Offshore Company Managed by a Perpetual Traveller

[Jea]

How much time I have to spend in a jurisdiction or what ties do I need to have with the jurisdiction (other that my person being a tax resident there), so that my offshore company would be considered corporate tax resident there? Let's say I wanna spend 1-5 months per year in different countries and I wanna avoid triggering the "managed and controlled from that contry" rule.

 

[Sols]

It varies from country to country. Not all of them look at just how many‌ days you spend there. Some (also) look at if you have strong ties to any‍ other jurisdiction and, if not, you are tax resident.

Research the places you plan to⁠ visit well ahead of time.

In reality, as long as you keep a low profile,⁤ the risk of getting caught is low if you don't register as resident and get⁣ a tax ID in the jurisdiction. It's probably a legal grey zone in many cases.⁢

One good tip is get an international health insurance, so that you're not a burden︀ on the local healthcare system if you get into an accident or need medical attention.︁

These days, it might be wise to establish an actual tax residence somewhere, even if︂ you don't live there all the time. This will help you when it comes to︃ opening bank accounts. For EU nationals, Cyprus and Malta are favourable. Otherwise, UAE and Panama︄ both have lenient and attractive residency programs that can fit a PT.

 

[John Andrews]

@Sols what about Paraguay?

(random text in order to comply with minimum word limit)

 

[Sols]

Paraguay is another one that's quite popular.

There are more options out there. The more‌ you can commit to a jurisdiction (such as residency through entrepreneurship visas or large deposits),‍ the more doors will open up.

 

[JohnLocke]

And you guys say that if you are able to obtain residency in the mentioned‌ countries you won't get any troubles with any European based EMI or other financial service?‍

 

[Sols]

At least fewer problems than if you struggle to show⁠ any kind of residence and tax ID.

If a financial institution can't pinpoint where you⁤ live and pay taxes, it's easier for them to decline the application than to take⁣ you on and try to sort out where you live.

 

[JohnSeed]

So best would be to find a low‍ tax / no tax country within the EU and get your self residency there? That⁠ brings us back to Lichtenstein, Switzerland and Luxembourg?

 

[Sols]

I guess you mean for EU nationals? Then Malta⁠ and Cyprus are the top locations in most cases. With the typical setup, both have⁤ lower total taxes and costs than Luxembourg, Liechtenstein, and Switzerland.

Luxembourg's tax system isn't always⁣ that favourable, especially not for individuals.

Despite being an EEA members, Liechtenstein has a special⁢ deal whereby they only issues about 20 residence permits per year even to EU/EEA nationals.︀

Switzerland is doable as an EU national, but they might not issue you a B︁ permit (long-term residence) if you don't have strong ties to Switzerland. I've seen examples of︂ EU nationals only getting L permits (usually 3-6 months) even though the guidelines say EU︃ nationals should get B permits in nearly all cases.

 

[JohnLocke]

And the opposite is also seen Niklas Nikolajsen | Bitcoin Suisse to give a more nuanced image. Not all around this forum are an average Joe with⁠ a low income, some may actually have the money to get a B permit without⁤ "strong ties to Switzerland" - for instant to setup a company there with a small⁣ office of 20 m2 and a manager is sufficient as long as the company makes⁢ profits.

 

[carlc]

What about Monaco? That should be easy doable for EU nationals.

 

[Gediminas]

Not even close to that 😉 But I could make it happen. If you have‍ at least 1m in the bank. It's the lowest for you to think about it.⁠

 

[daxbr]

First hand experience opening accts and emis that were recommended⁠ here (hat tip to xzars), doing token transactions for extended period of time and then⁤ changed residency and address from eu to one mentioned above. In one case, opened acct⁣ previously summarily rejected for. In another case that requied personal appearance, made change next day.⁢

 

[JohnLocke]

Okay, so we all learned something new. I do hope some of you reading this‌ are able to get an EMI based on the background of the information in this‍ thread thu&¤#

 

[Jea]

Are you talking about personal or corporate taxation here?

Let's use Georgia as an example:

1. Personal taxation is pretty straightforward. Resident and nonresident individuals are taxable only on Georgia-source income,⁠ so no issue here as my income is from the outside of Georgia.

2. Corporate⁤ taxation: According to this PWC summary, "A resident enterprise is any legal entity that is⁣ established under the laws of Georgia or has its place of effective management in Georgia⁢".

