The most googled exit tax question
Few questions come up more often than:
“Should I set up a holding company before selling my business?”
The short answer: Sometimes yes. Often no. And very often too late.
Whether a holding structure actually improves your net outcome depends on timing, structure and intent — not on the headline tax rate.
1. Why holdings are so attractive in exit discussions
The appeal is obvious:
Capital gains via a holding are ~95% tax-exempt
Effective tax burden: ~1–2%
Proceeds can be reinvested almost tax-free
This is why:
Private Equity funds
Serial entrepreneurs
Family offices
almost always operate through holding structures.
2. How a holding actually works in an exit
If a holding owns the operating company:
The buyer acquires the operating company (share deal)
The holding sells its shares
Only 5% of the gain is taxable at corporate level
Result: Maximum tax deferral and reinvestment flexibility.
3. The critical question: When was the holding set up?
This is where most misunderstandings occur.
Scenario A: Holding set up early (works)
Holding exists for years
Economic substance and purpose
No imminent sale at the time of setup
👉 Tax benefit fully applies
Scenario B: Holding set up shortly before exit (problematic)
Clear sale intent already exists
Shares transferred shortly before signing
No operational substance
👉 High risk of tax denial
In many cases:
tax authorities disregard the structure
capital gains are taxed at personal level anyway
4. “How early is early enough?”
There is no fixed legal deadline. But in practice:
< 12 months before exit: usually too late
12–24 months: risky, case-dependent
> 24 months: generally robust
Timing is not about optics — it’s about credibility.
5. Worst-case vs best-case outcome (real numbers)
Same company, same buyer, same price
Sale price: €5.0m
Capital gain: €4.5m
Without holding (private sale):
Tax: ~€1.2–1.4m
Net: ~€3.6–3.8m
With holding (clean structure):
Tax: ~€70k
Reinvestment capital: ~€4.43m
👉 Difference: up to €800k–1.0m
6. Common myths about holdings before exits
“I’ll just set it up now”
Often too late.
“My advisor said it always works”
It doesn’t.
“Holding means tax-free exit”
No. It means tax deferral, not tax elimination.
7. When a holding still makes sense — even without an exit
Even if a sale is not imminent, a holding can make sense when:
you plan future acquisitions
you want dividend optimisation
you think long-term about succession
But that’s strategic structuring, not last-minute exit planning.
Conclusion
A holding company is one of the most powerful tools in exit planning — if implemented early and credibly.
Set up too late, it creates false expectations and serious tax risk. Done right, it can add seven figures to your effective exit outcome.
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Theory is good, but concrete numbers are better.