International Holding Company Structure and Benefits

An offshore holding company structure can minimize your corporate tax liabilities in a very desirable way. International holding company benefits together with corporate tax planning can in many cases be the crucial factor that helps companies to reach their business goal and maximize profits for the shareholders.

A holding company is a legal entity, such as a firm, business or organization, which owns a controlling majority of the outstanding shares issued by another company. The company’s structure generally precludes it from manufacturing, distributing, selling or supporting the goods or services of the subordinate company. It does not engage in any active business operations of its own. This enables the holding company to reduce some of the risk and responsibilities of owning the business. Because the holding company owns the majority of a company’s outstanding shares and voting rights, it can influence the company’s board of directors and management policies.

Benefits with Holding Company Structure

An increasing number of companies are creating international holding companies to reduce their tax liabilities. The jurisdiction in which a holding company is organized may also provide additional tax planning benefits. Creating and registering a holding company in Sweden enables a business to maximize its profits and minimize expenses. Sweden has several favorable corporate tax regulations. Although the country is known for its high marginal tax rate on individuals, Sweden has a favorable tax structure for businesses. Companies can obtain a more favorable tax rate than is possible in other countries. This is particularly true when it comes to benefits with holding company structure organized out of Sweden.

The normal corporate tax rate on a company is 26.3 percent; however, Swedish regulations provide two key tax benefits to holding companies. The dividend payments on the stock that they own in other companies are tax-exempt. When a holding company sells shares in one of its companies, capital gains related to the sale may be eligible for a tax exemption. There is the possibility that no tax consequences will be triggered when capital investment shares are converted into business related shares. Because a holding company is considered a regular company, it falls under the auspices of general tax laws. As a result, the holding company has other benefits. The holding company may also be eligible for a withholding tax exemption on its interest, royalty and dividend payments. Sweden maintains double taxation treaties with over 80 nations and in general does not have thin capitalization rules.

In addition to favorable tax treatment, holding companies can be formed without a stamp duty and incorporation tax. The process required to establish a holding company is less complicated than in other jurisdictions. As a result, Sweden is increasingly becoming the popular choice for international business groups that want to decrease their overall tax expenses.

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