Separating risks
Isolating property and resources from the operating business, which is the part exposed to business risk.
Companies · Group structure
Holding and property companies
A holding company is not a way to pay less tax: it is a way to separate risks, organise a group and prepare a handover. The tax benefits exist, but they are a consequence of the structure, not the reason for it.
01 · The structure
What holding and property companies are
It is a company that holds shareholdings in other companies, rather than carrying on an operating business directly. The individual shareholders own the holding company, and the holding company owns the operating companies.
A property company (società patrimoniale) is a different arrangement but often associated with it: a company that holds real estate or other assets, keeping them separate from the business.
| Direct shareholding | With a holding company | |
|---|---|---|
| Who owns the operating companies | The individual shareholders | The holding company |
| Who receives the dividends | The shareholders, taxed on what they receive | The holding company, under the partial exclusion regime |
| Reinvesting profits | After personal taxation | At holding level, before personal taxation |
| Selling a subsidiary | Capital gain taxed on the shareholder | Participation exemption regime, where the requirements are met |
| Governance | Directly on the shareholders | Concentrated, with agreements at holding level |
| Structure costs | None extra | One more company to manage |
The main advantage is not the tax rate: it is deferral. Profits passed up to the holding company are taxed at a much reduced level and can be reinvested without going through the shareholder's personal taxation, which happens only when the money actually goes out to the individual.
02 · The objectives
The reasons for setting one up
They are organisational and asset-related reasons before they are tax reasons, and they are what make the structure defensible.
Organising a group
When there is more than one business, the holding company provides a single structure and simplifies governance.
Preparing the next generation
Transferring holding company shares is simpler and more gradual than transferring operating businesses.
Managing several shareholders
Shareholder agreements and rules at holding level, without touching the operating companies.
Reinvesting
Profits from the operating companies are concentrated in the holding company and fund new ventures without leaving the corporate perimeter.
Preparing a sale
The participation exemption regime, where the requirements are met, lightens the tax on selling the subsidiary.
03 · The regimes
How a holding company is taxed
Two regimes make a holding company attractive, both subject to precise conditions.
Dividends
Dividends received by a limited company count towards taxable income only for a reduced share: this is the mechanism that allows efficient reinvestment.
Participation exemption
Capital gains on the sale of shareholdings are largely exempt, where the requirements are met: a minimum holding period, classification among fixed assets, the residence of the subsidiary and its carrying on a commercial business.
Tax consolidation
It allows profits and losses of group companies to be offset against each other, subject to an election and its own requirements.
When personal taxation applies
It comes when the holding company distributes to its individual shareholders: at that point the rules on dividends apply.
The participation exemption requirements
They need checking beforehand, not at the time of sale.
- A minimum uninterrupted period of holding the shareholding
- Classification among financial fixed assets from the first financial statements
- The subsidiary resident in a country without a preferential tax regime
- The subsidiary actually carrying on a commercial business
04 · Property
The company that holds property
Separating property from the operating business is one of the most requested transactions, and one of the most delicate.
- The main benefit is protection: the property is not liable for the debts of the operating business.
- The separation is achieved by contribution, demerger or sale, each with different consequences.
- The property company pays IMU (the municipal property tax) and has its own rules on deducting interest and depreciation.
- Non-operating companies are subject to specific, penalising rules that need to be checked.
- The rent charged to the operating company must be at a fair level: token amounts can be challenged.
- The structure has recurring running costs that must be weighed against the benefits.
The rules on non-operating companies are the most concrete risk for a property company: a company that holds property without producing adequate revenue can be treated as a shell company (società di comodo), with a presumed minimum income and limits on using its VAT credit.
05 · The routes
How you get to a holding company
If you already have an operating company, you do not start from scratch: you have to reshape the existing structure, and there are several ways to do it.
- Contributing the shareholdings to a new company, with the tax-neutral regimes available where the conditions are met.
- Demerger of the existing company, separating the shareholdings or the property. See extraordinary transactions.
- Setting up the holding company from scratch and then buying the shareholdings.
- Each route has different tax consequences: the choice makes a difference.
- You need to check the effect on banking relationships and on the security already given.
- The step must be documented with solid economic reasons other than tax.
06 · What to weigh up
The risks and costs to take into account
A holding company is not free and it is not always the right answer.
- Abuse of law (abuso del diritto, the general anti-avoidance rule): transactions with no economic substance, aimed only at a tax advantage, can be challenged.
- Recurring costs: one more company means financial statements, tax returns, obligations, and possibly a supervisory body.
- Shell companies: the penalising rules hit anyone who holds assets without adequate revenue.
- Complexity: the structure must be managed competently, and mistakes cost more than in a single company.
- Rigidity: taking a holding company apart is more complex than setting it up.
- Minimum size: below a certain level of assets and income, the costs outweigh the benefits.
The question to ask is not "is a holding company worth it" but "what problem am I trying to solve". If the answer is protecting property, separating risks or passing the business to the next generation, the structure makes sense. If the answer is only saving tax, the structure is fragile exactly where it needs to be solid.
Frequently asked
The questions that keep coming up
Does a holding company mean paying less tax?
It does not reduce the overall tax rate: it moves the point at which the individual shareholder is taxed. Profits passed up to the holding company are taxed at a much reduced level and can be reinvested; personal taxation comes when the money goes out to the shareholder.
The advantage is therefore deferral and efficient reinvestment, not an absolute saving. Anyone who sets up a holding company to draw everything out straight away gains nothing.
At what size does it make sense?
There is no fixed threshold, but the recurring costs (financial statements, tax returns, obligations, a possible supervisory body) must be weighed against the concrete benefits.
If the aim is to protect property of significant value, organise several businesses or prepare to pass the business on, the structure can be justified even when things are not huge. If it is only deferral on modest profits, often not.
Can I put property into a separate company?
Yes, and it is one of the most requested transactions: it isolates the property from the risk of the operating business. It is done by contribution, demerger or sale, each with different tax consequences to assess.
Watch out, however, for the rules on non-operating companies: a property company that does not produce adequate revenue can be treated as a shell company, with a presumed minimum income and limits on the VAT credit.
Am I at risk of challenges?
If the structure meets real economic needs (protecting assets, organising a group, passing the business on) it is fully legitimate and defensible.
The risk of abuse of law concerns transactions with no economic substance, built only to obtain an undue tax advantage. That is why the documentation of the non-tax reasons must be put together at the start, not after a challenge has been made.
Let's talk
Without a real economic reason, the structure is fragile
The abuse of law rules target precisely those transactions built only for the tax advantage. We start from the objective, not the scheme.