Updated
GL-H-06
Glossary · Structures and trusts
Holding company - a company that owns rather than trades
A company that does not run a business itself — it only owns stakes in other companies. Why: asset protection, tax optimisation, easier group management. Popular in Cyprus, the Netherlands, Luxembourg, and Malta.
01 / In 30 seconds
The short answer
- What it is
- A company that owns stakes in other companies and assets
- What it does
- Owns and manages, but carries on no operating activity
- Why
- Structuring a group, taxes, inheritance
- What to take into account
- Substance, CFC rules and exchange of information
- Can you prepare
- Yes: choose the jurisdiction and ensure presence
02 / In plain words
What Holding company means
A holding company is a company that owns stakes in other companies and assets but carries on no operating activity itself: it does not sell goods or provide services. Its job is to hold and manage: to accumulate dividends, own real estate and intellectual property, and structure a group of companies.
Why a holding is created: convenience in managing a group, optimising taxes on dividends and capital gains (in jurisdictions with preferential regimes and a network of tax treaties), asset protection and simpler inheritance. A properly built holding can lawfully reduce a group’s tax burden.
But modern rules call for caution: without real presence (substance), a holding risks being deemed an “empty shell” and its income taxed in the owner’s country through CFC rules. Data on the structure are visible through the exchange of information. That is why a holding is built with real presence, transparent ownership and the taxes calculated, not as a screen.
A case from practice
An entrepreneur structures a group through a holding that accumulates the subsidiaries’ dividends. With a real office and management on the spot and a network of tax treaties, the holding lawfully reduces the tax on dividends. Without substance, the same income would have been taxed on them under CFC rules.
Why a holding is needed
- Structuring a group of companies
- Accumulating dividends
- Owning real estate and IP
- Optimising the group’s taxes
- Asset protection
- Simplifying inheritance
03 / What it covers
How a holding is structured
What it does
- Owns stakes
- Holds assets
- Carries on no operations
Why
- Taxes on dividends
- Capital gains
- Inheritance
Substance
- Real presence
- Management on the spot
- Against shells
Keep in mind
- CFC rules
- Exchange of information
- Disclosing the beneficial owner
04 / How it works
How to build a holding
Define the purpose and the group
Which companies and assets go into the group, and why.
Choose the jurisdiction and regime
A country with a favourable regime and tax treaties.
Ensure substance
An office, directors and decisions in the holding's country.
Take account of CFC rules and exchange
We check how the owner's country will view the holding.
A lawful structure
The structure works and stands up to scrutiny.
05 / Key facts
What you need to know
01What it does
Owns shares and assets
It receives dividends from subsidiaries and holds property and rights, but sells no goods or services.
02Why
Control, tax, succession
It makes the group easier to run and to pass on, and can lawfully reduce tax on dividends.
03Where
Treaty jurisdictions
Cyprus, the Netherlands, Luxembourg, Malta: favourable regimes and a wide network of tax treaties.
04Key condition
Real substance
Without an office and local management the holding is treated as a shell and its income is taxed in the owner's hands under CFC rules.
Common mistakes
Setting up a shell holding
Provide an office, directors and decisions made locally.
Choosing a country for low tax alone
Look at the treaty network and the CFC rules of the owner's country.
Not disclosing the beneficial owner
Disclose the owner to banks and registers: the structure is visible through information exchange anyway.
06 / Expert advice
How to prepare in advance
A holding is built with real presence, transparent ownership and the taxes calculated: the jurisdiction is chosen for the purpose and its network of tax treaties, substance is ensured, and the CFC rules of the country of residence and the exchange of information are taken into account. Then the holding lawfully optimises the group’s burden rather than becoming a risk of additional assessments.
What we do for you. We build holding structures lawfully: we choose the jurisdiction for the purpose and its tax treaties, ensure substance and take CFC rules and exchange into account. That way the holding optimises the group’s burden and protects assets rather than creating risks.
Dmitry NagyTax consultant, international taxation and compliance (ex-Big4)
07 / Questions
Frequently asked questions
It owns stakes in other companies and assets and manages them, but carries on no operating activity itself — it does not sell goods or provide services.
For structuring a group, optimising taxes on dividends and gains, protecting assets and simplifying inheritance.
Yes. Without real presence a holding risks being deemed an empty shell and its income taxed in the owner’s country under CFC rules.
A properly built one can lawfully reduce a group’s burden through regimes and tax treaties. But only with substance and transparency.
By the purpose, taking into account tax treaties, substance requirements and the CFC rules of your residence. We choose the optimal structure.
Yes, through the exchange of information and beneficial ownership registers. That is why a holding is built transparently, not as a screen.
Related terms
INITIAL ASSESSMENT
Tell us what outcome your family needs
We will design a solution for your case, choose the country and the right status, and take the whole process through to the result.
