News

INTERNATIONAL HOLDING STRUCTURES

We are being asked ever more frequently by Czech corporations to help them improve the functioning of their international holding structures by moving them back to the Czech Republic. This trend is, we believe, directly related to the recent developments in international taxation.

MOST FREQUENT LIMITATIONS OF INTERNATIONAL HOLDING STRUCTURES

In our experience, Czech owners of international holding structures encounter many complications and difficulties in practice. The most frequently occurring complaints include:

• Services of foreign trust companies do not meet expectation
• Delayed financial statements, resulting in delayed accounting by the beneficial owners
• Financial and tax savings do not correspond to costs of the holding administration
• Administrative activities in a holding have become quite complicated
• Trust companies often do not reflect new tax and legislative changes, and structures become ineffective

WHY SHOULD YOU CONSIDER THE OPTION OF MOVING YOUR HOLDING TO THE CZECH REPUBLIC?

The current economic recession is one of the reasons why an ever-increasing number of business owners are reassessing previous decisions. Many of them are deciding to relocate their holding structure back to the Czech Republic. Below, we summarise the main pros and cons we have encountered when implementing such transactions.

• Advantages
• Reduced management and paperwork costs (fees paid to trust companies)
• Reduced group administration costs (accounting, audit etc.)
• Better group management control - clear arrangement and transparency
• Decrease in certain tax risks (e.g. place of effective management or permanent establishment, transfer pricing risks, etc.)
• Preparation for higher taxes, as part of anticipated change in Czech legislation (increased personal income tax rates, provided there is no increase in withholding tax on dividends)
• Higher credibility for business contacts and state institutions
  Risks
• Restricted ability for aggressive tax planning
• Reduced anonymity of the final owner and protection of privacy
• Losing some “advantages” in certain jurisdictions (e.g. a lower level of statutory duties; bookkeeping, conducting audits and presenting annual reports is not necessary)

SOLUTION FOR YOUR BUSINESS

If you are currently discussing other opportunities for cost cutting in your group, this is probably the right time to consider whether repatriation of your holding to the Czech Republic might provide significant benefits for you and your group.
We understand that such a decision requires comprehensive strategic reflection and careful consideration of all related benefits and costs, and our hands-on experience in this area means we are ready and able to provide you with any necessary assistance you may require in the process.

If you have any questions or comments, please do not hesitate to contact us.

TACOMA
Lukáš Liška, Corporate Associate