Introduction
In our previous chapter, we have examined the role of family businesses in the Thai economy, the significance of family businesses in relation to market development, and the primary obstacle in the smooth transfer of assets, wealth, and business to the next generation.
A successful business transfer to the next generation and the preservation of family wealth within the family can be achieved through the implementation of a creative and correct tax and legal planning strategy. This chapter will provide you with a comprehensive overview of the structure, including the holding company, critical considerations, advantages and disadvantages, and our recommendation.
What is a Holding Company and Why is it noteworthy?
Initially, a Holding Company is a business entity that owns shares or assets of other companies. In general, the Holding Company is not involved in the daily operations of the group; rather, its primary responsibility is to oversee and administer the group’s investments. In numerous instances, the Holding Company can also serve as a treasury centre, lending loans to its subsidiaries or serving as a shared service centre for the group, providing support functions such as technical services, administration services, and management services.
Holding Company from a legal standpoint
In Thailand, “holding company” is not a defined legal term, yet it is a powerful legal structure used to manage control, risk, and inheritance, especially in family businesses. Below, we unpack how holding companies work in practice, particularly in terms of governance, risk protection and succession.
Centralised Control with Legal Backbone
As businesses grow and branch into multiple entities, decision-making often becomes fragmented. A holding company resolves this by concentrating key powers, usually through majority shareholding and board appointments, into a single entity that sits at the top of the group.
A holding company structure simplifies strategic decision-making and reduces internal deadlock. When subsidiaries are partly owned by external parties, centralised control via board seats and uniform shareholder terms help to minimise conflicts over dividends, reinvestments, capital allocation, or executive hiring. This clarity supports consistent direction and avoids the ambiguity that often arises in multi-party ownership.
In family enterprises, this structure often sits alongside a Family Charter: a non-binding yet respected document that outlines values, roles, and expectations across generations. Though not enforceable by courts, it complements formal agreements and helps prevent future disputes.
Aligning Rights, Roles, and Rewards
A major advantage of a holding structure is the ability to separate governance rights, day-to-day roles, and financial benefits among stakeholders. Thai law allows the issuance of shares with different rights, provided they are defined in the company’s Articles of Association.
For example, one sibling may be an executive in a trading subsidiary, while another hold shares in an IP-holding company without board control. Both may receive dividends, but their governance roles differ.
Directors’ remuneration, meanwhile, must follow proper company approvals to ensure fairness and transparency.
Legal Boundaries: Liability Protection
Each company in a group is treated as a separate legal entity. This means a creditor of one subsidiary cannot seize assets from others or the holding company, so long as the structure is legally sound.
In practice, this allows risk-heavy activities (like manufacturing) to be siloed from core assets (like land or IP). If the factory faces litigation, the holding company’s or other subsidiaries’ assets remain protected. This structure limits liability unless personal or corporate guarantees have been extended.
Protecting Assets and Managing Exposure
Holding structures are also used to shield core assets from business risk. For instance, land, trademarks, or licenses may sit in low-risk companies, while riskier operations are placed in subsidiaries. This “ring-fencing” approach is common in companies and family firms alike.
Unless there is a personal guarantee or cross-collateralisation, legal and financial risks remain confined to each entity.
Succession with Simplicity and Stability
Instead of handing down fragmented assets or direct shares in multiple companies, families can transfer holding company shares, streamlining the inheritance process. This makes estate planning easier, especially in large business families with multiple generations involved.
The Role of Family Charter in Family Business
In family enterprises, the holding company structure is complemented by a Family Charter: a non-binding document that sets out shared values, roles, and expectations across generations. Increasingly, it is used as a governance tool to:
- Clarify how family members may join the business, and what qualifications are required;
- Set principles for remuneration, bonuses, and leadership roles;
- Align the family on long-term goals and promote harmony across branches.
When used alongside shareholders and governance documents, a Family Charter offers a soft but steady influence during generational transitions.
