How to Set Up a Holding Structure for Asset Protection and Tax Efficiency

23.4.2026 | ARROWS law firm

A properly set up holding structure is one of the most effective tools for asset protection, tax optimisation, and long-term business stability. However, an incorrect solution will expose your business to legal issues, tax consequences, and, in extreme cases, loss of assets instead of protection. The attorneys at ARROWS, a Prague-based law firm, will help you create a holding structure that meets your business objectives and protects you even in crisis situations.

The illustrative image shows a lawyer discussing the topic of a holding structure.

Table of contents
Practical risks and mistakes associated with poorly structured holding companies
Tax and legal aspects: Where do you really stand?
Tax obligations towards foreign jurisdictions
Protection in insolvency
Most common questions on asset protection in a holding structure
Most common questions on secure structuring of holding arrangements

Key takeaways:

A holding company set up without professional oversight often hides tax risks, legal vulnerabilities, and issues with verifying the ownership structure in transactions.
A properly structured holding arrangement reduces the tax burden, separates risks among individual entities, and makes it easier to transfer assets to the next generation.
The attorneys at ARROWS, a Prague-based law firm, will ensure your structure complies with current Czech legislation, relevant international regulations, and your long-term objectives.
A properly safeguarded holding structure with high-quality contracts and governance is valuable asset protection in situations such as litigation, insolvency, or a crisis.

A holding company as a tool for protection and optimisation: How it works and why proper structuring is critical

A holding company generally means a company that owns interests or shares in other companies. Under Czech law, this is not a special legal category—it is a practical solution governed by the standard rules for limited liability companies (s.r.o.) or joint-stock companies (a.s.).

Entrepreneurs most often choose holding structures in order to:

Separate risks: If a subsidiary encounters a financial or legal issue, the parent (holding) company will not automatically be liable for the consequences. Creditors of one company cannot easily reach the assets of the other.
Optimise taxes: Both at the level of the operating companies themselves and through specific tax regimes (e.g., corporate income tax exemptions for profit distributions subject to certain conditions) for dividend payments, profit reinvestment, and other tax-relevant transactions.
Make ownership clearer: Where there are multiple businesses, real estate assets, or a long-term investment portfolio, it is a cleaner solution in which the holding company owns everything, and it is clear what a new owner or investor is buying into.
Prepare a transfer to the next generation: Instead of chaotically dividing businesses among descendants, the structure can be prepared gradually over time and it can be defined in advance who will receive what.

The problem is that many entrepreneurs say “I have a holding company” and assume they are protected, even though in practice it may be highly vulnerable. Typical mistakes include:

An incorrect legal form of the holding company (not chosen optimally for the given scenario).
Non-existent or vague internal legal documentation (articles of association, rules of procedure, agreements between shareholders/stockholders).
Lack of financial structuring (the holding does not function in reality, proper accounting is not maintained, loans are not formalised and repaid, etc.).
Ignoring tax obligations, especially where there is a foreign element or specific tax duties.
Uncontained legal or business risks that spread from the operating company to the holding company.

Our attorneys in Prague at ARROWS focus on exactly these aspects—not only the theoretical setup of a holding company, but its real-life operation and protection. There is a marked difference between “you have a holding company” and “you have a functionally secured holding company that truly protects your assets”.

Practical risks and mistakes associated with poorly structured holding companies

Before we discuss the right solution, you need to understand what the specific risks are.

Piercing the corporate veil (commingling of assets)

If the holding company and its subsidiaries are not clearly separated (both in substance and legally), creditors of one company may seek satisfaction from the assets of the other. This happens especially in situations where:

The owner or management acts as if all entities form a single whole. For example, the holding company provides and receives funds without proper documentation, transfers assets without contracts, etc.
Operating companies do not have their own bank accounts, separate management, or administration—everything is run by the holding company “from one office”.
Financial statements are not kept separately; the real flows of money between entities are not visible.

