Hi I have a seychelles IBC with transferwise bank account,trying to do business (IT Consulting services )in Malaysia,they are asking about Tax residency certificate but a Seychelles IBC is a non resident entity so what should I provide here? Any ideas??
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Malaysian Government Client asking for Tax Residency Certificate for Seychelles IBC-what to do?
- Thread starter fortunespeculator
- Start date
If I'm not mistaken, you can get a certificate saying the IBC is exempt from tax. It's a certificate, albeit of the complete opposite of what you want to show.
The Seychelles IBC is probably tax resident where you live, so register your company with your local tax authority and then get a certificate from them.
In other words: a Seychelles IBC is useless (for tax) in this situation.
The Seychelles IBC is probably tax resident where you live, so register your company with your local tax authority and then get a certificate from them.
In other words: a Seychelles IBC is useless (for tax) in this situation.
Do they specifically ask for Certificate of Tax Residence, or just a tax registration number/registration document?
Did you give them a Seychelles address?
Did you give them a Seychelles address?
Yes they are asking for a certificate of tax residence,i have already got the certificate that the IBC is exempt from tax as told by Sols above but i think this is a different thing being asked. Can you suggest anything because the whole purpose to setup in Seychelles was to avoid taxation.
I don't think that Seychelles setup is going to work for your case as the company is taxable at the place of management, so most likely your country of residence. You could register the company there for tax purposes, but obviously there is no point in doing so.
For IT services you might want to look into virtual zone entities in Georgia as they are tax exempt. means you open an LLC there with virtual zone status and have zero corporate income tax.
I didn't understand if your clients are based in Malaysia or if you want to operate from there. Depending on the situation Labuan could be an option, but you will need substance which costs around 10k USD per year (2 staff and office). You end up with 3% tax on turnover.
For IT services you might want to look into virtual zone entities in Georgia as they are tax exempt. means you open an LLC there with virtual zone status and have zero corporate income tax.
I didn't understand if your clients are based in Malaysia or if you want to operate from there. Depending on the situation Labuan could be an option, but you will need substance which costs around 10k USD per year (2 staff and office). You end up with 3% tax on turnover.
The client is a Malaysian Goverent entity.I am resident in Ivory coast and as there are no cfc laws it is not taxable in Ivory Coast. Yes I am aware of the Georgian VZE- i have thought of creating one VZE under my Seychelles company acting as a holding company- any pointers on the cost. Or can you help on this- although this is going off topic
You are probably mistaken, CFC laws are irrelevant. If there is a permanent establishment in Ivory Coast, then you need to pay the local tax.
Whether they have the will and capacity to enforce that is of course a different question.
https://taxsummaries.pwc.com/ivory-coast/corporate/taxes-on-corporate-income
Whether they have the will and capacity to enforce that is of course a different question.
https://taxsummaries.pwc.com/ivory-coast/corporate/taxes-on-corporate-income
There is no PE only I am resident in Ivory Coast:And this reads -Non-resident entities are subject to withholding tax (WHT) at 20%, subject to existing double tax treaties (DTTs), on their Côte d’Ivoire source income when they do not have a permanent establishment (PE). Non-residents with a PE are taxed in the same way as a resident.
So if there is no income made in Ivory Coast then there is no tax my friend.
So if there is no income made in Ivory Coast then there is no tax my friend.
Andrew Henderson is an idiot. Certainly not someone I’d want to take advice from.
Permanent establishment is the issue for normal people. CFC laws usually don’t even apply to active businesses anyway.
If you work from Ivory Coast (even for foreign clients through an offshore company), then there most likely is a PE.
Permanent establishment is the issue for normal people. CFC laws usually don’t even apply to active businesses anyway.
If you work from Ivory Coast (even for foreign clients through an offshore company), then there most likely is a PE.
I think you might be the Idiot.A director does not even need to stay in the place of residence for the full year.I have been studying International Taxation for some time now.Had you been studying them you wouldnt be posting and starting several threads at the same time and asking other people for advice.First get your education and maybe you will not require to ask stupid questions here
Just the kind of comment you’d expect from someone who doesn’t know the difference between CFC rules and permanent establishment.
Just the kind of idiotic reply from someone who needs to ask 4 different questions starting different threads and asks others for help and then starts to show how much he knows by getting into every thread.
fortunespeculator , What "JustAnotherNomad" said is true. If you are the only director and shareholder of the Seychelles IBC and you are performing your works and managing your IBC from " Ivory Coast " then the Seychelles IBC is indeed creating a PE and your IBC is liable to tax in Ivory Coast.
Please understand the fact that CFC and Place of management are two different things.
CFC - Say you are holding 50% shares of a big company which is tax resident in UK and the company got offices, staff, managers and directors in UK. The company is deemed to be tax resident in UK. The company can opt not to distribute any dividends. But if you (the shareholder) are personally resident in a country with CFC rules, you need to add your share of profit to your personal income tax return. This means you are forced to pay personal income tax even though you haven't received any dividends from the UK company. This is why big investors prefer residence in country with no CFC laws.
