Evaluation of company’s substance
It is extremely relevant to organise a sufficient level of substance for your international structure. There are two levels of substance for you to consider. They could be referred to as objective economic substance and subjective economic substance.

Objective economic substance is the level of economic activity and the actual setup of a foreign corporate entity. Subjective substance is the specific activities of the foreign corporate entity in correlation with the legal framework in the countries involved. It depends on the specific situation of your company, the actual international corporate structure, the applicable anti-avoidance tax regulations in your country of origin, jurisprudence on this issue in the jurisdictions involved and the rules of the applicable treaty for the avoidance of double taxation.

Generally, it is accepted by many jurisdictions that the Company qualifies as resident company if:

Decisions are taken in the jurisdiction of the company (including signing agreements, board meetings, etc.);
Directors of the company have major influence and control over company’s business (control bank accounts, control cash flow, conclude business contracts, etc.);
Directors are tax residents of jurisdiction of the company.
However, tax authorities normally would have more questions as they investigate presence of the company. The following FAQ (frequently asked questions by the tax offices) may help in planning your further steps of developing economic substance for your company:

Where do the Directors of the company reside?
Who has control over the corporate bank account?
Who actually signs contracts, resolutions, minutes, decisions and other company documents?
Where do the sales and operations actually take place?
How do your clients and suppliers communicate with your Company (by phone, e-mail)?
How can potential clients find information about your Company? (Do you have web-site? Do you use advertisement?)
How does your Company’s headquarters look like? Do you have a physical office? (Are there any employees?)
It might look like your Company’s substance really needs enhancement. Adding substance and establishing a management office is usually a tailored-made exercise. Confidus will help you fully evaluate your current situation and will offer step-by-step solutions on creating a Management Office.