A holding company can be established and used to hold the shares of subsidiaries located in high tax countries. Most high tax countries require tax to be withheld on dividends to be paid to non-residents, so attention should be paid to the availability of the double-tax-avoidance treaty between the country where the subsidiary is located and where the holding company is established.
Where a person is domiciled outside the territory and owns assets located in that territory (for instance, property), then such assets may be protected against inheritance tax and higher rates of taxation by holding the assets through an investment company. A high net worth individual with properties or other assets in a number of countries may wish to hold these through the medium of a personal holding company so that upon his demise the need to obtain probate in each country is avoided. This saves legal fees and avoids publicity.
Many of the difficulties and expenses associated with an investment in overseas property, such as holiday villas, may be avoided through the use of a company to hold the title of the property. Sales of the property at a future date can be dealt with quickly and easily by the sale of the company shares to the purchaser. This also saves legal fees and overseas transfer and value-added taxes levied by certain foreign countries. It can also be used to successfully avoid capital gains and inheritance taxes.
If a holding company is registered in a suitable jurisdiction with appropriate double-tax avoidance treaties in place with the owners’ home jurisdiction, such holding company may be used to hold shares in various trading companies owned by the same owner. Such layout would provide for fully or nearly tax-free repatriation of trading profits directly to the beneficial owner of the companies.
