Are you starting to think about how to ensure stable growth for your company, optimise your tax burden, and simultaneously protect your assets?

A holding structure represents an effective tool that growing companies in today’s business environment are using increasingly often. This article will introduce you to the main benefits that make holding structures so popular.

 

What is a holding structure?

A holding structure is a form of business where one parent company owns shares in several subsidiaries. It is not a separate legal form, but rather a clever organisational and ownership arrangement.

This model is used across various sectors and company sizes. It brings them a number of strategic, financial, and operational advantages, from tax optimisation and asset protection to easier expansion and business management.

 

What is the difference between a holding and a concern?

While the Business Corporations Act does not explicitly define the term holding, it details another term: concern.

A concern is a legally recognised form of control in which companies are managed in a coordinated manner according to unified interests. A holding, in contrast, is a broader arrangement of companies based on ownership control.

Basic principle of a holding lies in a vertical relationship. The parent company owns shares and valuable assets (such as real estate, intellectual property) and handles strategic management, while the subsidiary companies typically carry out operational, higher-risk activities.

Although a holding’s existence does not necessarily require the legal regime of a concern, modern Czech legal practice—especially the Business Corporations Act (primarily regarding the obligation to prepare a relationship report)—blurs regulatory differences.

The Business Corporations Act applies the obligation to prepare a relationship report also to simple control relationships, meaning that most holdings in the Czech Republic bear regulatory burdens very similar to those of formal concerns.

 

Reasons to consider a holding structure

Why consider a holding? It brings a number of strategic, financial, and operational advantages that help overcome common problems like inefficient tax burdens or high operational risk.

Below are the most important advantages of holding structures.

1. Tax optimisation

One of the main motives for establishing a holding structure is the ability to manage the tax burden more efficiently within a group of companies.

• Dividend exemption: Profit shares (dividends) paid from a subsidiary to the parent company are under certain legal conditions exempt from income tax. Typically, the parent must hold at least a 10% share for a minimum of 12 months.
• Profit transfers and tax losses: A holding enables the transfer of profits between companies within the group and the utilisation of tax losses of one company to reduce the tax liability of another.
• Transfer pricing: Proper setting of transfer prices between companies in the holding can further minimise tax and regulatory risks.

 

Note: Tax optimisation is a legitimate procedure but must not be the sole or primary reason for creating the structure. Holdings should be based on relevant economic and business reasons to avoid challenges by tax authorities. The Czech financial administration monitors the purposefulness of holding structures very actively, with the burden of proof on economic rationality lying with the tax subject.

 

2. Risk limitation and asset protection

In a holding structure, each subsidiary is legally separated. This is key for asset protection.

• Risk diversification: Risk diversification: Risks associated with business operations of one company do not threaten others. Valuable assets such as real estate, intellectual property, or financial reserves are held in the parent company and protected from liabilities and legal claims arising in riskier operational parts.
• Protection against insolvency: In case of insolvency in one part of the holding, the others, including assets in the parent company, remain protected.

 

3. Better access to capital

The holding can more easily obtain financing and is more attractive to external investors.

• Stronger negotiating position: Consolidated financial statements for banks and investors strengthen the credibility of the group, enabling better credit ratings.
• Easier investor entry: Investors can enter either a specific subsidiary or the entire holding. A clear and transparent structure facilitates due diligence and maximises company value on sale.
• Better evaluation of investment opportunities: Centralised management can better assess investment opportunities across the whole group.

 

4. Efficient management and control

Holding allows centralised management and decision-making with the possibility to set uniform standards across the group.

• Centralised leadership: The parent company can set group-wide strategy and introduce unified processes and systems (e.g., ERP, HR, compliance).
• Sharing know-how and resources: Central leadership effectively shares know-how, technology, and human resources.

 

This leads to higher efficiency, better control, and easier coordination of activities across subsidiaries.

 

5. Synergies and economies of scale

Holding can leverage joint procurement and services, resulting in lower costs and greater bargaining power with suppliers. Centralising support functions simplifies processes and brings economies of scale.

 

6. Flexibility in expansion and diversification

The holding structure enables quicker response to market opportunities.

• Rapid expansion and acquisitions: New companies can be easily established or attached to the existing structure, allowing quick reactions to new markets or facilitating acquisitions and divestitures.
• Business diversification: The structure facilitates diversification into unrelated sectors without impacting the existing operational structure, spreading risks.

 

7. Increased company value for sale (Exit)

A structured holding is much more attractive to investors.

• Transparency and clear structure: A holding with transparent ownership and reporting is more appealing to investors.
• IPO and segment sale options: It allows for an IPO (initial public offering) or sale of individual parts of the group without disrupting the whole. Subsidiaries operate as separate segments, making it easier to sell them when needed.

 

Types of holding structures

There are several variants differing mainly in management style or purpose. The most common three in practice are:

1. Pure holding (sometimes called financial holding)
   Designed primarily to strictly separate valuable assets from operational risks. The parent acts as a passive asset manager holding shares in subsidiaries, real estate, or intellectual property. Operational risks linked to daily activities remain with subsidiaries.

2. Operational holding
   The parent takes an active managerial and coordination role, focusing on operational synergies and economies of scale. It often provides shared, central back-office functions like IT, HR, central purchasing, or marketing for the whole group.

3. Mixed holding
   Combines the two above, where the parent not only manages shares and key assets but also performs some operational or service activities, such as providing in-group financial services or managing specialised know-how.

 

From a structural viewpoint, holdings can be:

• Horizontal holding – grouping companies from the same industry for synergies;
• Vertical holding – controlling the entire production and/or distribution chain.

 

Considering a holding structure? Choose suitable partners

To achieve the desired effect, holding setup should always be consulted with a lawyer and tax advisor as it requires detailed planning and knowledge of legal conditions.

Jaspar s.r.o. is more than an accounting office. We are experts in economic management and accounting for small and medium-sized companies. We are trusted partners for complex cases such as mergers, acquisitions, international taxation, and complex corporate structures. We have extensive experience with tax advice and outsourced accounting for holdings.

 

We provide:

• • Technological background and secure hosting of accounting software for your holding;
  • Financial analysis and management;
  • Tax consultancy;
  • Complete accounting and payroll processing regardless of employee numbers.

Thanks to our technology and team of accounting and tax specialists, you always get a clear and flawlessly processed economic picture of your companies. We will help you set a structure that supports your long-term growth and maximises asset protection.

Do you have questions about holding structures or need advice on corporate finance management? Contact us. We will be happy to answer any questions or arrange a meeting to discuss the details of the offer in person.