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What determines the use of holding companies and ownership chains?


  • Alfons J. Weichenrieder

    () (Johann Wolfgang Goethe Universität, Frankfurt & CESifo)

  • Jack Mintz

    (Rotman School of Management, University of Toronto)


The paper investigates the role of holding companies and conduit entities in German inbound and outbound FDI. It identifies the relevant conduit countries that act as stepping stones. Several tax and non-tax factors for the set-up of indirect structures are empirically identified. Withholding taxes, credit systems in capital exporting countries and the possibility of group consolidation are shown to be empirically important for the design of ownership chains in foreign direct investment.

Suggested Citation

  • Alfons J. Weichenrieder & Jack Mintz, 2008. "What determines the use of holding companies and ownership chains?," Working Papers 0803, Oxford University Centre for Business Taxation.
  • Handle: RePEc:btx:wpaper:0803

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    References listed on IDEAS

    1. Weichenrieder, Alfons J., 1998. "Foreign profits and domestic investment," Journal of Public Economics, Elsevier, vol. 69(3), pages 451-463, September.
    2. Fred Ramb & Alfons J. Weichenrieder, 2005. "Taxes and the Financial Structure of German Inward FDI," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 141(4), pages 670-692, December.
    3. Thomas A. Gresik, 2001. "The Taxing Task of Taxing Transnationals," Journal of Economic Literature, American Economic Association, vol. 39(3), pages 800-838, September.
    4. Sinn, H.W., 1990. "Taxation And The Birth Of Foreign Subsidiaries," Papers 66, Princeton, Woodrow Wilson School - Discussion Paper.
    5. Jack Mintz & Alfons J. Weichenrieder, 2005. "Taxation and the Financial Structure of German Outbound FDI," CESifo Working Paper Series 1612, CESifo Group Munich.
    6. Hines, James Jr., 1994. "Credit and deferral as international investment incentives," Journal of Public Economics, Elsevier, vol. 55(2), pages 323-347, October.
    7. Jack Mintz, 2004. "Conduit Entities: Implications of Indirect Tax-Efficient Financing Structures for Real Investment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 11(4), pages 419-434, August.
    8. Leechor, Chad & Mintz, Jack, 1993. "On the taxation of multinational corporate investment when the deferral method is used by the capital exporting country," Journal of Public Economics, Elsevier, vol. 51(1), pages 75-96, May.
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    Cited by:

    1. Spies, Julia, 2010. "Network and border effects: Where do foreign multinationals locate in Germany?," Regional Science and Urban Economics, Elsevier, vol. 40(1), pages 20-32, January.
    2. Martin Ruf & Alfons J. Weichenrieder, 2012. "The taxation of passive foreign investment: lessons from German experience," Canadian Journal of Economics, Canadian Economics Association, vol. 45(4), pages 1504-1528, November.
    3. Buettner, Thiess & Riedel, Nadine & Runkel, Marco, 2011. "Strategic Consolidation Under Formula Apportionment," National Tax Journal, National Tax Association, vol. 64(2), pages 225-254, June.
    4. Clemens Fuest & Thomas Hemmegarn & Fred Ramb, 2007. "How would the introduction of an EU-wide formula apportionment affect the distribution and size of the corporate tax base? An analysis based on German multinationals," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 14(5), pages 627-629, October.
    5. Schindler, Dirk & Schjelderup, Guttorm, 2012. "Debt shifting and ownership structure," European Economic Review, Elsevier, vol. 56(4), pages 635-647.
    6. Fuest, Clemens & Hemmelgarn, Thomas & Ramb, Fred, 2006. "How would formula apportionment in the EU affect the distribution and the size of the corporate tax base? An analysis based on German multinationals," Discussion Paper Series 1: Economic Studies 2006,20, Deutsche Bundesbank.
    7. Georg Wamser, 2011. "Foreign (in)direct investment and corporate taxation," Canadian Journal of Economics, Canadian Economics Association, vol. 44(4), pages 1497-1524, November.
    8. Marcel Gérard, 2006. "Reforming the taxation of multijurisdictional enterprises in Europe: a tentative appraisal," European Economy - Economic Papers 2008 - 2015 265, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    9. Georg Wamser, 2014. "The Impact of Thin-Capitalization Rules on External Debt Usage – A Propensity Score Matching Approach," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 76(5), pages 764-781, October.
    10. Alfons J. Weichenrieder & Helen Windischbauer, 2008. "Thin-Capitalization Rules and Company Responses Experience from German Legislation," CESifo Working Paper Series 2456, CESifo Group Munich.
    11. Marcel Gérard, 2006. "Reforming the Taxation of Multijurisdictional Enterprises in Europe, "Coopetition" in a Bottom-up Federation," CESifo Working Paper Series 1860, CESifo Group Munich.
    12. Maarten van 't Riet & Arjan Lejour, 2014. "Ranking the Stars: Network Analysis of Bilateral Tax Treaties," CPB Discussion Paper 290, CPB Netherlands Bureau for Economic Policy Analysis.
    13. Dieter M. Urban, 2006. "Multilateral Investment Agreement in a Political Equilibrium," CESifo Working Paper Series 1830, CESifo Group Munich.
    14. Arjan Lejour, 2014. "The Foreign Investment Effects of Tax Treaties," CPB Discussion Paper 265, CPB Netherlands Bureau for Economic Policy Analysis.
    15. Rünger, Silke, 2015. "The effect of cross-border group taxation on ownership chains," arqus Discussion Papers in Quantitative Tax Research 194, arqus - Arbeitskreis Quantitative Steuerlehre.
    16. Leibrecht, Markus & Bellak, Christian & Wild, Michael, 2009. "Does lowering dividend tax rates increase dividends repatriated?: evidence of intra-firm cross-border dividend repatriation policies by German Multinational Enterprises," Discussion Paper Series 1: Economic Studies 2009,19, Deutsche Bundesbank.
    17. Schindler, Dirk & Schjelderup, Guttorm, 2008. "Multinationals, Minority Ownership and Tax-Efficient Financing Structures," Discussion Papers 2008/19, Norwegian School of Economics, Department of Business and Management Science.

    More about this item


    Holding company; FDI; taxation; treaty shopping;

    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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