Advising Holding Company Structure

During a recent meeting with a Client, whose business is trading in automotive tires and spare parts – (both wholesale and retail), I understood that the Client had operations in Europe, Middle East and Africa. These operations were managed by independent legal entities and had no relation to one and other except sharing a common ownership. After reviewing the scale of operations, I briefed the client on how he could create value in his business by incorporating a Holding Company. This Holding company will be based in a tax efficient jurisdiction and will hold the shares of the entities based in Europe, Middle East and Africa.

The objective of the Holding Company was to consolidate the value of the entire business operations and to negotiate favorable banking facilities for the client. Over time, the shares of the Holding Company would be listed on a stock exchange and this could be the exit strategy for the client.

I had been assigned with the task to advise the jurisdiction of the holding company in any of the major financial hubs such as New York, London or Singapore with rationale.

Since the group’s investments are scattered in various countries in Africa, Middle East and Europe, I had to study the parameters in each country such as, Conducive business environment, Network of bilateral investment protection (BIPA), Stable policies, Domestic tax law regulations, Tax treaty network, Banking, Tax and Non Tax considerations, Cost involved in setting up and maintaining the Holding Company and other factors such as availability of service providers, skilled personnel and the Time zone.

While analyzing the Holding company Jurisdiction features, I understood that Singapore is better than New York and London jurisdictions in terms of Tax treaty network, tax free Dividend flow, cost of setting up and maintaining the Holding company etc.

I had made comparison of key parameters of holding company jurisdictions, summary of Tax analysis indicative costs, road map of go to structure and indicative cash flow for various options starting with profit before tax, applying prevailing rate of tax, jurisdiction wise and net distributable dividend in hand for the shareholder.

After thorough analysis, my advise to the client was to create a two layer structure. One holding company in Mauritius for all Africa & Middle East entities and another Holding company in Netherlands for European and Lebanon based entities. Above that the apex Holding Company in Singapore with the Mauritius and Netherlands Companies as subsidiaries.

To complete the process, I had included the migration procedure, steps for migration and the road map with indicative cost.