If the operating company then becomes insolvent, a Czech court could conclude that the holding company and the subsidiary were in fact a single entity (so-called piercing of the corporate veil) and could also reach the holding company’s assets.

Tax risks and audits

The Czech Financial Administration scrutinises holding structures very carefully, especially with regard to:

Dividend payments without evidencing profits or in breach of statutory requirements.
Retaining profits in subsidiaries without clear economic justification.
International transfers or structures using jurisdictions with preferential tax regimes (so-called tax havens).
Unjustified claiming of tax benefits or incentives intended for small and medium-sized enterprises.

If the Czech Financial Administration finds that your structure primarily serves tax optimisation without genuine business substance (especially in light of increasing international regulation such as the EU directive to combat the misuse of shell companies, the so-called Unshell Directive, expected to apply in 2026), it may recharacterise it and assess additional taxes plus penalties.

Problems during a sale or transfer

Investors and buyers will always first commission a thorough due diligence review of legal and tax cleanliness. If the holding company is not properly documented, lacks internal policies, has unclear rights and obligations, or hidden risks emerge, the transaction will be delayed or fail.

Personal liability and loss of protection

If the holding company owner personally secures an external loan, or behaves as if the holding company is merely their personal wallet, a court may, in the event of difficulties, disregard the legal separation and reach the owner’s personal assets.

Tax and legal aspects: Where do you really stand?

A properly designed holding structure can bring tax advantages, but only if it is set up correctly and in compliance with the law. Let’s look at specific aspects:

Income tax

In the Czech Republic, a uniform corporate income tax rate applies to legal entities. A holding structure as such does not bring a direct reduction of the rate. The key tax advantages lie in the possibility to exempt profit shares (dividends) received by the parent company from subsidiaries, provided the statutory conditions are met (Section 19(1)(ze) of the Income Taxes Act). This means that dividend distributions from a subsidiary to the holding may not be taxed.

If these funds are then distributed from the holding to shareholders/partners, they are subject to withholding tax (15% for Czech individuals and, depending on the double tax treaty, for non-residents). The attorneys at ARROWS, a Prague-based law firm, will help you structure distributions correctly so they are efficient and part of a clear strategy. They will assess whether reinvestment, capital increases, or other transactions are appropriate.

Tax benefits for small and medium-sized enterprises

Small and medium-sized enterprises may, in some cases, be eligible for various tax benefits or support programmes. However, holdings that are not properly structured may not qualify for these advantages, or claiming them may be more complex. The attorneys at ARROWS will ensure that your structure is not an obstacle to applying these potential benefits.

Real estate tax

If a holding owns real estate, it is subject to real estate tax. In some cases, it is more efficient for the property to be owned directly by the owner or another entity; in other cases, it is advantageous to hold it in a specialised company. The solution differs case by case and must be based on your specific objectives and overall tax strategy.

Tax obligations relating to foreign jurisdictions

If your holding or its subsidiaries operate abroad or have foreign owners, additional obligations arise—reporting profits, tax residencies, transfer pricing, etc. The Financial Administration monitors this closely, especially in view of international initiatives focused on tax transparency and combating abuse.

The attorneys at ARROWS, a Prague-based law firm, will ensure your obligations are met and that the structure complies with international standards.

Asset protection, risk separation, and dispute resolution

One of the main reasons entrepreneurs choose properly set up holdings is asset protection. Let’s show how this works in practice.

Risk separation

If you have a holding that owns five operating companies and one of them gets into trouble (for example, it owes a large creditor), the creditor cannot automatically reach the assets of the other four companies or the holding itself. This is crucial. In practice, it means that a mistake or failure in one area does not have to destroy your entire asset base.

Protection in insolvency

If a subsidiary becomes insolvent and enters insolvency proceedings, those proceedings concern only that company. The holding and other subsidiaries remain outside. (Of course, provided they are legally and factually separated and there has been no piercing of the corporate veil).

