For your businesses, irrespective of whether it operates on a international basis or just in a specific local market, one of your main objectives is likely to be the minimization of your tax liabilities. Within an global context, holding companies are often a viable means for implementing, directing , and adjusting tax reducing strategies.

What is a holding company

A holding company is an independent legal or business entity formed with the principle purpose of holding (long-term) investments in domestic and foreign subsidiaries. These investments are, the primary assets of a typical holding company, and its predominant activities are, therefore, generally restricted to controlling, and financing the relevant business operations. The operations, themselves, are not usually centralized.

Groping investments in different companies under a common holding company can serve several different purposes. The most common can be categorized into the following types of holding companies, management , financial, divisional, intermediate, family, and foreign. Although these signify a single primary purpose, in practice, dual-purpose holding companies combining two of the above elements are also common.

Other Factors

The decisions made concerning the organization and structure of foreign business activities can be dictated by both tax and non-tax reasons. There are a number of of non-tax factors that could influence the organizational structure and the location of the holding company. Primary factors include the stability of the foreign government and stability of its tax regime, the existence of exchange controls or import quotas, restrictions on foreign investment, the risk of property expropriation, the presence of stable banking facilities, the existence of adequate communication facilities. It is therefore prudent that the future structure should no entirely be based on tax considerations and that all the relevant non-tax factors should also be considered.

Case Studies

Using a UK Holding Company in International Tax Planning- Case study: China