Formation and Management of International Holding Companies

Holding and intermediate holding companies are companies that hold stakes in other companies, and they make an attractive vehicle for international tax planning. They offer a completely legal way to optimize things like asset management. Big names like Google show how it's done on a grand scale. But for you as an entrepreneur, too, holding structures can be an interesting option with a range of advantages when planned properly.

There are different types of holding companies, and which one suits you best depends on your situation. Mount Bonnell Advisors will gladly help you plan the right one for you. To start, here's a compact overview of the topic.

1What a holding company is and how it's used

As mentioned, holdings are companies whose business is owning stakes in others. In concrete terms, they hold, manage and optimize shares in other partnerships or corporations.

Holding companies have two main sources of income, and understanding them is key to seeing the tax optimization options. Here are two examples:

Profits from shareholdings

Through a holding, you own 50% of the shares in a UK company. That company might, for example, distribute 100,000 euros of the previous year's profit to its shareholders as a dividend. After 25% corporation tax in the country of incorporation (the UK), the holding receives a net dividend of 37,500 euros.

Profits from selling shareholdings

Same scenario: through a holding, you own 50% of the shares in a UK company. The holding then sells its shares to another company. Thanks to the participation exemption, no UK tax is due on the sale proceeds. The sale price of, say, 100,000 euros can be received tax-free, in full.

Other income options for holding companies include loans to the subsidiary, charges for administration, financing costs or license fees. The holding can charge these to the companies it holds stakes in. Always make sure the payments are at arm's length, so they aren't treated as hidden profit distributions.

Keep in mind that all profits are fully taxed in the country where each subsidiary is based before they are distributed to the holding. In other words, a holding company does not reduce operating profits.

2Advantages of different holdings

In this section we take a closer look at three different holding structures that are relevant when the US is involved. We explain what makes each one special and what you should consider up front.

2.1US holding company

Some of the world's largest holding companies and corporate groups are based in the US. That alone puts you in the very best company, quite literally.

From a purely tax perspective, however, a US holding company is not the recommended choice. One reason is that, unlike many other countries, the US has no participation exemption. Sale proceeds are therefore not tax-free.

EU countries apply a participation exemption. If your holding company owns at least 10% of another company for at least 1 year (2 years in some countries) and then sells it, the exemption means those gains are not taxed. The US, by contrast, has no such rule.

In the past, the US taxed the profits of foreign subsidiaries of American companies again. Under today's territorial tax system these are mostly recognized, but with numerous restrictions. Structuring with US holding companies without tax disadvantages is therefore very complex in most cases.

Still, there are several other reasons why a US holding company could be interesting for you as an entrepreneur:

• Confidentiality: Compared with the EU, the US makes far less information about companies public in the company register. Neither the owners nor annual financial statements have to be disclosed. State registers can be searched online, but they often show very little: in Delaware, for example, just the name, formation date and Registered Agent. If privacy matters to you, the US is clearly the better choice over Europe.

• Investors: Investors are another common reason to choose a US holding. Often there are American investors who only want to invest in the US, which makes this kind of structure unavoidable.

• Image: Apple, Amazon and the rest: the list of US-based holdings is long. If you work in certain industries, or image matters to you for other reasons, a company in the States is a real badge of honor.

There's also plenty to consider when choosing the right legal form for your US holding company. The classic American holding, and the most common choice in most of the cases above, is the C Corporation. One important point here is estate tax, which applies to the US C Corporation on the owner's death. The exemption for the estate of a non-US person is only $60,000. Above that, a hefty 40% is due.

Want a US LLC that stays tax-free in the US? Then our sister site zerotax.llc is the right place. It covers the LLC for owners who live outside the US and whose business does not take place in the US: no permanent establishment, no US tax on the profit. This site covers the opposite: companies that genuinely operate in the US, have a permanent establishment there and pay taxes in the US. Both are run by the same firm in Austin, Mount Bonnell Advisors.

2.2International holding company as parent of a US company

This is the option we suggest to all clients of Mount Bonnell Advisors who are thinking about forming a US company but don't want to move to the US themselves.

