Do we owe an exit charge for converting to a limited-risk distributor?
Possibly, and the answer turns on what left rather than on what the conversion is called. Turning a full-risk distributor into a limited-risk one moves profit potential out of that country, and the question is whether anything of value went with it: customer relationships, a workforce in place, rights under contracts, or a market position somebody built. If an independent party in the same position would have expected compensation for giving those up, a charge is due. If the entity genuinely had nothing to give up, there may be no charge, but that has to be demonstrated rather than assumed.
What actually gets valued when a distributor's functions are reduced?
Not the profit reduction as such, but the things that produced it. The analysis identifies what was transferred or given up and values that: the customer relationships the entity had built and will no longer serve on its own account, the assembled workforce moving to another entity or being released, and the rights it held under agreements that are being terminated or rewritten. Each has to be identified separately, because some of what looks like lost profit was never the entity's to keep. The exercise is easier and cheaper before the change than afterwards.
Can we restructure without paying anything to the exiting entity?
Sometimes, and the way to reach that conclusion safely is to do the analysis rather than skip it. There are restructurings where the entity being converted held no customer relationships in its own right, had no enforceable expectation under its agreements, and transferred no people or assets. In that case an independent party would not have been compensated and neither should it be. What makes the position defensible is contemporaneous work showing what was examined and why nothing of value was found, prepared while the people who ran the business are still available to explain it.
Should the converted company's margin fall after the restructuring?
Yes, if the functions genuinely fell. That is the point that catches groups out in the other direction: an entity that keeps making the same decisions, carrying the same inventory and bearing the same market risk is not a limited-risk distributor, whatever the new agreement says. Post-restructuring pricing has to match the functions actually performed and the risks actually borne. So the conversion has two halves, and both have to happen: the business change on the ground, and the pricing that follows from it. A paper conversion with unchanged conduct is the weakest position of the three.
Does terminating an intercompany distribution agreement require compensation?
It depends on what the agreement gave the terminated party and what it is losing. Read the contract first: its term, what notice it required, whether it granted anything that survives termination, and what an independent party negotiating it would have insisted on in those circumstances. Then look at what the entity built while it held the rights and where that value is going. Compensation follows from rights given up and value transferred, not from the fact of termination, so a short-notice agreement freely terminable on both sides supports a different answer from a long-term one.
What will the country losing the profit look at?
What left, where it went, and what was paid for it. A tax authority watching profit potential move out of its jurisdiction will start from the entity's own history: the customers it served, the people it employed, the contracts it held, and the returns it reported before the change. It will then compare the post-restructuring reward with the functions the entity still performs. The two questions it asks are whether an independent party would have been compensated for what it gave up, and whether the new pricing reflects genuinely reduced activity.
How would a foreign tax authority know I am resident there?
Mostly from information you or your bank already provided. Account-opening forms ask you to self-certify tax residence, and that certification is reported between authorities under the Common Reporting Standard or, for US accounts, under the FATCA framework. Beyond that: employer and payroll filings, property registries, immigration records and the tax filings of anyone who paid you. The realistic planning assumption is that the data arrives. See FATCA and information reporting.
How many days can I spend in a country before I become tax resident?
It depends on the country, and a day count is only ever the start. Many use a threshold in a tax year, some also look at averages across several years, and some have no day test at all and decide on where your home and life are. Two countries can both conclude you are resident, which is what the treaty tie-breaker exists to settle. Counting days without checking the tie-breaker is how people end up filing as resident nowhere. See the residency tie-breaker.
