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Is your holding structure working as intended with the set up? Dividend wise.

In case you have a holding structure and the working company has made profit over the years, have you secured the profit already?

A holding structure is a structure where a private person holds the shares in a BV company or limited liability company with a share capital equal to the BV company. This is the holding company and the holding company can held the shares of one or more working companies.

There are reasons to have such a structure. It can be to cut of liability if the working company goes bankrupt, it can be a future sale of the working company or easy transfer of the company to family.

The working company is generating the income. If the income is good, then profit is a result. Profit tax is due as corporate income tax. After tax the net result is added to the general reserve of the company. A profitable company has a substantial general reserve.

The working company now has the general reserve with the profit made over the years, but have you transferred this to the holding company. By making this transfer, it is save from bankruptcy with the working company.

We recommend you to arrange for a dividend to be paid from the working company to the holding company. The dividend withholding tax rate is nil, a dividend withholding tax return is still required. When there is a current account between the working company and the holding company, you can settle this in the dividend payment as well.

Only after the dividend is correctly transferred to the holding company, the profit earned over the years is save from what happens with or in the working company.

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