Benefit from all the advantages of an offshore holding company
An offshore holding company is a business entity that holds shares in one or more companies with the aim of controlling and managing them. With such a structure, you can therefore receive dividends from the owned companies and benefit from the resulting tax advantages.
In addition, by creating a holding company, you will have access to financing opportunities from financial institutions. In this case, the tax benefit lies in the reduction of interest to be paid or in the exemption of tax on interest received.
Offshore holding company: choosing the right location
Choosing the right jurisdiction is essential when setting up an offshore holding company. Indeed, tax conditions vary from one jurisdiction to another, and a poor decision may harm your investment.
The choice of location should not be based solely on tax benefits; the flexibility of the legal system must also be considered. Several countries offer highly attractive tax regimes for hosting holding companies.
Today, all European Union member states provide favorable tax regimes for the establishment of holding companies in their territories.
These regimes most often provide for the exemption of dividends from subsidiaries and capital gains from the sale of shares.
The Netherlands, for example, has introduced a system known as the “participation exemption.” This regime allows for the exemption of dividends and capital gains from the sale of shares. Investors are particularly drawn to the Netherlands because of this flexible system.
Under the July 1929 law, Luxembourg offers a regime that exempts all taxes on holding companies. Luxembourg also provides a regime for financial companies, known as “SOPARFI” (Société de Participation Financière), which exempts dividends and capital gains from taxation.
Belgium, for its part, has adopted a tax system that excludes up to 95% of dividends from participations from the taxable base, provided that these dividends come from companies subject to normal taxation. This regime also provides for the exemption of capital gains on the sale of such shares.
Finally, a few years ago—in 2002—the United Kingdom established a system exempting capital gains on the sale of participations.
And what about tax havens?
Tax havens also offer highly favorable tax conditions to encourage the creation of offshore companies. They enable many offshore activities such as insurance services, banking or financial operations, management and consulting services, and wealth management.
By facilitating the establishment of headquarters operations, they provide the following advantages:
- Shifting profits from international business operations into a more favorable jurisdiction than that of the operator,
- Setting up shell companies to cover taxable income such as royalties and dividends from subsidiaries,
- Locating profit margins through transfer pricing mechanisms.
Intermediate holding companies: a good solution for international tax optimization
Any business is entitled to invest in a country that has not signed a tax treaty with its home country. However, the tax implications of such an investment can be disadvantageous.
It is therefore possible to set up an offshore intermediate holding company in a jurisdiction that has favorable bilateral tax treaties with both countries involved in your business operations.
A very concrete example is Cyprus. This country has signed several bilateral agreements with former USSR states and Eastern European countries. Cypriot jurisdiction thus offers many advantages for investors seeking to expand into these countries under attractive tax conditions (including tax audit considerations).
This is why Cyprus is one of the most popular destinations for investors. Bank accounts, moreover, can currently be opened in different jurisdictions.
At ICD Fiduciaries, we will guide you toward the best jurisdiction for the creation of your holding company. We do everything possible to ensure you benefit from a much more favorable tax regime.
Submit your project to us—we will meet your needs.
If you have any questions, we are at your full disposal.
Wealth management: a business model worth studying closely
To build significant wealth, for example to prepare for retirement, many people wish to set up a real estate investment company (SCI). However, like any investment, creating an SCI holding requires careful thought and expertise to avoid mistakes. Indeed, it is important to know that in the event of SCI debt, the partners’ real estate assets may be at risk.
Entrust your wealth management to a professional to optimize your income
Although setting up an SCI is simple in practice, it is still preferable to call on an independent wealth management firm that will guide you through the process.
To do so, contact a consulting firm specializing in this field, rather than one focused solely on selling financial products. Thanks to its expertise, such a firm will help you build your wealth by setting up a holding company, but not only that. It will also advise you on reducing inheritance costs and taking advantage of various valuable tax benefits.
By turning to a wealth management professional, you reduce risks and can enjoy your wealth with peace of mind.
How to create a holding company?
Definition of a holding company
A holding company is a group of investors organized as partners and/or shareholders with the aim of holding stakes in other companies, and possibly providing services to those companies.
Difference between a passive and an active holding company
A passive holding does not intervene in the companies it holds. Conversely, an active holding, also called a “parent holding company,” does intervene in its subsidiaries. This intervention may take various forms: decision-making, administrative services, financial services, accounting, legal services, or subsidiary oversight.
Advantages of creating a holding company
Once a holding company owns more than 5% of a company’s shares, the dividends are exempt from corporate tax.
Similarly, after two years, capital gains from share disposals are tax-exempt.
Moreover, a holding can take out a loan to acquire shares. The dividends received can then be used to repay the loan. This solution is very practical for quickly increasing investments.
It is also worth noting that interest can be deducted from the holding company’s activity, which may be very advantageous for certain forms of holdings.
Creating a holding is also useful when one wishes to continue controlling a company without having to directly hold the majority of its shares. The idea is to create a holding company in which one holds more than 50% of the shares, and this holding itself owns more than 50% of another company. Additional holdings can even be added to the structure.
Who to contact to create a holding?
There are specialized service providers like us for the creation of holding companies. You can contact us to benefit from the expertise of a professional who will guide you through your project.
Read more:
– Offshore Wealth Management – way to grow your assets,
– Tax effective International Trading Structures,
– How to create an Offshore Company.
