Holding company question.

[jbax]

Hi,

An example:

ABC Holdings owns 51% of ABC News Ireland.

ABC News Ireland makes €100 million profit in a single financial year.

My question:

Does ABC News Ireland pay 12.5% corporation tax with the profit after tax going on the books of ABC Holdings?

In this case would ABC Holdings then pay 12.5% again on the the €87.5 million?

Or would the profit of €100 million go straight on the books of ABC Holdings who then pays the 12.5%?

 

[Nige]

ABC News Ireland would pay 12.5% corporation tax.

Unless ABC News then pays a dividend to ABC Holdings, ABC Holdings will not have any additional income to report (though it might increase the value of its investments on its balance sheet). It therefore does not pay any tax on the ABC News Ireland profits.

If ABC News Ireland Limited pays out dividends, these dividends might be taxable in the holding company's hands (they won't be if the two companies are Irish companies. Otherwise, general tax rules that allow a credit on underlying tax, often ensure that no further tax is payable on such dividends).