A holding is a company, which owns shares (or ownership interest) of other (foreign) companies. Holding activity consists of owning the corporative rights and managing subsidiary enterprises. The profit for a holding is the profit from its subsidiary establishments.
The important goal of tax planning is selecting a jurisdiction for a holding registration in such a way that tax losses as income flows from the initial to final beneficiary are at its lowest.
The country for holding registration should match the following requirements:
- Dividends received from subsidiary enterprises should either be completely free from taxes or be taxable at fallback rates in the residence country of the subsidiary enterprises. So, the country of the holding registration should have a Double Taxation Avoidance Agreement with those countries where the subsidiary enterprises are registered
- The holding’s profit in the form of dividends should be either completely profit tax free or the tax rate should be minimal
- As a result of share sale or sale of ownership interest there should not be any capital gains tax or it should be minimal in the country of the holding residence
- Dividends paid by the holding to the final beneficiaries should be tax free or minimal