In some cases, a Family Charter may also provide legal protection. When it defines how family assets are managed, actions taken in line with it may help shield individuals from property-related criminal liability involving shared ownership or consent.
To what extent does it benefit you in the context of taxes?
The Holding Company offers substantial tax benefits that could help your business expand, including:
- Enhance the group’s tax efficiency through investment: The Holding Company can serve as an investment entity for each of your family’s investments. In many instances, if your family possesses investments both in Thailand as well as overseas and these investments are managed by the Holding Company, dividends distributed from the operating entities (both domestically and internationally) to the Holding Company may qualify for tax exemption, provided that specific conditions are satisfied. In the future, the Holding Company can choose to utilise the dividend for reinvestment in another project. The dividend flows from the operational company to the Holding Company are expected to be tax efficient, enabling for the seamless reinvestment of these funds in the new project. Kindly be advised that a 10% withholding tax will apply when the Thai operating company distributes dividends to foreign shareholders.
- Tax strategies upon exit: Consider a scenario where your operating entity is owned by a single individual; in this case, the potential Personal Income Tax (“PIT”) on capital gains recognised from the sale of shares upon exit could range from 0% to 35%. In many cases, we observe that a PIT rate of 35% is typically applied when the value of the assets or shares sold is considerably high. Conversely, if the operating entity is owned by the Holding Company, the capital gains from the disposal of shares in the operating entity are subject to Corporate Income Tax (“CIT”) at a rate of 20%, with related expenses also eligible to be offset against those gains. It is apparent that there exists a 15% discrepancy (with the PIT rate at 35% and the CIT rate at 20%), which highlights the advantages of establishing a Holding Company.
- Flexibility: Through the Holding Company, your family can efficiently oversee each investment while having more flexibility, particularly in situations involving mergers and acquisitions where a potential investor expresses interest in purchasing your business. One has the option to dispose of each investment by instructing the Holding Company to sell shares in that investment or by selling shares in the Holding Company itself, should the investor wish to acquire all business units. In the event that the latter case is considered, it is advisable to implement 2 layers of the Holding Company.
- Tax incentives: In certain groups with numerous investments in Thailand and overseas, the incentive called “International Business Centre” or “IBC” may be evaluated, as the Thai Revenue Department offers reduced CIT rates of 3%, 5%, and 8% for the IBC, along with a flat PIT rate of 15% for expatriates worked for IBC businesses.
Based on our experience, many families frequently inquire whether the Holding Company should be established overseas, specifically in locations such as Singapore or Hong Kong. At the outset, an offshore holding company may not be advantageous in all circumstances; rather, it may result in the family being burdened with additional management costs. A comprehensive analysis on a single basis should be performed before establishing the offshore Holding Company.
What recommendations would we provide in our capacity as legal and tax advisors?
Business owners should evaluate if the Holding Company is in harmony with their strategic goals. The Holding Company provides a range of advantages to your group across different areas. Nevertheless, there are significant factors that your family needs to be aware of and assess prior to forming the Holding Company. Every family business has its unique characteristics and complexities. Just like fingerprints, every family structure is distinctive. This necessitates a tailored study carried out by experts. We at Forvis Mazars strongly recommend that you seek guidance from legal and tax professionals when contemplating the establishment of a Holding Company and its optimisation.
How we can help
At Forvis Mazars, we understand the complexities and different requirements of family businesses. Our dedicated experienced professionals will work side-by-side with you, providing services to help you meet your family’s goals.
Forvis Mazars has offices in over 100 countries to help you scale up your business, both domestically and abroad. We can provide the most efficient solutions for your business with tax, accounting outsourcing, legal, audit, and financial advisory services, regardless of the industry or country.
Contact us: If you have any questions or inquiries, please contact the following people.
Parin Supsavaipol, Tax Director at parin.supsavaipol@mazars.co.th
Chatchawat Kriengsuntikul, Legal Partner and Head of Legal Practice at chatchawat.kriengsuntikul@mazars.co.th
