Conduit Company Law and Legal Definition

Conduit Company is a company which is set up in connection with a tax avoidance scheme. Whereby income is paid by a company to the conduit and then redistributed by that company to its shareholders as dividends, interest, royalties, etc.

In such companies, arrangement is made to avoid paying tax twice on an income where the country in which a parent firm is located. It may not have a taxation treaty with the state in which its subsidiary is located. In this method, a holding company is formed in a country which has such treaties with both countries, to serve as a pipeline for income from the subsidiary to the parent.