Double taxation agreement
Double taxation agreements. Strategic approaches if no DTA exists.
Double taxation agreement
What is the strategy if there is no double taxation agreement (DTA) between the country of residence and the country of domicile of your foreign company?
A foreign company that is classified under the CFC rules leads to add-back taxation in the country of residence of the shareholder of this company. As already explained, the profits of the foreign company are subject to income tax in the shareholder's country of residence for shareholders who are natural persons.
In the following diagram, every activity for the company triggers a permanent establishment in your country of residence, provided there is no double taxation agreement (DTA).
Your presence at your place of residence can give rise to a permanent establishment. There is then a suspicion of tax evasion.
Our strategic advice:
An EU holding company holds the shares of your foreign company whose country of domicile has signed a double taxation agreement with the country of domicile of the foreign company. You represent your EU holding company in external relations.
This is legal due to the EU freedom of establishment and does not trigger a permanent establishment.
If an EU foreign company is founded, we will inform every entrepreneur of the requirement to "build up substance" as part of the structuring advice without being asked.
We make it clear that many competitors completely neglect the issue of "building up substance" in the context of international tax law.
With a view to the moderate expense of using our business addresses on 5 continents, we address entrepreneurs on their way to global entrepreneurship. We create clarity through positioning.
P.S. It follows: "How can I deal strategically with profit distributions from my foreign company?"
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