Litigation management

In a situation where a dispute between your company and a third party is being resolved, it is important that the holding has its own legal position. The attorneys at ARROWS, a Prague-based law firm, will assist you with representation in court proceedings and ensure that your holding structure is not the weakest link in your defence strategy.

Transactions and sale

If you decide to sell one or more operating companies, it is easier when they are owned by a holding. The buyer purchases the interests or shares in the holding and it is clear what is being transferred. Our attorneys will help you with the documentation and ensure the sale is safe for both parties.

Most common questions on asset protection in a holding

1. What is the most common issue holdings face during Financial Administration audits?
Most often, it involves undocumented transfers of money, especially when the owner withdraws funds from the holding or its subsidiaries based on informal records without proper contracts.
The Financial Administration then challenges whether it is a loan, a gift, or an unauthorised withdrawal, and assesses additional tax and penalties. The attorneys at ARROWS, a Prague-based law firm, will help you document all transactions and defend you in the event of an audit. Contact office@arws.cz.

2. If one of the holding’s partners/shareholders incurs personal debt, can a creditor reach the holding’s assets?
Generally no—a creditor pursuing the partner/shareholder personally cannot reach the assets of the holding itself. However, they may reach dividends or other proceeds that the partner/shareholder would receive from the holding. That is why proper implementation of a shareholders’ (or partners’) agreement is critical. The attorneys at ARROWS will help you set up a legal framework that protects you.

3. What if the holding owner owes money to a Czech bank and wants to transfer the holding to his son or daughter to get rid of the debt?
Such a situation presents significant legal risk. A court or creditor could assess such a transfer as a legal act that can be challenged (i.e., an avoidable legal act under the Czech Civil Code) and transfer the holding back into the assets of the original owner.
Any transfer of a holding or its shares must be legitimate and economically justified. The attorneys at ARROWS, a Prague-based law firm, can assist you with safe and lawful planning of transfers over time. Contact office@arws.cz.

Table of potential issues

Potential issues	How ARROWS helps (office@arws.cz)
Piercing the corporate veil – there is a risk that creditors or courts will treat all your companies as a single entity and reach your overall assets	We will prepare and implement clear legal separation between the holding and its subsidiaries, ensure they are managed separately, and put safeguards in place against piercing the corporate veil.
Tax audits and penalties – the Financial Administration challenges the correctness of your structure and looks for undocumented transfers or unjustified tax relief	We will set up a proper tax regime for your holding, ensure documentation of all transactions, and represent you in communications with the Financial Administration and, if necessary, in court proceedings.
Dysfunctional internal governance – you lack articles of association, agreements between partners/shareholders, clear rules for decision-making and asset management	We will prepare and tailor all internal documents for your holding, including articles of association, rules of procedure, and agreements between partners/shareholders, so that your governance is functional, transparent, and compliant with Czech law.
Issues during a sale or investment – a buyer or investor discovers that the holding is not properly documented, and the transaction is delayed or fails	We will conduct a legal audit of your structure and prepare it for sale; we will secure all necessary documents and legal opinions for the buyer or investor.
Personal liability or risk of losing separation – if a problem arises, creditors or courts may pursue you personally	We will set the correct legal boundaries, ensure the holding operates independently, and help you defend against claims seeking to impose personal liability.

Final summary

A holding is not just a technical solution – it is a long-term strategy to protect your assets, optimize taxes, and prepare for the future. A properly set up holding also works as a “protective regime” in case of problems: it separates risks, makes it harder for one crisis to affect all your assets, and facilitates future transactions.

But beware: a holding created without professional oversight gives you only an illusion of protection. In practice, it hides tax risks, legal vulnerabilities, and issues that surface at the worst possible moment – during an audit, a dispute, or a sale.

