Formation of a family holding company

Creating a holding company provides an efficient organisational, management and tax structure. Its purpose is to bring all your companies together under a single entity where shared general expenses are centralised to reduce costs. The holding company manages and oversees the shareholdings in its subsidiaries and provides certain intra-group services to the companies that carry out the group’s various business activities, which are coordinated from the holding company’s headquarters.

If you are considering setting up a holding company, it is important to understand the requirements you must meet.

• Corporate purpose and main assets: The main purpose of the holding company must be the ownership of shares or interests in other companies and their management and administration.
• Management and control purpose: The holding company must be primarily aimed at directing and managing the subsidiaries. This involves taking strategic and operational decisions. It is also advisable for the holding company to centralise general services for the group and provide those services to the subsidiaries.
• Economic activity: The holding company must carry out an economic activity. Otherwise, it would be classed as a passive asset company. In addition, it must hold more than 5% of the capital of one or more subsidiaries in order to benefit from the tax advantages available to this type of company.
• Clear organisation of personnel and resources: The company must have a clear and well-defined structure of human and material resources to manage the subsidiaries effectively and to provide centralised services to them.

In Corporation Tax

• 95% exemption on dividends received from subsidiaries if certain conditions are met.

• The entity receiving the dividends must hold a direct or indirect stake of at least 5% in the subsidiary.
• The holding must have been maintained continuously for at least one year on the date the dividends are distributed.

• 95% exemption on capital gains generated from the sale of shareholdings held by the parent company in its subsidiaries, provided certain conditions are met.

• The entity receiving the dividends must hold a direct or indirect stake of at least 5% in the subsidiary.
• The holding must have been maintained continuously for at least one year on the date the dividends are distributed.

• Possibility of opting for the special consolidated taxation regime for Corporation Tax if the required conditions are met.

• The participation between the entities must be equal to or greater than 75%.
• All entities must be resident in Spain, although some exceptions exist.
• The consolidation must be approved by the Board of Directors or an equivalent body.

In Inheritance and Gift Tax

• 95% reduction in Inheritance and Gift Tax for all companies in the group if the required conditions are met, as noted above.

In Wealth Tax

• Exemption from Wealth Tax on the shareholdings of a holding company, provided certain conditions are met.
• The entity must not be classified as a passive asset company.
• The taxpayer must hold at least 5% of the share capital individually or 20% at family level.
• The taxpayer must carry out management duties in the company and receive remuneration representing more than 50% of their total income. If the participation requirement is met at family level, only one family member needs to meet this condition.