How risky is it to do business without a corporate tax residency certificate?

[JustAnotherNomad]

I see that I asked the same question three years ago and never got an answer:
https://www.offshorecorptalk.com/threads/corporate-tax-residency-certificate-required.29497/
Has anyone ever experienced this? What would be the implication if you can't produce a corporate TRC? Would your client be unable to claim deductions for the business expense?

 

[CyprusLawyer101]

JustAnotherNomad said:
I see that I asked the same question three years ago and never got an answer:
https://www.offshorecorptalk.com/threads/corporate-tax-residency-certificate-required.29497/
Has anyone ever experienced this? What would be the implication if you can't produce a corporate TRC? Would your client be unable to claim deductions for the business expense?
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These certificates are mostly used for claiming double tax treaty benefits between countries. They may also be relevant to local tax rules however thia would depend on a particular jurisdiction's rules

 

[JustAnotherNomad]

I believe it's very typical in the EU that during an audit, this could be requested if there are doubts about an invoice?

 

[CyprusLawyer101]

JustAnotherNomad said:
I believe it's very typical in the EU that during an audit, this could be requested if there are doubts about an invoice?
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I little bit fail to follow your reasoning. You are saying that an invoice issued from a company in one jurisdiction issued to a company in another jurisdiction, may not be accepted as deductible expense by the authorities of the latter jurisdiction. Are those two companies , associated / under common ownership?

 

[JustAnotherNomad]

No, the companies would not be associated. From what I have heard, it is very rare that a TRC would be requested. This would typically be the case only if there is an audit or they have some other reason to doubt that an invoice is legit. But I don't know how often this happens in practice and what the consequences can be.

 

[CyprusLawyer101]

JustAnotherNomad said:
No, the companies would not be associated. From what I have heard, it is very rare that a TRC would be requested. This would typically be the case only if there is an audit or they have some other reason to doubt that an invoice is legit. But I don't know how often this happens in practice and what the consequences can be.
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If companies are unrelated, it would have been strange to requeat oe even deny a deduction for a genuine invoice. If companies are associated, it could probably be requested as an indication of the existence of a solid company abroad and that it is not a shell company under a substance assessment or other anti avoidance rules targeting artificial arrangements or tax fraud.

Last edited: Jun 3, 2023

 

[JustAnotherNomad]

I know it doesn't usually happen, I'm only worried if there is an audit and then someone starts asking questions. Everything would be 100% legit, but I'm worried that the client could get into trouble/not be able to claim deductions etc.

 

[CyprusLawyer101]

JustAnotherNomad said:
I know it doesn't usually happen, I'm only worried if there is an audit and then someone starts asking questions. Everything would be 100% legit, but I'm worried that the client could get into trouble/not be able to claim deductions etc.
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If i could think where it would happen it would be in some jurisdiction where the rule of law is not well adhered to and the tax office has a selective application of whatever they feel like in the moment. Where is your client based?

Last edited: Apr 28, 2023