If you aim to build a long-term stable and legally secure holding, it is not something to handle on your own. The attorneys at ARROWS, a Prague-based law firm, will help you create a structure that not only meets your business objectives but will also protect you in future difficulties. Contact us at office@arws.cz and consult your specific situation with us – in many cases, a consultation costs disproportionately less than fixing issues later.

Frequently asked questions on the safe setup of holding structures

1. How much does it cost to set up a professional holding?
The price varies depending on the complexity of your structure – the number of subsidiaries, the countries in which they operate, and the scope of the required documentation. In general, you should expect that a comprehensive legal audit and setup takes on the order of hundreds of hours of work.
Based on a consultation, the attorneys at ARROWS, a Prague-based law firm, will prepare a specific proposal for you. Above all, keep in mind that investing in a proper setup at the beginning costs significantly less than fixing mistakes later. Contact us at office@arws.cz for a specific estimate.

2. Can a holding help me if I have long-term personal debt or a serious court dispute?
Partly. If it concerns entirely new debts or disputes, a holding cannot protect you from them. However, if the dispute relates to your operational activity (for example, a buyer complains about the quality of goods), then yes – a holding separates your personal liability from the liability of the subsidiary.
The attorneys at ARROWS, a Prague-based law firm, can help you assess which legal steps are appropriate in such a situation. Write to office@arws.cz.

3. If I own a holding and die, what problems will my heirs face?
If the holding is not legally arranged (there are no clear procedures for management after the owner’s death, no governance system is set, etc.), the heirs may face significant problems. A court would have to resolve who has the right to make decisions about the assets, what happens next with the holding, who manages it, and so on.
The attorneys at ARROWS, a Prague-based law firm, can help you prepare the holding for such a situation – setting up inheritance arrangements, relevant powers of attorney, and governance procedures. Contact office@arws.cz.

4. Is a holding with tax residence abroad possible?
Yes, it is a common model – for example, a holding in Ireland, Luxembourg, or the Netherlands with subsidiaries in various countries. But beware – the Financial Administration may not like it if the sole aim is to “hide” profits and there is no real economic substance.
There must be a genuine business or investment strategy, and the structure must meet transparency and substance requirements (especially in light of EU directives such as the Unshell Directive, effective as of 2026).
The attorneys at ARROWS, a Prague-based law firm, who work within the ARROWS International network, can help you set up such structures – how to set them up properly so they are lawful and effective. Contact office@arws.cz.

5. If I decide to dissolve the holding, what issues should I expect?
Dissolving a holding is legally and tax-wise complex – it involves issues of asset distribution, taxation, repayment of debts, etc. You cannot simply cease operations and take all assets. A proper legal process is required.
The attorneys at ARROWS, a Prague-based law firm, can help you plan the dissolution, minimize tax impacts, and ensure the entire process is compliant with Czech law. Just contact office@arws.cz.

6. Is a holding company compliant with EU regulations and international anti-money laundering standards?
Yes, a holding company is a common and fully legal structure. However, if the beneficial owner is concealed (for example through a chain of other holding companies in different countries), regulators will scrutinise it closely.
The EU has strict requirements for ownership transparency, reporting of beneficial owners (the so-called register of beneficial owners), etc. The attorneys at ARROWS advokátní kancelář will ensure that your holding company meets all international standards and is transparent towards regulatory authorities. Write to office@arws.cz.

Notice: The information contained in this article is of a general informational nature only and is intended to provide basic guidance on the topic under the legal framework as of 2026. Although we take the utmost care to ensure accuracy, legal regulations and their interpretation evolve over time. We are ARROWS advokátní kancelář, an entity registered with the Czech Bar Association (our supervisory authority), and for maximum client protection we maintain professional liability insurance with a limit of CZK 400,000,000. To verify the current wording of regulations and their application to your specific situation, it is necessary to contact ARROWS advokátní kancelář directly (office@arws.cz). We accept no liability for any damages arising from the independent use of the information in this article without prior individual legal consultation.

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