Holding company benefits
Offshore holding company – whose activities are limited to the investment or management of the property. The company does not fulfil the normal commercial and trading activities. Holding company status requirements vary depending on the country, for example, Liechtenstein, Luxembourg, Nauru and the Netherland.
An offshore holding corporation structure can reduce your corporate tax liabilities in an attractive way for target. International holding company benefits are incredible crucial factor that helps companies to reach their business goal and maximize profits for the shareholders. In this case very important is tax planning structure of for offshore business.
As an international business company (IBC), an offshore holding corporation enjoys the rights, powers and benefits of an offshore company. The offshore holding company can engage in any legitimate business in addition to its holding functions, can trade anywhere in the world, is a legal person that exercises the same rights of a natural person and is able to open and manage accounts, enter contracts, invest, pursue legal proceedings, take loans, acquire real property and undergo legal charges or claims.
Offshore companies investments
Offshore corporations often hold investments in subsidiaries and/or associated companies, publicly quoted and private companies, as well as joint venture projects. Capital gains arising from the disposal of particular investments can be made without taxation. In the case of dividend payments, reduced levels of tax on income can be achieved by utilizing an offshore holding company incorporated in a zero or low tax jurisdiction that has double tax agreements with the contracting state.
Many large corporations are interested in investing in countries where no double tax agreement exists between the country of the investor and the country in which they are investing. In this case, an intermediary company is established in a jurisdiction with a suitable treaty.
For a country to be an attractive location in which to set up an offshore holding company four criteria must be satisfied:
- Incoming Dividends: Incoming dividends remitted by the subsidiary to the holding company must either be exempted from or subject to low withholding tax rates in the subsidiary’s jurisdiction.
- Dividend Income Received: Dividend income received by the holding company from the subsidiary must either be exempted from or subject to low corporate income tax rates in the holding company’s jurisdiction.
- Capital Gains Tax on Sale of Shares: Profits realized by the offshore holding company on the sale of shares in the subsidiary must either be exempt from or subject to a low rate of capital gains tax in the holding company’s jurisdiction.
- Outgoing Dividends: Outgoing dividends paid by the offshore holding company to the ultimate parent corporation must either be exempt from or subject to low withholding tax rates in the holding company’s jurisdiction.
The following jurisdictions are best qualified for the holding company formation purposes: Luxembourg, Netherlands, Belgium, Sweden, Austria and Norway.
Many large corporations and companies investing in countries which do not have double taxation agreements, with the investor’s country, setting up (set up) an interim company in a jurisdiction with a suitable treaty.
Offshore holding company helps to control your international business. Company Express helps to incorporate and handle a new company. Our solutions also include readymade companies.
Offshore Company Types
- International Business Company (IBC) – these are offshore companies that enjoy a statutory tax exemption in the jurisdiction of incorporation Belize IBC, BVI Company and Seychelles IBC.
- Low Tax Offshore Company – these are offshore companies found in offshore jurisdictions that enjoy a low statutory or effective rate of taxation.
- Limited Liability Company (LLC) – the LLC is a fiscally transparent company that allows income and tax liability to pass through to its members (Nevis LLC).
- Limited Liability Partnership (LLP) – this is a fiscally transparent entity that may be operating without attracting tax in the jurisdiction of formation.
- Onshore Company – these are companies that are incorporated in jurisdictions that either have a territorial tax regime, for example Hong Kong, or that offer some other incentives whereby the company can be used in a structure to achieve a low overall effective rate of taxation for the structure.