What counts as economic substance for a holding company?
People who make decisions, decisions that are actually made there, and functions matching what the company is said to do. A holding company whose only activity is owning shares needs less than a financing company, but it still needs someone with authority in the jurisdiction, meetings that deliberate rather than ratify, and records created at the time. An address, a service agent and a bank account are not functions. The test is whether the things the company is credited with in its accounts correspond to work somebody in that country actually did.
Can our directors sign board resolutions from another country?
They can sign wherever they are, and that is exactly the practice that undermines the position. What is being tested is where the decision was taken, not where the paper was executed. Resolutions drafted at the parent, circulated for signature and returned show a decision made elsewhere and merely recorded locally. If the board is meant to be exercising judgement in the jurisdiction, the meeting should happen there, with the directors present, with papers issued in advance, and with minutes recording what was weighed. That record has to be made at the time.
Will a company with no employees be denied treaty benefits?
It is one of the first things asked when a claim is examined, and an entity with no people is hard to defend. The question underneath is whether the company is the real recipient of the income or a conduit for someone behind it, and people, authority and decisions are the evidence either way. Functions can sometimes be performed by directors, or under a properly priced arrangement with another group company, rather than by employees. What does not work is a company credited with income it had no capacity to earn or to decide anything about.
How do we prove substance years after the event?
Mostly you do not, which is why this is the one area where the work has to be done as you go. What survives is contemporaneous: board papers issued before meetings, minutes showing alternatives considered, travel and attendance records, employment contracts with real authority in them, and correspondence showing decisions being taken locally rather than confirmed locally. A memorandum written during an examination, however accurate, carries little weight against a file of resolutions signed abroad. The honest course at that stage is to gather what exists and assess the position on it.
Does renting an office and hiring a director create substance?
They are inputs, not the thing itself. Substance is about functions and decisions, so what matters is whether the office is where work happens and whether the director holds and exercises real authority. A director who holds many similar appointments and signs what is sent to them adds a name rather than a function. Spending on premises and fees without moving any decision-making produces cost without protection. The useful question is which of the company's activities a person in that country decides, and what evidence would show it.
Where is our company resident if decisions are made abroad?
Incorporation is one test and the place where the company is really managed is another, and several systems apply both. A company incorporated in one country but directed from another can be resident in both, or treated as resident only where it is managed, with the treaty deciding between them. The consequences run through everything: which country taxes the profit, what withholding applies to amounts paid out, and whether relief for the other country's tax is available at all. Where the decisions happen is a structural question, not an administrative one.
Do I get credit for all of the foreign tax I paid?
Only up to your own country's tax on that same income, and only for tax you were legally obliged to pay. Two consequences follow. Living somewhere that taxes you more heavily than your residence country does leaves an excess that becomes a carryover rather than a refund. And withholding suffered above the treaty rate is not creditable — the route back to that money is a refund claim in the country that took it. See claiming the credit.
How does a remittance actually work, and is it taxed?
A remittance is a transfer of money, not a category of income, and moving your own funds between your own accounts is not what creates tax. What can create tax is the income behind the money and the rules of the country it leaves. India, for instance, collects tax at source when a resident individual remits abroad under the Liberalised Remittance Scheme, and requires certification before certain payments leave. The transfer is the trigger for paperwork rather than for tax. See the LRS and tax collected at source.
