Reasons for using Holding Companies


Holding companies: selecting a suitable jurisdiction

The first step might be to ask what will be the functions of the holding company and the purpose for using it. Possible reasons for establishing a holding company might include:
a) Withholding tax minimisation
b) Tax-free or tax-deferred disposal of shares
c) Facilitating group activities or functions such as:
i) Financing
ii) Licensing
iii) Group services
iv) Acquisition vehicles, etc.
d) Personal holding companies

The second step might be to ascertain whether onshore or offshore jurisdictions best suit the purpose for setting up a holding company.

Offshore jurisdictions include: Bahamas, Barbados, Bermuda, BVI, Cayman Islands, Isle of Man, Jersey, Labuan, Liechtenstein, Madeira, Mauritius, Seychelles

Onshore jurisdictions in Europe include: Austria, Belgium, Cyprus, Denmark, Luxembourg, Malta, the Netherlands, Spain, Sweden, Switzerland, UK

Onshore jurisdictions outside Europe include: Malaysia, Netherlands Antilles, Singapore

For onshore jurisdictions a careful review of the relevant tax aspects of each country should be carried out including:

* Conditions of participation exemption (if available)
* Taxation of dividends, interest and royalties received
* Taxation of dividends, interest and royalties paid
* Taxation of capital gains on sale of shares
* Withholding taxes under domestic law
* Withholding taxes under treaties
* Capital taxes on increase of share capital

Further work might include considering whether a single holding company or multiple/regional holding companies provide the best solution to a tax-efficient structure for a multi-national group. There are many complex legal and other issues involved besides taxation. Proper advice should be taken well in advance of implementation. For information as to how your group can optimise or mitigate its world-wide tax liabilities, please contact us.