Place of management/ Place of effective management/Permanent Establishment - This is the difficult part. Here the taxman is mainly looking at who is managing the business and from where. i.e, where the board meetings are done, who signs the contracts, who have right to hire/fire staff, Who performs the tasks which leads in generation of income etc. If you are the sole owner/ director/UBO of a company then the company actually becomes tax resident where you are personally tax resident. Please don't say that you will fly out of country for a day or two, sign the agreements/board resolutions etc and come back to Ivory Coast. It won't work.
Example: You have a UK company with UK staff, UK office and even UK clients but no UK resident directors. You are the sole owner/director and is a resident of "Ivory Coast". You are the one giving instructions to your staff in UK to do the jobs or you are the one who is signing contracts with clients. In this case "Ivory Coast" can claim that the UK company is tax resident in "Ivory Coast" because it is being managed from " Ivory Coast". Here DTAA agreement plays it's role. By default UK companies are liable to tax on worldwide income. But if there is a DTAA with another country (Ivory Coast) and the company is treated as tax resident there because of place of management rules then UK taxman will agree that UK taxes will be limited to the income from UK sources and all other income shall me taxed in "Ivory coast".
Workaround for you: You can still avoid taxes if you are a perpetual traveler and do your jobs while outside of "Ivory Coast". As per the rules if you hold a permanent home ( own/rented ) you are treated as personally tax resident there. Don't spend more than 183 days there and also don't live more than 183 days in any other country too. Keep your flight/travel tickets, hotel/airbnb bookings, email to clients etc as a proof that the work was done while outside "Ivory Coast". Also make sure that nothing is carried out while in Ivory Coast (No meetings, no contracts, no work). If possible, get rid of Seychelles IBC and use some other country based company where it is more easy to get a corporate tax residency certificate just because of being registered there (Romania, Estonia, Georgia etc)
Please understand the fact that CFC and Place of management are two different things.
CFC - Say you are holding 50% shares of a big company which is tax resident in UK and the company got offices, staff, managers and directors in UK. The company is deemed to be tax resident in UK. The company can opt not to distribute any dividends. But if you (the shareholder) are personally resident in a country with CFC rules, you need to add your share of profit to your personal income tax return. This means you are forced to pay personal income tax even though you haven't received any dividends from the UK company. This is why big investors prefer residence in country with no CFC laws.
Place of management/ Place of effective management/Permanent Establishment - This is the difficult part. Here the taxman is mainly looking at who is managing the business and from where. i.e, where the board meetings are done, who signs the contracts, who have right to hire/fire staff, Who performs the tasks which leads in generation of income etc. If you are the sole owner/ director/UBO of a company then the company actually becomes tax resident where you are personally tax resident. Please don't say that you will fly out of country for a day or two, sign the agreements/board resolutions etc and come back to Ivory Coast. It won't work.
Example: You have a UK company with UK staff, UK office and even UK clients but no UK resident directors. You are the sole owner/director and is a resident of "Ivory Coast". You are the one giving instructions to your staff in UK to do the jobs or you are the one who is signing contracts with clients. In this case "Ivory Coast" can claim that the UK company is tax resident in "Ivory Coast" because it is being managed from " Ivory Coast". Here DTAA agreement plays it's role. By default UK companies are liable to tax on worldwide income. But if there is a DTAA with another country (Ivory Coast) and the company is treated as tax resident there because of place of management rules then UK taxman will agree that UK taxes will be limited to the income from UK sources and all other income shall me taxed in "Ivory coast".
Workaround for you: You can still avoid taxes if you are a perpetual traveler and do your jobs while outside of "Ivory Coast". As per the rules if you hold a permanent home ( own/rented ) you are treated as personally tax resident there. Don't spend more than 183 days there and also don't live more than 183 days in any other country too. Keep your flight/travel tickets, hotel/airbnb bookings, email to clients etc as a proof that the work was done while outside "Ivory Coast". Also make sure that nothing is carried out while in Ivory Coast (No meetings, no contracts, no work). If possible, get rid of Seychelles IBC and use some other country based company where it is more easy to get a corporate tax residency certificate just because of being registered there (Romania, Estonia, Georgia etc)
Ok Got it.I generally am not in any country for more than 4 months to get outside the 183 days however the pandemic has stopped me from travelling.
How about me moving to Vanuatu does it solve the problem?
CFC rules usually aren’t an issue for most people though as they typically only cover companies with (mainly passive) income in low-tax jurisdictions, sometimes they also only apply to corporate shareholders. An example would be if you are an Italian software manufacturer and you sell the rights to the software to a Cayman Islands company. Your company does the development and customer support in Italy (a high-tax country) and you make a profit of €1M. Unfortunately, you also have to pay license fees of €900k to the Cayman Islands company, reducing your profits by 90%. The company is not actively managed from Italy, there are local directors and an office in the Cayman Islands, but it’s owned by the Italian company (majority shareholder), makes most of its revenue from passive income (license fees) and is in a low-tax jurisdiction - so it is a “controlled foreign corporation.”
