Holding company tax considerations

For businesses expanding internationally, or funds and other entities making international acquisitions, an important consideration is the corporate holding structure for the business and the location of the entities used to own and operate the expanding business.

While tax efficiency is a factor in the use of holding companies, there are also sound business reasons such as consolidating management, ring-fencing business divisions and administrative convenience. In addition, lenders will often require the use of holding companies as this can make it easier to enforce and realise security in the event of a default.

The location of the underlying business activities and the ultimate shareholders will usually be fixed, but there is often a degree of flexibility regarding the location of holding companies. Many commercial factors are also relevant to this issue, including the nature of the business and its customer base, the location of key management and employees and access to finance and other support services, but taxation and tax efficiency is often also an important consideration. However, companies established in a particular jurisdiction wholly or mainly for tax reasons are increasingly unlikely to achieve the anticipated