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UK Holding Company Multinational's Jurisdiction of Choice
Ideal Characteristics for the Location of an International Holding Company
The location of a holding company is an important consideration in any international structure where there is a desire to minimise the tax charged on the income flow. Ideally the company should be resident in a jurisdiction which:
- has a good double tax treaty network, thereby minimising withholding taxes on dividends received
exempts dividend income from taxation
- does not charge capital gains tax on the disposal of subsidiaries
- does not impose withholding taxes on distributions from the holding company to its parent or shareholders
- does not impose capital gains tax on profits arising from the sale of shares in the holding company by non-resident shareholders
- does not impose capital duties on share capital
- does not have a minimum paid up share capital.
UK holding companies can benefit from all of the above.
UK resident holding companies are subject to UK corporation tax levied on the taxable profits at the rate of 20% from April 2015, plus VAT and payroll taxes.
There are two principal exemptions:
- Substantial shareholding exemption: a disposal by the holding company of shares held in a subsidiary will be exempt for UK tax, providing the holding company held an equity interest of more than 10% in that subsidiary for a continuous period of 12 months or more before the disposal, which includes tax on any capital gain on the disposal.
- Worldwide dividend exemption: dividends and any other distributions from both UK and non-UK subsidiaries to the holding company are exempt from UK tax.
While the payment of dividends is not deductible, the receipt of dividends by a UK holding company from a non-UK subsidiary may be exempt from any withholding tax, by virtue of the UK’s double taxation treaties and the EU Parent Subsidiary Directive.