Holding for Universal Transfer of Assets
Holding for Universal Transfer of Assets
You are planning to transfer the assets and liabilities of your French company to another company. Find out more about TUP-transfrontalière
This company, known as the absorbing company, will become the sole shareholder of your French company, before the latter is dissolved.
The absorbing company may be a French or foreign company, owned by a purchaser or by yourself.
This company will therefore be a holding company.
We can set up this holding company in London within 24 to 48 working hours.
Difference between TUP and TUP-transfrontalière :
If the absorbing company (holding company, sole shareholder, tuppant, transferee, etc.) is French, and the dissolution of the French subsidiary (absorbed, tuppant, transferee, etc.) is decided, the procedure is a Transmission Universelle de Patrimoine (TUP).
If the absorbing company (holding company, sole shareholder, tuppant, transferee, etc.) is foreign, and the dissolution of the French subsidiary (absorbed, tuppant, transferee, etc.) is decided, the procedure is a Transmission Universelle de Patrimoine transfrontalière (TUP-transfrontalière).
A TUP or a TUP-transfrontalière can arise, for example, in a situation where the absorbed company is facing difficulties and needs to be rescued.
This rescue, if well prepared and managed – which is the objective – is better for the shareholder and creditors alike than a compulsory liquidation. For the shareholder, the takeover of the company should be a springboard, a challenge, a solution to develop its activities, preserve the assets and absorb the contingent liabilities of the absorbed company; for creditors, if any, their claims remain due and payable.
If you are the owner of the holding company, you will be able to manage the assets and liabilities of your former French company, but this will not exempt you from your tax obligations. If you are a French tax resident, you will have tax obligations in France: you will have to pay your taxes in France. If your holding company is not actually established (physical presence and economic substance: office(s), premises, employee(s) and/or yourself, activity) in the country where it is registered, it will be considered de facto (by default) established in your country of tax residence.
If your UK holding company receives dividends from a non-UK subsidiary, part of these will be exempt from dividend tax (up to -95%), as long as your company is a holding company (subject to any tax treaty between the UK and the country where the subsidiary is based).
For your English company to retain its holding status after it has dissolved your French company (if your holding company has dissolved the French company), your English company must have at least one subsidiary. In the case of a cross-border TUP, the dissolution of the subsidiary (your company) is imperative; the deletion may be effective beyond the legal 30-day period (creditors’ right of recourse) or in the short term (to allow ongoing business to be managed).
If your subsidiary is dissolved, and the holding company belongs to you, it is up to you to set up a subsidiary or buy shares in another company.
We can set up this subsidiary in France, Scotland or Ireland.
If this is the case, your English company will lose its holding status and become a classic LTD or LLP company (see our page: Creating a subsidiary).
“Dividends received by a UK company will generally be exempt from corporation tax. This applies to dividends received from non-UK companies.”
https://www.eaiinternational.org/public_files/prodyn_img/royaume-uni.pd
“In the event that dividends are paid by a French company to a British company which holds, directly or indirectly, at least 10% of the capital of the French company, no withholding tax will be due in France in application of the agreement.
Hague Convention – 1992 – Decree 92-521 “Any natural or legal person resident in the European Community has the right to set up a company in the country of his choice without having to be resident there for tax purposes”.
Find out more about UK holding companies*.
Having left the European Union, the UK continues to be an attractive place to set up an international holding company, because not only does it offer a relatively stable legal, political and economic system, but it also has an attractive tax regime in its own right and an extensive network of tax treaties with the rest of the world.
This network of tax treaties extends to every European country and, in most cases, provides for favorable and straightforward reciprocal tax arrangements. Most importantly, the UK brings indisputable international business experience and a global and virtually inescapable business network, which, contrary to all expectations, keeps expanding since the Brexit.
The location of a holding company is an important consideration, in any international structure where there is a plan to operate in a secure, well-regulated environment, which also benefits from minimal tax on professional income streams.
England :
- exempts a large proportion of dividends received from subsidiaries in most countries,
- does not charge capital gains tax on the sale of trading subsidiaries,
- has no capital gains tax on profits from the sale of holding company shares by non-resident shareholders, with the exception of UK property-rich companies,
- offers significant relief for start-ups,
- offers significant relief for qualifying research and development expenditure,
- has the possibility of a remittance tax base for non-UK domiciled individuals who come to the UK, for example as directors of holding companies.
Tax treaty network
The UK has the world’s largest network of double tax treaties.
In many situations where a UK company holds more than 10% of the share capital of an overseas subsidiary, the rate of tax on professional dividends is considerably reduced.
The UK left the European Union but already had long-standing tax treaties with all European countries which, in many cases, reduce withholding taxes to very low levels.
