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:
Advantages Available to UK Holding Companies
Tax Treaty Network
Tax Exemption for Foreign Income Dividends
Small companies are companies with less than 50 employees that meet one or both of the financial criteria below:
turnover less than €10 million
balance sheet total of less than €10 million
companies receive a full
exemption from the taxation of foreign income dividends if these are
from a territory which has a double taxation agreement with the
Medium and Large Companies
A full exemption from taxation of foreign dividends will apply if the dividend falls into one of several classes of exempt dividend. The most relevant classes are:
paid by a
company that is controlled by the
dividends paid in respect of ordinary share capital that is non redeemable
most portfolio dividends
dividends derived from transactions not designed to reduce tax
Capital Gains Tax
There is no capital gains tax on disposals by a trading company or by a member of a trading group. This relates to the disposal of all or part of a substantial shareholding in another trading company, or the disposal of the holding company of a trading group or sub-group.
To have a substantial shareholding, a company must have owned at least 10% of the ordinary shares in the company and to have held these for a continuous period of 12 months during the two years before disposal.
To qualify for this exemption, the investing company must still be a trading company or a member of a trading group immediately after the disposal. If it is no longer a trading company or member of a trading group, dissolution of the holding company should proceed immediately, in order to qualify for the exemption.
Sale of Shares in the Holding Company
No Withholding Taxes
No Minimum Paid up Share Capital
There is no minimum paid up share capital for normal limited companies in the
In the event that a client wishes to use a public company, the minimum issued share capital is £50,000, of which 25% must be paid up. Public companies are normally only used for substantial activities.
EXAMPLE OF THE USE OF A UK HOLDING COMPANY
example, where the trading company is situated in the EU,
When these dividends are received by the
Dividends can therefore be paid to the