Use of holding companies in international tax planning

Abstract

Foreign operating subsidiaries are often held through a foreign holding company by a US or non-US multinational group. Many international practitioners praise the merits of holding companies, and indeed they can provide numerous advantages in multinational corporate tax planning. The benefits of holding companies are described, both in the context of outbound planning and inbound planning. Some of the pitfalls of using holding companies in international tax planning are explored, and the structures and planning techniques that are most typically used are analyzed. The anti-treaty shopping measures potentially applicable to a foreign holding company that receives distributions from a US subsidiary are also discussed.