What is an investment holding company?
An investment holding company (IHC) is an overarching entity with controlling ownership over other businesses or assets. These asset classes span from public or private companies and real estate to stocks, patents, trademarks, intellectual property, cash, bonds, and other interest-bearing investments. Unlike operating companies, holding companies don't engage in day-to-day operations but focus on strategic planning, overseeing subsidiaries, and making major policy decisions like dividends distribution and mergers and acquisitions.
Holding companies are also referred to as parent or umbrella companies, while their subsidiaries are known as operating companies. In Singapore, holding companies are classified as either investment holding companies (IHCs) or financial holding companies, each with distinct registration criteria and features.
Key features
A holding company:
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• holds long-term investments: assets such as properties and shares are held for extended periods of time.
• earns non-trade income, generating revenue instead from activities like interest, rental, and dividend income.
• qualifies for tax deductions by subtracting expenses associated with investment activities, compliance, and operation, such as interest on financing, statutory and regulatory expenses, administrative costs, salaries, and utility bills.
Advantages of an IHC
Tax advantages
Gains derived by a company from the disposal of ordinary shares that take place between 1 June 2012 and 31 December 2027 will not be taxed if the company has held at least 20% of the ordinary shares in the investee company for a continuous period of at least 24 months prior to the disposal. This protection does not apply to gains derived by an insurance company or disposal of shares in certain companies that trade or hold immovable properties, as well as disposal on or after 1 June 2022 of unlisted shares in companies in the business of trading, holding, or developing immovable properties in Singapore or abroad.
Use cases for a holding company
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Setting up a holding company
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