In this structure, the US venture is held by a holding company abroad. A major advantage concerns estate tax. On the owner's death, the foreign holding remains the owner of the US company's shares, so there's no need to worry about the low $60,000 exemption and the 40% due above it.

In most cases, Europe is the natural home country for the international holding. Of course, places like the Bahamas or other offshore destinations can also be considered. In practice, though, the latter usually come with a number of problems attached and so aren't the first choice. One of these difficulties for offshore companies is credibility. Things like opening a bank account are usually difficult too, since banks reject offshore companies across the board. For these reasons, a holding in Europe is usually the more practical choice.

Another argument for Europe is the participation exemption mentioned above, the exemption for income from shareholdings. With such a holding company it allows the tax-free sale of shareholdings in other companies. So when the US company pays dividends, they are not taxed again in the holding's home country. And you can open accounts for this kind of company without any trouble.

Mount Bonnell Advisors recommends the UK or Malta, for example, for international holding companies that will serve as the parent of a US company. We'll gladly work with you to find the most advantageous structure for your holding plans.

2.3IP holding company

The last holding structure on this page is the IP holding company. An IP holding is dedicated to intellectual property, the intangible assets a business creates. These often make up a substantial share of a company's assets and should therefore be part of its financial planning.

An IP holding company holds intellectual property on behalf of the business, such as patents, designs, know-how, trade secrets and so on, and usually receives all rights to them as well. It is typically used for every transaction connected with these assets. Besides licensing rights, that includes the registration and marketing of the intellectual property. That is why it deserves a place in the strategic planning of your corporate structure. The IP holding is registered as a separate legal entity and acts as the parent company of the operating business.

An IP holding gives a business a range of advantages. Selling licenses can generate new revenue streams . Centralizing the intellectual property makes for efficient administration. If the operating subsidiary is closed, the holding still owns the intellectual property. License fees paid by the operating company to the IP holding company also have a positive tax effect.

IP holdings drew attention some time ago, mainly because of the questionable way several multinationals used them. Tax schemes like those once used by Google and others no longer work today, though. International legal changes such as BEPS, ATAD (Anti Tax Avoidance Directive) and others have put a stop to the frequent abuse of

IP holding companies have been shut down. In the USA, a US C Corporation in Delaware offers a possible, completely legal solution. It can serve as an elegant alternative to an offshore company or similar structure as an IP holding company. The States are of course not a low-tax country. In this case, though, they are an interesting option, because foreign profits are currently taxed at an effective rate of only around 14% (deduction under Section 250 IRC). The previously planned increase of this rate from 2026 was scrapped by the One Big Beautiful Bill Act of 2025. Depending on your country of residence, withholding tax is then due on profits distributed by the Delaware C Corporation. Exempt taxpayers can receive them through salary tax-free.

For an in-depth look at Delaware as a location, see the page Holding in Delaware; how your country of residence affects things is covered in US company and taxes in your country of residence. You'll find an overview of all formation services under Formation.

In short

• A holding company owns and manages shares in other companies. It earns from dividends and sales of stakes, plus loans, management services and licenses for its subsidiaries.
• The subsidiaries' profits are fully taxed in their home state before distribution; a holding is not a tool for minimizing operating profits.
• A US holding rarely pays off for tax purposes, because the US has no participation exemption. The case for one rests on confidentiality, investors and image; with a C Corporation, the estate tax exemption for foreigners is only $60,000.
• An international holding, for example in the UK or Malta, as parent of the US company solves the estate tax issue and brings the participation exemption with it.
• Old tax-saving schemes using IP holdings no longer work since BEPS and ATAD; a Delaware C Corporation is a legal alternative.

How we help you

• Delaware holdingThe holding above your US companies, with one consolidated tax return.
• Tax structureA clean structure between parent company and US subsidiary, or between you and your US company, coordinated with your accountant.
• Form a CorporationThe US corporation (Inc) for growth, investors and your visa.
• US blocker for real estateBuying US property through a US C Corporation with a UK holding company.
• Company formation consultationEntity type, state and tax consequences, before you commit.