Advantages of using a Dutch holding company
Sooner or later 85% of the entrepreneurs who set up a BV also set up a holding company. The reason is that there are many advantages to using a holding company, as a corporate shareholder of your operational company. The flexibility, protection and tax benefits make a holding company an interesting tool.
What is a holding company?
A holding company is really just a BV (Private Limited Company). The holding company is simply the parent company within a group. This means that the holding usually holds 100% of the shares in the subsidiary; the operating company. There can also be multiple subsidiaries. The unique aspect of a holding company is that no activities take place (at all!). All activities take place in the subsidiary.
What are the benefits?
One of these reasons is to exclude personal liability for debts of the BV. The BV is therefore usually only liable for these debts itself. But often that is little comfort. If the BV has valuable assets on its balance sheet, you can imagine that a bankruptcy can hurt, despite the fact that your private assets spring from the dance. Do you think that is part of doing business and taking risks? Wrong! You can arrange it even better for yourself. You can place your valuable assets (including A business property, patents, software, surplus liquid assets) in a separate holding company above your BV. This holding company will not carry out any activities, but will give the operating company the right to use these assets. On balance, you can now do whatever you want, but you have separated your high-risk daily operation from your valuable assets, minimizing your risks.
Bankruptcy of the operating company
Imagine that, after sleepless nights full of worrying, you decide to set up a BV. After advice from your environment, you choose this legal form because you want to minimize the risk of losing your own valuables - such as your house and your car, for example. Before you set up the BV, you will hear from a friend that his BV, a garage company, has gone bankrupt. The curator has seized all cars, but he has also lost the large garage building. Although you start an electronics store and not a garage, you decide to take his hopeless 'I wish you' advice to heart and set up addition to a BV. After 5 years, your company has had its best time. Yields are low and debts keep rising. Imagine that your software and the business premises were still in the Operational Company; you would have lost that now. In principle, if the operating company goes bankrupt, the creditors cannot access the assets of the holding company.
The participation exemption prevents profit, which has previously been taxed at the subsidiary, from being taxed at the parent company again. This concerns, for example, the profit that arises when the mother sells the shares in the subsidiary, or the dividend that the parent company receives from the subsidiary.
You have a BV (operating company) without Holding.
You sell this BV.
Then the profit from the sale of your company comes to the income and you probably pay 25% income tax on the profit. The result: you immediately lose a fairly large part of the income from your company.
You have a holding company.
This holding company owns the shares of the operating company BV.
Then the sales proceeds of your shares will go to your holding company. A holding company does not pay tax on this. A holding company is in most cases exempt from tax on the realized profit when the shares in the operating company are sold. Result: you can continue to do business with the money in your holding company or use the amount in a tax-favorable way for your retirement provision.
So if after a few years of doing business you sell your interest in a company for € 1 million, you have to make sure that you do that from a holding company. That way you do not pay any tax on that purchase price and you can use it to further invest and do business from your holding company. If you do not do this, and if you receive the purchase price in private, you must immediately pay income tax on it (25% if your interest is 5% or more). It is therefore very fiscally advantageous to use a holding company. However, please note: this arrangement only applies if the parent company holds at least 5% of the shares in the operating company.