The holding company: what you need to know

What is a holding company?

A holding company is a private limited company (BV) with the role of ‘parent company’. The holding company has one or more ‘subsidiaries’. No work is often done in the holding BV. That happens at the subsidiary BV: the operating company. A parent company may have one or more subsidiary BVs.

The holding BV and the subsidiaries together form a group. Such a set-up is called a holding structure. The purpose of the holding company is to hold assets. These include shares in one or more other BVs, but also, for example, a company office and profits.

Advantages of a holding company

You can use a holding company to spread risks and get tax benefits. 

Less risk of losing money

You use the operating company for business activities that involve risks. Like making products, giving advice, fulfilling orders, and hiring employees. The holding company is used for ‘keeping’ important assets, such as a company building or machinery, or profits.

With business, you run risks. Think of angry customers who want their money back. Or businesses that do not keep to agreements in contracts. Perhaps your BV cannot repay a loan to the bank as a result. In the worst case, you have to stop your business and the BV goes bankrupt.

Do you not have a holding company? Then your business assets and your company are in one BV. If the BV goes bankrupt, an administrator sells all assets, such as a company building, furniture, and equipment. The receiver divides the proceeds among the creditors.

Do you have a holding company and an operating company? Then the parent company is the owner of the assets, such as a company building, furniture, and equipment. If the operating company goes bankrupt, the liquidator cannot sell those assets.

 

 

Increasing wealth with less risk

The holding company's profit consists of the operating company's receipts minus expenses. On the profit, the holding company pays corporate income tax. Depending on the amount of profit, this is 19% or 25.8%.

You can keep the amount remaining after paying corporate income tax in the holding company. You can thus build up assets outside the operating company in which you run entrepreneurial risk. For example, to use for future investments from the holding company.

No double customary salary scheme

You are a director and major shareholder if you work in a private limited company and have more than 5% of the shares. This applies to shares you own yourself, but also to shares you hold through your holding company. It does not matter what position you hold in the BV: you do not have to be a manager director to be a DGA.

The Netherlands Tax Administration states that in 2025, as a director and major shareholder, you must pay yourself a minimum salary of €56,000. You also pay wage tax on that salary. That is the customary pay scheme.

Are you a director of 2 private limited companies without a holding structure? Then you should always get that double salary. But are you a director of one or more private limited companies in a holding construction? Then you can ensure that the customary salary scheme only applies to the holding company. So then you only have to pay €56,000 to yourself once. This way, you pay less wage tax.

How to arrange this? Make sure you are employed by your holding company. The holding company hires you out to the operating company or operating companies as a manager. For this, the operating company pays a management fee to the holding company. The holding company pays your salary from the management fee received.

You put these agreements in a management agreement. The contract also specifies the management fee the holding company will charge the operating company each month for your work. The amount of the management fee is up to you. It must be sufficient to cover the costs of the holding BV, including your salary.

Easily sell individual parts

A holding structure makes it easier to sell business units separately. You do not have to sell all parts of your business at once. If you only have one private limited company, it is more difficult.

For example, you can keep your business premises in the holding company and sell all the shares of the operating company. You can then lease the commercial building from your holding company to the buyer of the operating company.

If you only have one private limited company, this is more difficult. If you choose to sell all the shares of the private limited company, you will be selling everything that is currently ‘in the private limited company’. This includes the commercial building, for example.

Fiscal unity

Does your holding company own at least 95% of the shares in the operating company? If so, you can form a fiscal unity between your holding company and the operating company.

This means that the profits and losses of your companies can be added together and distributed in the most advantageous way. This ‘offsetting’ often results in tax savings.

More than one shareholder in the operating company

If you have a private limited company with a business partner, the company has 2 shareholders: you and your business partner. You may have different private situations and a different way of spending money. Yet you still have to make the same choice about distributing profits.

If you and your business partner each hold the shares of the operating company in your own holding company, you can distribute the profit to each other's holding company. You can then decide for yourselves whether to take the profit out of your own holding company and pay income tax on it or leave it in your holding company tax-free.

Intermediate holding company

Sometimes it is useful to have another private limited company between the holding company and the operating company. This private limited company is then called an intermediate holding. The holding company then holds the shares in the intermediate holding, and the intermediate holding is the sole shareholder of the operating company.

This approach is useful when you work with other entrepreneurs, for example. The personal holdings of all the entrepreneurs together are shareholders of the intermediate holding company. The intermediate holding company can be the owner of the business premises. And the business activities take place in the operating company.

