In the globalised world we live in today with numerous cross-border transactions taking place every minute, it has become relatively easier to decide where to set-up shop. Re-location or incorporation of a company in a jurisdiction other than the country of residence of the Ultimate Beneficial Owner is, today, a normal occurrence.
In most cases, companies established in foreign jurisdictions are used in order to benefit from a particular legislation that will help their business activity commence or simply to benefit from favourable taxation conditions or double tax treaties offered in the respective jurisdiction.
Ultimately, company substance refers to the respective company’s economic activity. It intertwines with value creation, which most notably shows that the management and day-to-day control of the company is the jurisdiction of its tax residency.
Company substance therefore plays a key role in its structure and efficient international tax planning. Get to know more on how we can help you and why your company substance decision matters.
Company substance plays a major part in determining its structure and international tax planning strategies. Company substance is however also being placed as a pivotal determining point by banks and authorities alike. Your company should not be in a position to be rejected from opening a bank account due to its lack of company substance in the respective jurisdiction.
The Organisation for Economic Co-operation and Development (OECD) in its base erosion and profit shifting (BEPS) action plan has highlighted the importance of company substance and having its value creation in the respective jurisdiction that it is operating in.
In line with the OECD’s determination, banks and institutions have started placing company substance as a central part during the application stage. Ultimately, the economic world is shifting importance to the economic and operational reality of a corporate structure, requiring physical and actual presence.
Valuation of company substance is carried out on a case-by-case basis. It is however wise to keep in mind the below points, which assist you in determining whether company substance in the respective jurisdiction is satisfactory or otherwise:
- Full-time local employee/s;
- Local Office (different from Corporate Service Provider, Law firm or Accountant address);
- Assets held and registered in incorporating jurisdiction;
- Board of Directors composition (50% being nationals or permanently resident in incorporating jurisdiction);
- Ultimate Beneficial Owner being a national or permanent resident of incorporating jurisdiction and;
- License to operate granted by the relevant local authority, if applicable.
E&S Group assists our clients to tailor make their companies to meet these required standards for company substance while respecting and adhering to the company’s operations.
E&S provides office spaces that are fully operational and include all the basic requirements, such as phone and internet connections, desks and boardroom access. The Offices are designed in an efficient way of having all the features of a fully functional office space for a considerably lower cost than other alternatives.
Should you require to employ staff to enhance your company substance, E&S Group may assist you in recruiting the necessary individuals. We may also provide assistance in the monthly computation of tax and social contributions of the employees through our payroll services.
Relocation to Malta
Our team is equipped to assist you in relocating to Malta either through self-sufficiency, employment or any other attractive residency programmes offered in Malta.
Individual or Corporate Directors
This service is subject to a case-by-case analysis and depending on the business activity and necessary risk assessments. E&S would require holding 2 – 4 board meetings per year and ensure that these are documented and stored. Directors would also require control and access to any local or offshore bank accounts.
Our advisory team is willing and able to review your current structure and see how it may be improved or amended to ensure that it is working in the most tax efficient manner and operating within all legal framework.