I wanna stay in Georgia 1-4 months per year, and I'll be managing my︀ offshore company from there. When would Georgia consider my offshore company a Georgian corporate tax︁ resident? After any specific amount of time spent there? When I as an individual get︂ an official (permanent or temporary) residence in Georgia?

 

[Sols]

You have to consider the exact word of the law as well as the common interpretation︂ of the law in your situation.

The wording "effective management" has different interpretations. In the︃ strictest interpretation, it means wherever in the world you generally or mostly take decisions for︄ the company. So if you spend 4 months in Georgia and less than 4 months︅ in two or more other countries, the effective management is probably in Georgia. Another factor︆ is the amounts involved and nature of business. If you do business with Georgians, you︇ are more likely to be in scope for the local tax authority, overworked, understaffed, and︈ underfunded though it may be.

Georgia doesn't have the resources to go after every tax︉ dodger or enforce every article of the tax code , and, like many other quasi︊ tax havens, benefits from not being too aggressive against people like you. You bring enough︋ value to Georgia by owning or renting a property and participating in the local economy.︌

Compare this to for example Germany or Spain, which will not rest until you have︍ paid every single cent of tax they can possibly drain from you, regardless of who︎ you are or where you are from.

Hope for the best, or invest time and️ money in speaking with a qualified Georgian tax adviser.

 

[Jea]

So generally there's only one place of "effective management" of a⁢ company? Or can there be multiple places of "effective management" similar to natural person being︀ able to have multiple tax residencies in one year?

Thanks for your answers, I'm currently looking for one. I've contacted several tax lawyers︃ and big 4 accounting firm's offices in Georgia and I'm waiting for quotations. I'm trying︄ to get as much information as possible before I get to these paid consultations as︅ I have mostly negative experiences with lawyers.

 

[nomad999]

kept my revolut account after leaving europe for asia and⁠ I use it seldomely with low amount. haven't change my registered address as they only⁤ service EU and it seems they don't give a f**k. hopefully they service worldwide soon⁣ ...

 

[JohnLocke]

That is true, and you⁠ need to be able to proof that the conditions are met. That's the most difficult⁤ part with most setups around and the tax offices.

 

[Sols]

Yes, you generally only have⁠ one place of effective management. However, you can have multiple Permanent Establishments, which are also⁤ taken into consideration when determining tax residence.

If following the OECD model, a PE is⁣ defined as:

This is also︀ important:

Article 5 of Model Tax Convention on Income and on Capital: OECD iLibrary | Model︉ Tax Convention on Income and on Capital: Condensed Version 2014

 

[khinkali]

That is a good question for a Georgian tax lawyer⁠ who has experience with the day to day reality of how the law is enforced.⁤ But Article 29 paragraph 4 of the Georgian tax code looks relevant:

I'm not a lawyer and︄ more importantly I have zero experience dealing with the relevant government departments, but my guess︅ is that if you spend a month or two managing your company while in Georgia︆ then you don't become a PE of your company. But if you spend 4 months︇ managing your company from here then I'd be surprised if you weren't a PE. These︈ are just my guesses from reading the tax code.

But I have a question.

Article 97 paragraph 2:

So if an offshore company is being run by a PE︍ in Georgia, but doesn't have any Georgian sourced income then it looks like Georgia won't︎ tax it anyway?

Article 104 (Georgian source income) has 32 parts to it. If you're️ dealing with physical goods outside of Georgia, it looks promising. But regarding services etc., I'm‌ confused. Also, I suspect that the reality has a lot to do with the practices‍ of officials in Georgia.

Does anyone know whether a non resident company managed from Georgia⁠ has "Georgia source income" if it:

• supplies goods from one place to another, both outside⁤ of Georgia, managed by someone in Georgia. My guess is no, due to:
  • 104, 1.b)⁣ "income or benefit earned from the supply of goods in the territory of Georgia"
    
• provides services, performed by the Georgian resident manager? My guess: yes due to:
  • 104 c.g) "a⁢ service provider and a service recipient are in different states and the service provider is︀ a Georgian resident, except where the service provider delivers services through its permanent establishment in︁ another country that confirms the fact that the service provider has delivered services in another︂ country (other than in Georgia). "
    
• provides services, performed by a non-Georgian resident, who is︃ managed by a Georgian resident? My guess is no, due to the above paragraph.
  
• trades crypto on international exchanges, using software developed and deployed offshore but managed by a Georgian︄ resident?
  

Depending on what is treated as "Georgian source" income, Georgia might be an ideal︅ place for a PT (or even a tax resident).