The concern of every business person and/or entrepreneur is to continue advancing and evolving in their business.
Sometimes, there is the opportunity to invest in other sectors more or less related to the usual one that allow diversifying the activity and the risk as an entrepreneur.
But… do entrepreneurs really know how to organize their business assets?
The answer to this question is called: Corporate Holding.
To create a Holding company you do not need a turnover of millions of euros or a multinational activity, it is enough to have differentiated business sectors, to want to optimize fiscal and business resources and a business consultancy that can guide you along the way. AG Asesoría y Gestoría can be your travel companion, if you decide to create your Holding Company with us.
What is a Holding Company?
A Holding Company serves to manage various business activities from a parent company. This parent company allows to have control of the rest of the subsidiaries without the need of having the totality of their capital. It would be necessary to control at least half of its capital, and if the businessman wants to access the tax consolidation and take advantage of the tax benefits, he must control 75% of the capital if the company is not listed and 70% if it is a listed company.
The Holding Company allows diversifying the responsibility of the entrepreneur, since each line of business would have a different investee company. It is a very flexible figure, since it allows the entry and exit of partners as needed.
All transactions between partners and/or partners and company are known as related-party transactions and there is a commercial obligation to document them and value them at market prices, but in the case of the Holding Company, this obligation disappears, making intra-group transactions more flexible and easier.
How is a Holding Company constituted?
In reality, the incorporation of a holding company is not very different from any other limited liability company or corporation. It is required to go through the notary and registry office, to pay the corresponding regional taxes and to present your census form to the tax office.
When it comes to shaping the statutes of a Holding Company, it is necessary to pay special attention to the dividend distribution policy, to the purchase and sale of shares and the corresponding entries and exits of partners, and to properly establish the management and control bodies of the company and their remuneration.
What are the tax advantages of a Holding Company?
The main tax advantage lies in the possibility of opting for the tax consolidation regime in the Corporate Income Tax, this would allow the establishment of a taxpayer as a unit and the compensation of the profits of one sector with the losses of another.
Double taxation in corporate income tax could be avoided as neither the distribution of dividends nor the sale of shares affects the holding company for tax purposes.
The Holding’s business structure would facilitate the generational handover. The parent company would be the holding company of the rest of the subsidiary companies, and the Holding Company would have a special reduction of 95% in Inheritance and Gift Tax.
Finally, as the Holding Company maintains economic activity, it would be exempt from paying Wealth Tax.
As you can see, the Holding Company is all advantages and it is not an exclusive figure of the big companies. Any small businessman can set up his mini Business Holding Company and start benefiting from its features, if he has the right professional help from specialized business advisors.