Holding company in Italy is particularly used for the purpose of estate planning and asset protection.
The term holding company refers to a company that holds controlling and/or connecting interests in other companies that, in turn, may hold additional interests in other companies.
In Italy, holding companies of two types can be incorporated.
1) The “Pure” holding company, which exercises only the management of the shareholdings and sometimes the financial management of the group.
2) The “Industrial” holding company, in addition to maintaining and managing holdings in other companies, directly carries out production activities.
Holding companies in Italy may be limited to holding the shareholdings and enjoying the fruits (dividends and capital gains) or also exercise management and control over the subsidiaries.
How to incorporate a holding company in Italy.
The most choosen company type is the SRL (Società a Responsabilità Limitata). The SRL or Limited company ensures better management of equity investments held, more efficient tax planning, and a clear separation of company and shareholder assets.
The Holding company’a articles of association will set out the company’s characteristics, defining what kind of activities it should perform, whether only management and control or commercial activities.
Italian Holdings and taxation system.
The Italian tax system has also adopted the Participation Exemption (PEX) system.
This system consists of the exemption from taxation to the extent of 95% of the capital gains realised through the sale of shares.
With PEX, Italy wants to bring in entities established abroad where this system has been in use for some time.
In order to benefit from the participation exemption, the capital gains realised by the holding company following the sale of participations held must meet the following requirements:
1) uninterrupted possession from the first day of the twelfth month preceding that of the transfer, considering the shares acquired on the most recent date as sold first.
2) classification in the category of long-term investments in the first annual financial statements closed during the holding period.
3) tax residence of the subsidiary in a State or territory that does not have a privileged tax status.
4) carrying on business activity.
Setting up a holding company in Italy, therefore, has several advantages, thanks also to more favourable taxation of capital gains, and allows the development of business projects aimed not only at capital planning but also at business diversification.