In this case all profits of the Cayman Islands company, even undistributed profits, would be added as taxable income to the Italian company, according to its share size. So if the Italian company owns 100% of the shares and the Cayman Islands company had a profit of €850k, 100% of those €850k would be taxable in Italy due to CFC rules.
Typically, companies must have mainly passive income (a restaurant in the Cayman Islands usually wouldn’t be considered a CFC) and be paying significantly less taxes than it would be paying in the jurisdiction of its parent company (the UK typically wouldn’t count as low-tax) to fall under CFC rules.
Now on the other hand a PE is about where work is done. This can be a place of management, but it can also simply be a place where work is done regularly. In another thread, I made up an example where a Bulgarian company sends housekeepers to work at different Italian hotels for the summer months every year. It may be different workers every year, they may be working at different hotels every year, but every year that Bulgarian company sends workers to Italy to work there for three months. So year after year, you would be finding Bulgarian workers from that company in Italy for three months at a time. The Italian taxman could then declare that the Bulgarian company has a PE in Italy and charge Italian corporate income tax. As per the DTA, that income would not be taxed again in Bulgaria.
So basically any work you do anywhere over either a prolonged time (usually 12 months) or regularly (like in the example above) can trigger a PE. Even/especially if it’s just a place of management where you make decisions and sign contracts. A PE is like a local branch office of a company, subject to that country’s tax laws like a local company.
And then finally (but I believe this is rather rare), if a company is only incorporated offshore, but all work (including management decisions) is carried out in another country, then the company’s whole tax residency status can be challenged and it can be deemed a local company. But I think that’s quite complex, so they would usually simply declare that there is a PE.
In this case all profits of the Cayman Islands company, even undistributed profits, would be added as taxable income to the Italian company, according to its share size. So if the Italian company owns 100% of the shares and the Cayman Islands company had a profit of €850k, 100% of those €850k would be taxable in Italy due to CFC rules.
Typically, companies must have mainly passive income (a restaurant in the Cayman Islands usually wouldn’t be considered a CFC) and be paying significantly less taxes than it would be paying in the jurisdiction of its parent company (the UK typically wouldn’t count as low-tax) to fall under CFC rules.
Now on the other hand a PE is about where work is done. This can be a place of management, but it can also simply be a place where work is done regularly. In another thread, I made up an example where a Bulgarian company sends housekeepers to work at different Italian hotels for the summer months every year. It may be different workers every year, they may be working at different hotels every year, but every year that Bulgarian company sends workers to Italy to work there for three months. So year after year, you would be finding Bulgarian workers from that company in Italy for three months at a time. The Italian taxman could then declare that the Bulgarian company has a PE in Italy and charge Italian corporate income tax. As per the DTA, that income would not be taxed again in Bulgaria.
So basically any work you do anywhere over either a prolonged time (usually 12 months) or regularly (like in the example above) can trigger a PE. Even/especially if it’s just a place of management where you make decisions and sign contracts. A PE is like a local branch office of a company, subject to that country’s tax laws like a local company.
And then finally (but I believe this is rather rare), if a company is only incorporated offshore, but all work (including management decisions) is carried out in another country, then the company’s whole tax residency status can be challenged and it can be deemed a local company. But I think that’s quite complex, so they would usually simply declare that there is a PE.
So it all comes down to where the work is actually carried out and where the company is managed. That may be the country you’re tax resident in or somewhere else. That’s a typical question the taxman would ask, so you better have a good answer to that which you can back up with proof.
Your personal tax residency is only relevant for any money you personally receive through salaries, dividends etc.
It is not generally true that if you spend less than 183 days in a country, you will not be considered a tax resident. For example, you may want to google the US “substantial presence test.”
Having a spouse or kids in another country can also trigger tax residency. For many high-tax countries, even just having a key to an apartment is enough to trigger tax residency.
You can be tax resident in several countries at the same time. If there is a DTA, it will contain tie-breaker rules to determine where you should pay your taxes. If there is no DTA, you might have to pay taxes in both/all countries.
Believe it or not, but the governments of high-tax countries aren’t complete idiots. They are doing what they can to keep their tax revenues.
Your personal tax residency is only relevant for any money you personally receive through salaries, dividends etc.
It is not generally true that if you spend less than 183 days in a country, you will not be considered a tax resident. For example, you may want to google the US “substantial presence test.”
Having a spouse or kids in another country can also trigger tax residency. For many high-tax countries, even just having a key to an apartment is enough to trigger tax residency.
You can be tax resident in several countries at the same time. If there is a DTA, it will contain tie-breaker rules to determine where you should pay your taxes. If there is no DTA, you might have to pay taxes in both/all countries.
Believe it or not, but the governments of high-tax countries aren’t complete idiots. They are doing what they can to keep their tax revenues.
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