Limits to Tax Planning

S. 115 1. Introduction

“A holding company structure, together with various tax planning techniques, can be an important aspect of more comprehensive tax planning employed by the “best-in-class” multinational enterprises and is often integral to the company’s global tax strategy”.

Many reasons may lead to the setting up of a holding company. However, the most typical motives for establishing a holding company are ownership of affiliates or subsidiaries in different jurisdictions, i.e. shareholding or participation in group companies and centralization of management. Therefore, a holding company in an intermediary jurisdiction allows an entity to hold and manage its investments in foreign subsidiaries .

A pure holding company is confined to managing and holding investments only, while a mixed holding company can also engage in other commercial activities. Often a holding company combines the holding of investments with intellectual property (IP) activity, i.e. the development, management and exploitation of IP as well as financing and treasury activities . Therefore, a holding company is a sort of headquarters for a multinational enterprise (hereinafter MNE).

Apart from the above, the followin...