When you start or already own a private limited company (B.V.), you often come across the term holding structure. But what exactly does it mean, and why do so many entrepreneurs, from startups to experienced directors-major shareholders (DGAs), choose such a setup?
A holding structure consists of two or more B.V.s, where you as an entrepreneur are the indirect owner of your operating company (or companies) through a personal holding B.V. This provides tax benefits, asset protection, and flexibility in business operations.
What is a holding?
A holding is a B.V. that holds shares in other companies (usually operating companies). Other common terms include parent company, management company, or investment company. The holding typically does not carry out operational activities itself but is involved in managing shareholdings, retaining profit reserves or assets (such as real estate or IP), and providing loans to affiliated companies.
What does a holding structure look like?
A standard structure consists of:
- A holding B.V., where valuable assets are placed. This company holds 100% of the shares in the operating company.
- An operating company, where the business activities take place. This is where the entrepreneurial risk lies.
As a DGA, you own the shares in the holding, which in turn owns the shares in the operating company. This creates a two-tier structure that offers legal protection and tax opportunities.
Why set up a holding structure?
Often, the structure is established right at the start of a business. You first set up a holding and then an operating company in which the holding holds the shares. Do you already have a sole proprietorship? You can contribute it into an operating company and immediately set up a holding structure. This does require careful tax guidance, for example to use the tax-neutral transfer facility and avoid immediate taxation.
Do you expect profit or growth in the near future (such as selling part of a business)? Then it’s usually wise to set up the structure in advance.
Benefits and additional advantages of a holding structure
A holding structure offers attractive tax advantages:
- Participation exemption: Profit distributed as dividends from the operating company to the holding is tax-free. You only pay tax in Box 2 when distributing to your personal account.
- Tax-free sale of shares: If the holding sells a qualifying participation (usually ≥5%), the profit remains untaxed within the holding. A direct sale by a natural person would be taxed in Box 2.
- Fiscal unity: With a ≥95% shareholding, a fiscal unity for corporate income tax can be formed. This allows you to offset profits and losses within the group.
- Customary salary at holding level: With multiple operating companies, you don’t need to take a salary in each B.V. separately; the assessment is made at holding level.
- Flexibility for investments: From the holding, you can invest, provide loans, build up a pension, or act as a management company. Note that loans to private individuals must meet business conditions (keep the Excessive Borrowing Act in mind).
Are there also drawbacks?
A holding structure also has some considerations:
- Higher setup costs: You need at least two B.V.s and sometimes additional deeds, for example when contributing an existing business.
- More administrative burden: Each B.V. must have its own accounting and annual accounts. Transactions between B.V.s must be recorded correctly.
- Harder to set up afterwards: Establishing a holding later is more complex and may result in taxation on hidden reserves or goodwill.
Is it right for your business?
A holding structure is not just for large companies. Even as a startup, it can be smart to benefit from tax advantages and limit risks. Do you expect growth, profit, or are you working in a high-risk sector? Then it pays to arrange this in advance.
At Brand Boekhouders, we are happy to help you think through the right structure for your business. We guide you through the entire process, tax, administrative, and in cooperation with the notary.
