Item — HN Reader

Please beware:

From: https://learn.e-resident.gov.ee/hc/en-gb/articles/3600007215...

> Corporate tax residency

> However, some countries have different rules for deciding if a company is tax resident. It is common that, in addition to the place of incorporation, the place of effective management can trigger tax residence. If you run your company from a country with regulations like this, then the company may end up having dual tax residence. This happens when two states believe that the company is tax resident in their jurisdiction and will want to tax the company’s profits.

This 'It is common that [...] the place of effective management can trigger tax residence' is indeed common.

3 comments

It is still amazing to me that so many people don't get this fact.

It doesn't matter where your company is incorporated, you'll be liable to pay the taxes where you live. And if you think the revenue service of your country is going to forget, you are guaranteed to have a very nasty surprise waiting for you when you least expect it.

The only way to more or less skirt this rule is to keep moving so you're technically never fiscally resident in any country (not even sure if it works), or move your personal fiscal residence to a tax haven like Monaco.

Also estonian law doesn't recognize trusts, so if you want to save your assets for your children that's a problem.

I assume we are taking about a foreign trust and not an Estonian one. In what regard? When it comes to money laundering? Profit distributions?

No, I was under the impression that foundations must be established with a non profit goal in mind. I thought you cannot just give beneficiaries cash. I see I was mistaken and that private foundations allow you to treat the structure the same as a trust fund.

You mostly use foundations for that purpose in civil law countries (which are also not part of the hague trust convention )

Hence the executives/boardmembers-all-fly-to-some-island (Jersey is the one in my mind), have board meeting in the airport, sign the papers, and all fly home?

Company stays "in" Jersey, none of the humans need to live there?

That is unfortunately not how it works. Most commonly the place from which decisions are made on a day to day basis is used. This results in the country in which 50% or more of your directors reside for 183 days a year.

So if 50% or more of your directors spend 183 days per year in the UK then your Estonian based business becomes UK tax resident in the eyes of the UK.

Do not underestimate the complexity of these rules.

If the company is managed 'day by day' by a local director (for example by a company like Intertrust or Trustmoore) then the non-local board and/or shareholders can indeed flyin to have 'a meeting with extensive discussions where all decisions where made and some papers were signed'. I had a company in Singapore for some years doing this.

That does not work necessarily work in the UK anymore.