We know it, holdings are trendy, and in fact, saying that holdings are trendy is also trendy. “Tax optimization” between companies is a formula that sounds very appealing to any entrepreneur, tax experts know this, and internet tax-expert influencers know it even more. We don’t criticize it, it’s normal—there are many tax-related questions, and solving them through social media is likely one of the most effective ways to sell tax services. The profession is not being undermined; attracting clients in exchange for knowledge is a mutually beneficial agreement for all parties. We’ve done it, and in this blog, we share the conclusions (and some post-recording reflections) we’ve drawn from the educational webinar on holdings.
99% of people don’t understand what a holding is, and that’s why they think it’s somewhat illegal.
Holdings are an instrument proposed not only by the Spanish regulator but also by all “Western” regulators who want to boost business, work, and financial reinvestment. The legal structure of holdings allows moving and reinvesting capital between companies without what we could call “double taxation.” In other words, it is a figure deliberately created by the regulator to help businesses grow faster by reducing the tax burden, as long as the money is not taken out towards the individual income of individuals.
In no case is it a “trap” created by the misalignment of regulations; rather, it is an alternative that the administration offers without shame, as long as it is used within the appropriate terms.
Holdings not only offer tax savings, but they are also a structure to make companies within the same business group more efficient. In fact, if the holding has no valid economic reason and is only created for the purpose of saving taxes, its existence may be considered inadequate in front of the Spanish Tax Agency (DGT).
However, there are holdings that do not have operational activities as such (for example, differentiate between Warren Buffett’s pure holding and Coca-Cola’s mixed holding)
However, there are holdings that do not have operational activities as such, and this is where we find two often-cited paradigm models: Warren Buffett’s pure holding and Coca-Cola’s mixed holding.
Warren Buffett’s Berkshire Hathaway is the perfect example of a pure holding. Its main function is the acquisition and ownership of shares in companies from various sectors without actively getting involved in their daily operations. In this way, Berkshire acts as a financial umbrella that allows its subsidiaries to operate independently, while the conglomerate optimizes capital allocation and reinvestment of profits according to its own strategies. Practically speaking, it is a structure that allows diversification and protection against the individual risks of each subsidiary without the need for direct intervention in the daily operations.
On the other hand, Coca-Cola operates under a mixed holding model. Its parent company not only owns stakes in subsidiaries but also provides essential services to them. The production, distribution, and bottling of Coca-Cola are not centralized in a single entity but are managed through a network of subsidiary companies operating in different regions of the world. In this case, the holding centralizes key functions such as global marketing, financial strategies, and intellectual property, but the business operations are managed by its specialized subsidiaries.
So, while both structures are holdings, their function and practical application are completely different. Not all companies can operate like Berkshire Hathaway, nor do all need a structure like Coca-Cola. This is where the customization of the strategy comes into play, depending on the business model and goals of each company.
But it’s not as simple as choosing one model over the other. Creating a holding also involves certain costs and obligations. One must consider administrative expenses, additional tax obligations, and, above all, the maintenance of the structure, which can become a burden if not managed correctly. Furthermore, it is essential to understand that if the holding does not have a valid economic reason, it can be questioned by the Tax Agency.
It is also important to mention special tax regimes, such as tax consolidation, which allows companies within the same group to offset losses. This can be a key factor for many companies looking to optimize their tax burden legally and efficiently. However, not all holdings can benefit from this advantage, as it requires meeting certain participation and age requirements.
Another interesting aspect is internationalization. Many companies use holdings to structure their global expansion, placing the parent company in a country with favorable taxation and managing their subsidiaries from there. This is where double taxation agreements come into play, which can make a big difference in the taxation of profits earned in other countries. However, caution is also necessary, as moving shares between jurisdictions without a clear economic reason can raise suspicions with tax authorities.
In conclusion, a holding is a powerful tool, but it is not a magical shortcut to paying fewer taxes. Its true usefulness lies in business organization and efficiency, allowing better asset management, reinvestment, and tax planning within the bounds of the law. The decision to create one should be made thoughtfully and, above all, with professional advice.
