Substance organization

In accordance with international tax rules, it is very important to have a real physical presence of your company in the country of registration. Substance requirements may vary depending on jurisdiction, but the lack of economic presence raises the suspicion of tax evasion by tax authorities.

International tax authorities and public opinion are united in the fight against fraud and tax evasion, which affects all countries. Schemes designed artificially to optimize taxation that abuse the scope of the law will be considered unlawful or, even worse, illegal tax evasion. The international community notes that cooperation and interaction between jurisdictions is the only solution to the problem of tax evasion, since the country cannot solve it on its own. In this regard, the economic presence has become an extremely important requirement for doing business abroad.

One of the most important conditions for obtaining tax treaty benefits under the OECD Convention is as follows:

  • The company must be a tax resident of the country in which it is registered;
  • A company is the beneficial owner of a distribution of income, such as interest, royalties or dividends;    
  • As a result of the foregoing, a company needs to create a wider structure in the country of registration that meets international requirements for an economic presence.

Substance is directly related to “effective management”. A company controlled by directors who do not make real decisions has the risk of losing their tax residency and the ability to take advantage of double tax treaties.

There are two things that can protect against future risks:

  • the first is the physical presence of the director in the country of tax residence of the company;
  • and the second is proof that the main decisions were made in the jurisdiction in which the company was registered.

We provide the following services to create an actual presence:

  1. Consultation on the appropriate level of Substance.  
  2. Company management services. 
  3. HR services.   
  4. Office rental and support.  
  5. Special telephone and fax lines.   
  6. Creating an independent environment.

We suggest to start with a free preliminary consultation to find out your needs.

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