Subsidiary company

Tax Glossary Definition

Subsidiary company

A subsidiary is a company over which another company—known as the parent or holding entity—has decisive authority. This control generally comes from holding a majority of voting rights, being able to influence or determine board appointments, or otherwise directing key operational and strategic decisions. For financial-reporting and tax purposes, a subsidiary forms part of the parent company’s overall group structure.

Example: If ABC Ltd. acquires 60% of the voting equity in XYZ Pvt. Ltd., ABC gains the ability to direct XYZ’s major decisions. As a result, XYZ is classified as a subsidiary of ABC Ltd.

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