Substance

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CaptK

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About 18 months a go I had quoted a client who required a UAE structure but didn't want to leave Sweden. I quoted him everything he required not only for Tax efficiency but also to prove SUBSTANCE.
I never heard from him after that until last week.
He rang me to say that I was a liar and a crook and that he is going to ruin me. After letting him release his steam I then said to him that he never did any business with me so how could I have cheated him in any way.
His response was that the structure I prescribed to him didn't work and now the authorities want Euro 376K!!!
So the story goes he contacted someone else who told him what he wanted to hear and he registered him a company at about 50% less than what I quoted him.
The difference in price was substance....... He now has "substantially" (pun intended) big bill to pay because he had no substance.
He now has offered me quite a substantial percentage of the bill to sort it out. I politely declined and he now keeps calling asking for help.

Has anyone else fallen into the substance trap?
 
I´m curios to hear how a substance setup was only 50% more expensive than a non substance setup?

In my head a substance setup (with leased office space(10k+ EUR/year), local workforce (60k EUR/year)), surely must
be much more expensive than a non substance setup.
 
He was happy to pay the running cost but he was cheap.
Company set up and all the things he needed to confirm substance including office 12K (normally about 6).
2 staff members 500 each.
At least one of them needed to be in the UAE. Then it all the little things like emails telephone numbers, website and the actual process that you handle business.

All this was in his quote but the guy he bought from didn't care about his situation. The only thing he did listen to was not to get a RAK ICC and got an FZE.
 
JustAnotherNomad said:
JustAnotherNomad said:
500 sounds cheap. Can't really see the authorities in a country like Sweden falling for that...
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I must say, I doubt this too. Sweden is like most other Scandinavian countries and they don't fall for cheap setups, believe me, at least not if the purpose is tax evasion

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CaptK said:
CaptK said:
About 18 months a go I had quoted a client who required a UAE structure but didn't want to leave Sweden. I quoted him everything he required not only for Tax efficiency but also to prove SUBSTANCE.
I never heard from him after that until last week.
He rang me to say that I was a liar and a crook and that he is going to ruin me. After letting him release his steam I then said to him that he never did any business with me so how could I have cheated him in any way.
His response was that the structure I prescribed to him didn't work and now the authorities want Euro 376K!!!
So the story goes he contacted someone else who told him what he wanted to hear and he registered him a company at about 50% less than what I quoted him.
The difference in price was substance....... He now has "substantially" (pun intended) big bill to pay because he had no substance.
He now has offered me quite a substantial percentage of the bill to sort it out. I politely declined and he now keeps calling asking for help.

Has anyone else fallen into the substance trap?
Click to expand...
Click to expand...
Admin said:
Admin said:
I must say, I doubt this too. Sweden is like most other Scandinavian countries and they don't fall for cheap setups, believe me, at least not if the purpose is tax evasion
Click to expand...
Click to expand...

Going the cheap route Is always expensive on the longrun,apparently he now has more of an issue than a solution...take him in, do your due diligence and invoice him for coming back after a year, prior to sorting him out...high time service providers on the OCT get more appreciation @ respectcig-:,

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No, because if I get involved now I'm stuck with the problem. I dont know what he has done nor who his customers are.
It's a time consuming problem I dont need and he will be calling me every day like he has been.
 
JustAnotherNomad said:
JustAnotherNomad said:
500 sounds cheap. Can't really see the authorities in a country like Sweden falling for that...
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Click to expand...

Cheap is relative to the wages in country. His business is fruit and vegetables from Africa. Predominantly Kenya, Uganda and Tanzania. His managers would have been in Kenya and that is a fair wage for administration.
 
I thought we were talking about the UAE? How would it give him substance in the UAE if he has employees in Africa?
 
Also substance wouldn't help much if he's still a shareholder, as the UAE company would be considered a CFC in Sweden (when there is substance in UAE).
 
I had a quick look at the Swedish CFC rules. They're probably the strictest in the world. Even having close family members in Sweden can mean they will have to pay tax just because you have a company in a low tax country, even if you don't live in Sweden.
 
JustAnotherNomad said:
JustAnotherNomad said:
I thought we were talking about the UAE? How would it give him substance in the UAE if he has employees in Africa?
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Well for 500euro a month you can get some cheap bangladeshi / pakistani staff there, but like already mentioned before, if you are the only shareholder your homecountry will prolly still tax you.

Same for germany btw lol
 
Lets say that the Swedish shareholder only had 25% ownership of the UAE company, and that the UAE company had substance in UAE.

Would CFC rules then kick in for him?
 
JustAnotherNomad said:
JustAnotherNomad said:
I thought we were talking about the UAE? How would it give him substance in the UAE if he has employees in Africa?
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They were getting employment Visa's so they can travel back and forth to the UAE and sit in the office from time to time and hold meetings. The services office we use actually have an office there for you with a telephone number and receptionist.


They have to go between Africa and UAE sourcing and selling, as he was supplying a couple distributors in the UAE also. Travel was expensed by him plus perdiums.

Last edited: Sep 8, 2020
 
NicolasMaduro said:
NicolasMaduro said:
Lets say that the Swedish shareholder only had 25% ownership of the UAE company, and that the UAE company had substance in UAE.

Would CFC rules then kick in for him?
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Click to expand...

I only had a quick glance at the rules, but it seems like the minimum ownership was lowered from 50% to 25% as part of the ATAD implementation. So yes.
 
It was just a quote and I probably spent too much time advising him. I didn't do any research regarding the Sweden part as he hadn't paid anything.
 
It depends on the country. Germany for example does not count a company as a CFC if there is sufficient substance, if I'm not mistaken.
 
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