You must be aware of three things when choosing a right jurisdiction for a holding company:<\/p>\n
(a) Taxation of incoming dividends;<\/p>\n
(b) Corporate income tax on received dividends;<\/p>\n
(c) Taxation of ongoing dividends.<\/p>\n
a) Incoming dividends from a subsidiary company must be either exempted from withholding tax or be subject to the convenient tax rate (i.e. 5%-10%<\/em>). This can be achieved by having in place a convention for avoidance of double taxation (DTA<\/em>) between two states where the parent company and the subsidiary are located.<\/p>\n If the parent and subsidiary companies are located in the EU member states no withholding tax is levied on such dividends from the subsidiary according to the EU parent\/subsidiary directive. This rule applies where the parent company holds more than 10% of stake in its subsidiary.<\/p>\n b) As the common rule the funds received by the parent company from its subsidiary as dividends are subject to the corporate tax of such parent company. It is vital for the holding jurisdiction that the funds received as dividends are exempted from corporate tax or reduced through tax credit method.<\/p>\n The Netherlands, for instance, apply the \u2018participation exemption rules\u2019 the gist of which is to exempt incoming funds from the subsidiary from taxation on the parent company level. Nevertheless, the \u2018participation exemption rules\u2019 apply if the following conditions are met: the Dutch holding must own at least 5% of shares of its subsidiary, such shares must be held from the beginning of fiscal year, the subsidiary profit must be taxed, the parent company must be actively involved in the business of its subsidiary, and the subsidiary must not be a \u2018tax exempt portfolio investment company\u2019.<\/p>\n Another good example is Singaporean fiscal policy of taxation of incoming dividends. Singapore operates both exemption and credit methods under the DTA regimes and solely credit method where there is no DTA signed. Depending on the terms of DTA dividends may be exempted from the corporate tax. Alternatively the full value of the tax paid in other jurisdiction (including withholding tax on dividends<\/em>) is credited against Singaporean corporate tax which is assessed on the whole foreign profit. If the foreign tax credit exceeds Singapore corporate tax rate no further tax is levied. If no DTA signed between Singapore and dividends remitting jurisdiction tax credit is allowed for dividends incoming from the subsidiary where the parent company holds 25% of shares.<\/p>\n c) If the beneficiary is domiciled in different jurisdiction than the holding jurisdiction it is of the essence that the ongoing dividends are subject to low tax rate. As it has been seen above under the EU parent\/subsidiary directive no taxes will be levied in the dividends flow within the EU jurisdictions. Another option is to choose a jurisdiction with an extensive network of DTAs or even a jurisdiction with one-tier tax system such as Singapore. One-tier tax system means that taxes are paid only once and on the company level, i.e. no withholding taxes are levied on the outgoing dividends.<\/p>\n The Netherlands and Singapore are the jurisdictions which satisfy the aforesaid criteria. Moreover there are no capital gain taxes in both jurisdictions.\u00a0Holding\u00a0companies\u00a0of these jurisdictions\u00a0are considered as the most\u00a0respectable\u00a0ones\u00a0due to\u00a0sustained\u00a0law,\u00a0developed financial system and\u00a0economic stability.\u00a0By cause of the\u00a0geographic location Dutch companies\u00a0are more frequently used\u00a0for investments\u00a0in Europe\u00a0while\u00a0Singaporean\u00a0in Asia. Nonetheless,\u00a0both of\u00a0these\u00a0jurisdictions\u00a0are applicable\u00a0for use\u00a0in almost any\u00a0part of the world.<\/p>\n","protected":false},"excerpt":{"rendered":" You must be aware of three things when choosing a right jurisdiction for a holding company: (a) Taxation of incoming dividends; (b) Corporate income tax on received dividends; (c) Taxation of ongoing dividends. a) Incoming dividends from a subsidiary company must be either exempted from withholding tax or be subject to the convenient tax rate […]<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":77,"menu_order":0,"comment_status":"closed","ping_status":"open","template":"","meta":{"om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0},"_links":{"self":[{"href":"https:\/\/pari-passu.net\/index.php?rest_route=\/wp\/v2\/pages\/205"}],"collection":[{"href":"https:\/\/pari-passu.net\/index.php?rest_route=\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/pari-passu.net\/index.php?rest_route=\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/pari-passu.net\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/pari-passu.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=205"}],"version-history":[{"count":3,"href":"https:\/\/pari-passu.net\/index.php?rest_route=\/wp\/v2\/pages\/205\/revisions"}],"predecessor-version":[{"id":370,"href":"https:\/\/pari-passu.net\/index.php?rest_route=\/wp\/v2\/pages\/205\/revisions\/370"}],"up":[{"embeddable":true,"href":"https:\/\/pari-passu.net\/index.php?rest_route=\/wp\/v2\/pages\/77"}],"wp:attachment":[{"href":"https:\/\/pari-passu.net\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=205"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}