictions.

Cyprus, Latvia, Netherlands, Malta, Hungary

0% tax on outgoing dividends

0% withholding tax on outgoing dividends paid out from the holding company to shareholders (non-resident individuals or non-resident companies).

Cyprus, Hong-Kong, Latvia, Singapore, Ireland, Hungary

Confidentiality of beneficial owner

Offshore companies, trusts and foundations are often used for this purpose. Prestigious EU jurisdictions can establish confidential trust companies for inheritance and non-disclosure purposes

Austrian and Irish Family Funds, or Dutch STAK. Contact us for details.

0% capital gains tax on sale of shares

Capital gains tax on sale of shares is exempted in many European jurisdictions.

Cyprus, Latvia, Netherlands, Malta, Hungary

How does it work?

In order to apply Double Tax Treaties or EU Parent Subsidiary Directive to lower or eliminate tax on dividends, the holding company must

be a tax resident company (must be able to present a tax resident certificate)
follow requirements of the participation exemption (if such exist) imposed by the holding jurisdiction on
minimum period of ownership
minimum % shares on ownership
level of corporate income tax in the jurisdiction of the subsidiary (tax test)

Compare holding companies

	Incoming dividends	Outgoing dividends
LATVIA	0% corporate taxReceived by a Latvian company from resident and non-resident companies (except offshore companies).	0% withholding tax0% for non-resident corporate shareholders 0% for resident corporate shareholders 10% for individuals
CYPRUS	0% corporate taxif min. 50% of the subsidiary income is trading income, andsubsidiary is subject to at least 5% tax in its own jurisdiction.	0% withholding tax0% for non-resident corporate shareholders 0% for resident corporate shareholders 0% for individuals
NETHERLANDS	0% corporate tax Under Participation Exemption conditions: Dutch Holding Company holds minimum 5% of subsidiary’s shares; Subsidiary is a trading company or subsidiary is not held as a portfolio investment; Subsidiary is subject to “tax test” – minimum 10% corporate tax rate; Subsidiary is subject to “asset test” – passive assets must be less than 50%.	0% withholding taxUnder EU Parent Subsidiary Directive and/or whenParticipation Exemption applies. 15% in other cases, but structuring is possible.
SINGAPORE	0% corporate taxIf dividends arrive from jurisdiction with minimum 15% corporate tax.	0% withholding tax 0% for non-resident corporate shareholders 0% for resident corporate shareholders 0% for individuals
MALTA	0% corporate taxIf Maltese company holds at least 10% of foreign company shares;OR has investments in a subsidiary company for a minimum amount of 1.5 million eurosForeign subsidiary must be: incorporated in EU, OR, pay >15% corporate tax in any country, OR, at least 50% of its income derives from trading	0% withholding tax 0% for non-resident corporate shareholders 0% for resident corporate shareholders 0% for individuals