In this form, even if you work with several business partners, you can ensure that the business assets are separate from the business activities and the risks are spread.

Disadvantages of a holding company

Creating a holding structure is more expensive and results in more administration.

Higher costs

With a holding structure you have at least 2 private limited companies. That is more expensive than setting up one. You also have double the costs for those 2 companies every year. For example, for drawing up 2 financial statements instead of one.

Administration

Two private limited companies means more paperwork. You have to keep records for both companies and record the transactions between the holding company and the operating company very precisely. That takes more time and effort than with one private limited company.

Many holding companies hire a specialist to help them, such as an accountant. That costs money.

Considering a holding company? Keep the following in mind

Are you thinking about setting up a holding company with one or more operating companies? Then keep the following points in mind.

Not always protected

A holding structure does not always protect you from liability. What if you do not follow the rules or take unnecessarily large risks when managing the private limited companies? In that case, the judge can decide that it was ‘mismanagement’.

You will then be personally liable and will have to pay with your own money for the problems that have arisen due to your decisions. This administrative liability can apply to any private limited company, including the parent company.

Taxes

If the operating company makes a profit, it pays corporate income tax on it. If the profit does not exceed €200,000, you pay 19%. For the part of the profit that exceeds €200,000, you pay 25.8%.

Have you paid this tax? Then you can pay the remaining profit to the holding company. You will not have to pay tax on that profit again in the holding company. This is due to the participation exemption. Do you want to make use of the participation exemption? Then the holding company must have at least 5% of the shares in the operating company.

Taxes on profits

If you want to transfer the profits from the holding company to your private account, the holding company must first deduct 15% and set it aside. The holding company must later pay that amount as dividend tax.

You must pay income tax on the amount that you receive in your private account in box 2. The rate for amounts up to €67,804 is 24.5%. Above that amount, the rate is 31%. You may deduct the dividend tax you have paid from the tax you pay in box 2.

A private limited company without a parent company pays the same amount of tax on its profits. Like an operating company, the private limited company must pay corporate income tax. Do you deposit your profits in your private account? Then the private limited company pays dividend tax on them. You must also pay income tax on them. You may also deduct the dividend tax paid from the tax you pay in box 2.

Shares

The law states that a BV must have capital upon incorporation. You can determine how much capital the BV will hold, but it should be at least € 0.01.

The articles of association of the BV specify that this capital is split up into a certain number of shares. Shareholders, the owners of the shares, pay the value of their shares to the company. A holding company holds shares in one or more other companies. If you are the sole shareholder of the holding company, it is your personal holding company. 

How do I set up a holding company?

Structures consisting of an operating company with a holding company are called holding structures. You can set up a holding structure when you set up your business, but you can also incorporate an existing business into one. 

Setting up a new business

To set up a BV, you need a notary. If you want to set up a holding structure, you should first set up the holding company with the notary, after which you set up the operating company on behalf of the holding company. When the holding company is incorporated, you own all the shares of the company, while ownership of the shares in the operating company is transferred to the holding company. The notary registers the BVs in the KVK Business Register, as well as documenting the identity of the Ultimate Beneficial Owners (UBOs) of the BVs. 

Incorporating an existing business into a holding structure

You can also switch to a holding structure if you already have a business, a sole proprietorship for example. You can do this in 2 ways. Which way makes the most sense for you depends on your personal situation. It is best to discuss this with your accountant or tax adviser. 

1. Converting your sole proprietorship into a holding company and operating company

The first step is to form a holding company with a notary. The shares of this holding company have a certain value, as stated in the articles of association of the holding company. In this case, the value of these shares is not paid up with money, but with the assets and debts of the sole proprietorship. The notary draws up a deed of contribution and contribution memorandum for this purpose. 

After this, the holding company forms an operating company. The assets and debts transferred to the holding company in the first deed of contribution are used by the holding company to pay up the shares of the operating company. Therefore the notary creates a new deed of contribution and contribution memorandum.

2. Forming a holding company and operating company and selling your sole proprietorship to the operating company

You can also decide to form a holding company and an operating company first and pay up the shares with money. This involves selling the assets and debts of your sole proprietorship to the operating company. You can then dissolve your sole proprietorship and continue your business through the operating company. 

Ask an expert to explain how a holding structure is created and what the consequences are. Consider an accountant, bookkeeper, or tax specialist. They can calculate what is most advantageous for you.