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Substance services for companies: office, telephone, website, employees
In connection with the tax abuses of companies that did not have actual activities in their country of registration, international regulators introduced the defining concept of "real presence" or substance.
Substance is a kind of indicator that allows you to identify shell companies with nominees and companies that actually physically and economically operate in the country of incorporation. Offshore companies were the first to face this problem, from which regulators began to require compliance with the presence criteria for further use of tax preferences. Thus, the substance criteria have become determining the future fate of the offshore business.
- local office and/or warehouse;
- local contact phone and/or fax;
- resident director of the company;
- resident employees;
- a website hosted by the country of registration (or international hosting with a local address);
- corporate account in the country of registration;
- VAT payer status;
- the status of a local employer;
- storage of accounting in the country of registration;
- submission of reports in the country of operation;
- certificate of tax residency of the company.
- high reputation of the company;
- business transparency before the tax authorities;
- unlimited banking services;
- availability of local tax incentives;
- the opportunity to enjoy the benefits of bilateral tax agreements;
- trust of partners and contractors;
- failure to apply sanctions or restrictions on activities;
- the possibility of buying real estate in respectable countries;
- obtaining a tax residency certificate.
Substans for European companies
Today, the EU countries are also extremely concerned about tax manipulations. Therefore, from 2024, the European Union plans to introduce a standardized approach to identifying companies that should not be eligible for tax benefits. Directive ATAD 3, which regulates these rules, has already been developed and is at the stage of coordination. Thus, all European companies that do not comply with the requirements of the minimum substance will be deprived of tax benefits and recognized as "sham". Moreover, sanctions at the level of the European Union will be applied to such companies, and their status will be entered into a single European database. Therefore, we strongly recommend that you take care of the status of your foreign companies in advance in order to avoid negative consequences in the future. Substance criteria are becoming the new reality of international business, and our lawyers are ready to help you adjust to them.