Tax exemption for dividends from foreign professional income*Small businesses
Small businesses are defined as companies with fewer than 50 employees that meet one or both of the following criteria
financial criteria below :
- sales under €10 million
- total assets under 10 million euros
Small businesses benefit from a very substantial exemption from taxation on foreign business income dividends if these originate in a territory that has a (non) double taxation treaty with the UK, which contains a non-discrimination article. The UK has treaties with over 130 countries.
Medium-sized and large companies
A very significant exemption from foreign dividend taxation applies if the dividends fall into one of the relevant dividend categories, including:
- dividends paid by a company controlled by the UK beneficiary company
- dividends paid in respect of ordinary shares
- non-refundable capital
- most portfolio dividends
- dividends from unconceived operations
Where the exemption classes do not apply, foreign dividends received by a UK company will be subject to UK corporation tax. However, foreign tax relief will be granted where the UK company controls at least 10% of the foreign company’s voting rights.
No withholding tax
The UK imposes no withholding tax on the distribution of dividends to shareholders or parent companies. No matter where in the world the shareholder resides.
Capital gains tax
There is no capital gains tax on disposals of subsidiaries by a holding company of a trading group, provided that the conditions of eligibility for the “substantial shareholding exemption” (SSE) are met.
To qualify as a substantial shareholder, a company must have held at least 10% of the company’s ordinary shares for a continuous period of 12 months during the two years preceding the sale.
To benefit from this exemption, the investment company must still be the holding company of a trading group or a trading company itself immediately after the disposal. If it is no longer a trading company or a member of a trading group, the holding company should be dissolved immediately in order to benefit from the exemption.
Sale of holding company shares
The UK does not levy capital gains tax on the sale of shares in a holding company located in the UK and owned by non-residents. Consequently, if the holding company is itself disposed of by non-UK owners (personal or business ownership), then there is no UK capital gains tax.
Controlled Foreign Corporation (CFC) legislation in the UK
Anti-avoidance rules, known as Controlled Foreign Company (CFC) rules, prevent UK resident companies from accumulating profits in jurisdictions where tax rates are very low.
UK CFC laws exist for :
- target and impose a tax on SECs, against the artificial detour of UK profits,
- exempt all or part of foreign profits, where there is no risk to the UK tax base
- ensure that profits from genuine economic activity outside the UK are taxed little or not at all in the UK – an essential element of any holding company regime.
Controlled foreign company (CFC) legislation in the UK
Anti-avoidance rules, known as Controlled Foreign Company (CFC) rules, prevent UK resident companies from accumulating profits in jurisdictions with very low tax rates.
Conclusion
Setting up a holding company in the UK is highly desirable because of :
- the UK’s extensive network of (double) tax treaties,
- full or partial tax exemption on UK business dividends,
- exemption from capital gains tax for trading companies,
- no withholding tax,
- no capital gains tax on sales of holding company shares by foreign shareholders.
*The above information may be inaccurate or subject to change, in particular as a result of new government regulations, and is therefore deemed to be non-contractual. Before ordering a holding, it is strongly recommended to consult a tax lawyer, which we are not. If you find any incorrect information on this page, please let us know.
Shareholders of foreign companies are reminded that income tax, dividend tax and flat tax must be paid in their country of tax residence. If the foreign company lacks economic substance, shareholders will pay corporate income tax in their country of tax residence.
The use of a nominee (designated agent), if it has no real function, is prohibited in France. It is up to you to consult a lawyer before placing an order; the place of residence for tax purposes of the company’s owner(s), the place where the company is actually established, materialized, hired and active will be factors that may prevent the use of one or more nominees (designated agents). For example, a French expatriate in London, resident for tax purposes in London, will be able to use the services of a nominee, subject to validation of the project by his lawyer; on the other hand, a French resident for tax purposes is not entitled to use the services of a nominee if the latter does not have a real, precise, legal and official function within the company.
(1) Please note: we do not give any advice, in particular tax advice, on cross-border TUP and or the creation of an extra-territorial company; you should seek advice from a tax lawyer before ordering a TUP or extra-territorial company from us. A cross-border TUP must be justified by an economic interest: a valid reason for tupping; you cannot organize your insolvency or transfer assets and liabilities without consideration. The company to which you transfer your company’s assets must have an economic reason for absorbing your company: similar activities, holding (management, financing), pooling of operating costs, human resources, infrastructure (movable (offices), real estate), clientele, added value, know-how, customer relations, intellectual property, etc. The creation of an offshore company remains your property if you are the beneficial owner: you are accountable to the authorities in your country of tax residence, even if you own only part of the offshore company. For cross-border TUPs, the cost of the legal announcement (around €290 excl. VAT) is added to the cost of the procedure (€890 excl. VAT); if you don’t have a holding company, allow an extra €790 excl. VAT for its creation.
We do not draw up private deeds: you will fill in a form which will generate the specific documents. These documents have been validated several times by a lawyer, and have enabled us to carry out several successful cross-border TUPs before the competent courts. To register a TUP online, you will be asked to pay an additional fee of €490 (excl. VAT).