Forming a company is a registry event. Tax residence is a conclusion under one or more tax laws, often looking at incorporation, at where the company is managed and controlled, or at both. A business can also create a taxable presence, sometimes called a permanent establishment, in a country where it was not incorporated at all. These are three sentences. People regularly collapse them into one.
Where it is actually run
Board meetings in a convenient airport, contracts signed from a kitchen in a third country, and a single director who lives somewhere else are the facts that make ‘our company is in X’ a thin description. Some systems care deeply about where central management happens. Whether yours does is a question for an adviser looking at that law. The practical step is to know where decisions are taken, and to stop pretending a registered office is a mind.
A presence is not the same as residence
Employees, a dependent agent, or a fixed place of business in another country can raise a permanent establishment question even when the company is plainly resident somewhere else. The consequence, if one exists, is local tax on profits attributed to that presence. This article does not decide that a home office or a salesperson creates one. It says the question is real enough to ask before you hire.
Banking follows the people too
Banks ask where directors live and where the business operates, because those facts change their risk. A company that is ‘offshore’ on paper and run from a dining table may be difficult to bank, regardless of the tax analysis. Sort the narrative so that it is true. Do not invent a substance you do not have.
Where a company is formed is not where it is necessarily taxed
Incorporating a company in a country gives it a legal home for company law: a register, directors’ duties, a registered office. Tax residence of that company is a further question. Many countries look at where the company is managed and controlled, or at where its business is carried on, and they may do so even when the incorporation is elsewhere. A director who moves, a board that starts meeting in a kitchen in another country, or contracts negotiated entirely from a new address can all be relevant. They are facts. What they mean is for a qualified adviser.
The same move can create a taxable presence for the company in the country where the work is done, sometimes discussed as a permanent establishment. Whether one exists depends on the activity and on any treaty. It is not answered by the company’s letterhead. If you are the person doing the work, your personal tax residence is yet another question, running alongside the company’s.
Write down where decisions are actually made
Keep board minutes that say where a meeting happened and what was decided. Keep contracts that show who negotiated them and from where, if that is known. Keep a note of where the bank account is operated from. These records are dull until two tax authorities ask different questions about the same year.
Ask the adviser before you move a director, change the registered office, or start billing customers from a new country. The cheap moment to ask is before the pattern has already run for a year. Banking will ask its own questions about directors who live abroad. That onboarding is not the tax analysis, and passing it does not mean the company’s tax residence has stayed where you think.
A practical checklist
- Where the company is incorporated.
- Where directors live and where they decide.
- Where contracts are negotiated and fulfilled.
- Where people work.
- Which countries those facts might interest.
- Advice before you move a director, or form a company, to change a personal tax bill.
Questions to ask
- Which facts does this country use for company residence?
- Could another country also treat it as resident?
- Is there a risk of a permanent establishment where the work is done?
- Does a treaty change that picture?
- Will a bank accept this pattern of management?
- What happens if I, the director, move?
Common mistakes
- Equating a registered office with residence.
- Holding every meeting wherever the founders happen to be on holiday.
- Hiring in a country and calling it ‘just a contractor’ without asking.
- Forming a company because a podcast suggested it.
- Ignoring the personal tax of the person who owns it.
WiT Access provides general information and comparison resources. Nothing on this website constitutes financial, tax, legal or investment advice. Always consider obtaining advice from an appropriately qualified professional.
