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Date of publication: November 2018

Locating your Holding Company in the UK

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 5 common holding company locations based on these characteristics.

Characteristics of an Ideal Holding Company location

  • Common Language
  • Easy to set up
  • Little or no administrative burden if acting solely as holding company.
  • Wide range of tax treaties which minimise withholding tax on dividends received and paid.
  • Dividend income subject to no or minimal Corporation Tax
  • Sale of Shares in a Subsidiary are exempt or have a reduced rate of tax.
  • Easy access to sources of finance
  • No restrictions on overseas share ownership
  • No requirement for resident director(s)
  • No requirement for Resident Company Secretary.
  • Low rate of Income Tax

The tax treatment of international transactions is a complex issue – professional advice should always be sought.

Comparison of Common Holding Company Locations

  UK Ireland Switzerland* Singapore Hong Kong
Withholding tax on dividends† 0% 0/20%† 0-35% 0% 0%
Corporate taxes on Dividends** 0% 12.5/25% 11.5-24.2%†† 0% 0%
Standard Rate of Corporation Tax** 19% 12.5% 11.5-24.2% 17% 8.25/16.50%
Number of Tax Treaties 133 73 93 89 40
Resident Director? No EU Resident Required/Non Resident Director Bond Yes – Majority of board must be resident Yes No
Resident Shareholder? No No No No No
Other Requirements   Mandatory Company Secretary Mandatory General meetings with participants physically in Switzerland Mandatory Qualified Resident Company Secretary Mandatory Resident Company Secretary

*Rates vary depending upon tax treaties and other conditions, and level of shareholding.
**Rates given will vary depending on location, size of company etc.
Exemptions available for Withholding tax.
†† Relief available where at least 10% of dividend paying company’s share capital is held

Comparison of Commonly Used Company Locations

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.

TAX 5

Disclaimer: This note does not contain a full statement of the law and it does not constitute legal advice.  Please contact us if you have any questions about the information set out above.

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