Definition: The Income Tax Ordinance (ITO) defines a "household company" as a private company that meets the following conditions:

• It is a "closely held company" (as defined in Section 76 of the ITO) with no more than 20 shareholders.
• No shareholder is a public company.
• The company's assets are primarily real estate.
• The company's business is primarily the holding of real estate.

Tax regime: The tax regime applicable to household companies is designed to provide tax benefits to individuals who own and operate a family-owned business. Under this regime, the company's income is taxed as if it were the income of the shareholders, rather than as corporate income. This means that the shareholders are taxed at their individual income tax rates, which are generally lower than the corporate tax rate.

In addition, household companies are subject to a number of other tax benefits, including:

• A reduced rate of capital gains tax on the sale of real estate: The capital gains tax rate on the sale of real estate held by a household company is 25%, compared to the general capital gains tax rate of 35%.
• A deduction for depreciation: Household companies are allowed to deduct depreciation on real estate assets over a longer period of time than other businesses.
• A reduced rate of tax on dividends: Dividends paid by a household company are subject to a reduced rate of tax of 25%, compared to the general rate of tax of 30%.

Purpose: The purpose of the household company regime is to provide tax relief to small, family-owned businesses that hold real estate. The regime was originally enacted in a time when corporate tax rates were higher than individual tax rates. The regime was intended to allow these businesses to take advantage of the lower individual tax rates.

Restrictions: There are a number of restrictions on the eligibility for household company status. For example, the company's assets must be primarily real estate, and the company must meet the other conditions listed above.