Slough Office: Herschel House,
58 Herschel Street, Slough SL1 1PG
London Office: 10 John Street,
London WC1N 2EB
Slough Office: Herschel House,
58 Herschel Street, Slough SL1 1PG
London Office: 10 John Street,
London WC1N 2EB
Deciding where to locate your group’s holding company is a major decision which may have a significant impact on the group’s tax position. This guide examines the key characteristics of an Ideal Holding Company and compares 6 common holding company locations based on these characteristics.
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The tax treatment of international transactions is a complex issue – professional advice should always be sought.
| UK | Ireland | Switzerland* | Singapore | Hong Kong | Delaware C Corp | |
|---|---|---|---|---|---|---|
| Withholding Tax on Dividends | 0% | 0/20%† | 0-35% | 0% | 0% | 0% |
| Corporate Taxes on Dividends** | 0% | 12.5/25% | 11.9-21%†† | 0% | 0% | 0% |
| Standard Rate of Corporation Tax** | 19-25% | 12.5% | 11.5-24.2% | 17% | 8.25/16.50% | 8.7% |
| Capital Gains Tax on Disposal of a Subsidiary | 0%ˆ | 0%ˆ | 0%ˆˆ | No CGT | No CGT | 0% |
| Number of Tax Treaties | 154 | 76 | 93 | 89 | 40 | 58 |
| Resident Director? | No | EU Resident Required/Non Resident Director Bond | Yes – Majority of board must be resident | Yes | No | No |
| Resident Shareholder? | No | No | No | No | No | No |
| Tax Relief on Disposal of Shares in Subsidiary? | Exempt, if share in subsidiary is more than 10% and held for more than a year | Exempt, if share in subsidiary is more than 5%, held for more than one year and the company is resident in the EU or there is a double tax treaty. | Participation reduction, if share in subsidiary is at least 10% and held for more than 1 year. The relief is a percentage reduction based on net participation income and taxable income. | Exempt, if share in subsidiary is more than 20% and has been held for more than 2 years. | No tax on capital gains. | No exemption for shareholdings. |
| R&D Tax Credits | 33%/13% cash back for activity conducted anywhere in the world | 25% cash back for eligible expenditure. Limited to tax already paid | No tax credit available, permits a 50% additional deduction for qualifying Swiss Costs. | No tax credit available, qualifying companies may apply for a reduction or exemption in the applicable tax rate. | No tax credit available, some categories of expenditure may qualify for an additional 100/200% deduction. | 20% Tax credit based on qualified research expenditure. |
| Other IP Reliefs | Patent box – 10% tax rate on Patented Intellectual Property (IP) | IP Regime – Capital allowances on qualifying IP expenditure may be offset against up to 80% of relevant IP profits. Knowledge Box – 6.25% tax rate on assets resulting from qualifying R&D. | Patent box – income from Patented IP exempt from tax up to a maximum of 90%. Requires the IP to have arisen from previously incurred R&D expenditure. | Intellectual Property Development Incentive – Approved companies are eligible for a tax rate of 5/10% on qualifying income from IP. | No other IP reliefs available | No other IP reliefs available |
*Rates vary depending upon tax treaties and other conditions, and level of shareholding.
**Rates given will vary depending on location, size of company etc.
ˆRelief available when held for 1 year with 10%+ share capital held
ˆˆ Relief available when held for 12 continuous months with 5%+ share capital held
†Exemptions available for withholding tax.
†† Relief available where at least 10% of dividend paying company’s share capital is held
Frequently a holding company will not use an ideal location whether that be due to a desire for a simple group structure or lack of knowledge about the available options. Below is a comparison of some of the more typical locations used:
| UK | USA | Australia | Germany | Netherlands | |
|---|---|---|---|---|---|
| Withholding tax on dividends† | 0% | 0-30% | 0-30% | 0-25% | 0-15% |
| Corporate taxes on Dividends** | 0% | Federal 21% State 1-12% Average 25.7% |
0% | 0% | 0% |
| Standard Rate of Corporation Tax** | 19-25% | Federal 21% State 1-12% Average 25.7% |
30% | ~30.82%* | 25.8%. Lower rate of 19% for first €200,000 |
| Number of Tax Treaties | 154 | 58 | 45 | 96 | 97 |
| Resident Director? | No | No | Yes | No | No but majority Dutch resident for tax purposes |
| Resident Shareholder? | No | No | No | No | No |
| Other Requirements | Registered Agent resident in relevant state. | Resident Company Secretary, Written permission to use registered address | Minimum Capital for GmbH €25,000 UG €1 but must transfer 25% to reserves until GmbH level is reached |
*German tax is a mixture of federal (15%) and state (varies, average 15.82%) tax
**Rates given will vary depending on location, size of company etc.
† Withholding tax varies based on the location of the recipient and in some cases the level of shareholding.
Frequently a holding company will not use an ideal location whether that be due to a desire for a simple group structure or lack of knowledge about the available options. Below is a comparison of some of the more typical locations used:
| UK | USA | Australia | Germany | Netherlands | |
|---|---|---|---|---|---|
| Withholding tax on dividends† | 0% | 0-30% | 0-30% | 0-25% | 0-15% |
| Corporate taxes on Dividends** | 0% | Federal 21% State 1-12% Average 25.7% |
0% | 0% | 0% |
| Standard Rate of Corporation Tax** | 19% | Federal 21% State 1-12% Average 25.7% |
30% | ~30.82%* | 20/25% |
| Number of Tax Treaties | 133 | 58 | 45 | 96 | 97 |
| Resident Director? | No | No | Yes | No | No but majority Dutch resident for tax purposes |
| Resident Shareholder? | No | No | No | No | No |
| Other Requirements | Registered Agent resident in relevant state. | Resident Company Secretary, Written permission to use registered address | Minimum Capital for GmbH €25,000 UG €1 but must transfer 25% to reserves until GmbH level is reached |
*German tax is a mixture of federal (15%) and state (varies, average 15.82%) tax
**Rates given will vary depending on location, size of company etc.
† Withholding tax varies based on the location of the recipient and in some cases the level of shareholding.
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