Holding companies in Spain

Are you wanting to establish yourself in Spain, create a holding company and expand your business in the Spanish market? Holding companies are seen as the ideal solution for all companies in development. To learn more, read the following short summary:

What is a "holding company"?

Generally, a holding company is called a "parent company". This structure allows one (or a group) to hold or control several companies whose interests are the same without needing to appear as the leader of these other companies.

A holding company is the proper formula to use when it comes to Spanish taxation. It can manage investments, financing and patents, it can carry out control actions and assistance for the launch of newly created companies. This type of company can also allow shareholders with a majority stake to increase their authority in managed business affairs.

Moreover, one of its main strengths is the ability to hold numerous stakes. In Spain, when one holds 50% of a holding company that itself holds 50% of the businesses' capital, it controls these companies while actually only holding a quarter of their capital. This share capital (essential to control) can be halved every time another level of holding is added. However, one should obviously find other partners willing to hold the remaining 49.9%. In general, if the holding company does not find associates, it will resort to a loan from the bank.

In the case of a holding company owning the majority of stakes in a subsidiary, the CEO of the single holding company is hierarchically superior to the CEOs of the different subsidiaries of the holding company.

Why should you start a holding company?

Starting this type of company provides significant benefits in terms of taxes. It's a solution that limits income tax by structuring individual assets in a way that encourages reinvestment. There are various reasons pushing the partners or shareholders to put their shares or stakes in a single holding company: - Transfer of business(es) The creation of a principally family holding company is a good alternative for entrepreneurs who want to transmit the units or shares of their companies to their successors or even to their employees whilst entrusting the management of the holding company with one of its heirs. It can also be used to transmit a business as a gift or sale especially to manage the business assets of a leader or even distribute the wealth among family members. - Reorganisation of a group of companies Here the holding company is formed by the transmission input and the stocks and shares of companies already on the market. Setting up a holding company will allow better management of roles within each company of the group as a whole. These companies can improve their management too by entrusting some of the activities to their "parent" company such as treasury and accounting. - Business(es) redemption A holding company enables financing for the redemption of one or more businesses. The investors, in the case, proceed to create the "parent" company by transferring their capital. Subsequently, this last step buys the majority of the capital for each redeemed company by resorting to borrowing.

The tax system for a Spanish ETVE

In Spain, tax benefits are very important. The ETVE "Foreign Investments in Holding Companies" has been set up to attract multinationals: the capital is exempt from tax from when they enter until they leave the country. They only become taxable when they start investing in order to make the business grow. This type of company is actually a "mailbox" i.e. it reaps the benefits of other European subsidiaries. Here is a very good example of expertise when Spain proves itself to be a true tax haven. In 2010, and according to Spanish authorities, the money made thanks to the ETVE accounted for a quarter of foreign direct investment.

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