I have discovered the techniques that French state workers use to start legal proceedings against directors of offshore companies.
They use the following databases:
DUN & BRADSTREET
FAME
From these databases, they browse the lists of virtual office addresses with the highest number of companies. Then, they check the nationality of the director. That's how they find their targets. So for instance, they found that an address had 100 registered companies in it. They don't try to know whether people work remotely and don't have an office. They look up for offshore directors right away.
They even don't visit official company house registries. They get the information from these 2 databases.
So, for instance, for the UK, the director should a local director is the most important. All cases are linked to a french director, not a UK director and a french shareholder.
A local shareholder & director would be for sure in this context the best solution to be on the safe side. Article 5 and Article 7 of any Double tax treaty agreement.
UPDATE 2024/03/13:
=> For French residents, it appears that the tax investigators look for prints, USB sticks, hard drives and SSD primarly because they aren't encrypted. Bitlocker on PC is your best friend. Everything should be digitalized. A web server domiciled in another country is also your best friend. VPN? Still not useful.
Virtual office address => when the virtual office company that hosts share the same address than the hosted company, they see it and they use it as an evidence. I have read numerous reports saying: "Dear judge we would like to draw the attention to the following: the UK company "jojo ltd" is domiciled in an office where "my virtual agency ltd" is also domiciled. "My virtual agency ltd" offers nominee and virtual address services. This leads us to believe that jojo ltd benefits from the services of my virtual agency ltd"
I didn't find any case where the beneficial owner was the problem when a nominee director was in place. However, the tax investigators have access to the document records of company registries from all over the world except some countries like Belize. If a company was incorporated with the real ultimate beneficial owner before the nominee director or vice versa, they will see it. So, if you are a french resident (but would be the same for Germans, Italians, Dutch...) you must appoint a director that is not you RIGHT FROM THE BEGINNING. If you didn't move to the country where you incorporated the company, never appoint yourself as a director. I have seen several cases in which someone created a HK company with a local HK director and then, decided to appoint himself as the director of the company. However, he didn't move to the country where he was the director (Hong Kong). The French tax authorities saw it and sued him for not paying French corporate tax. So, if this happens to you, there is not other options than winding up the company and starting a new company. So, you could tell me that the tax authorities could still see that an individual was the director of an "offshore" company in the past. They need a financial proof between the director and the offshore company. If the offshore company does not exist anymore and if there is no money transfer to the personal account of the company owner, you mitigate the risk.
UPDATE 2:
90% of the cases are related to permanent establishment. A french resident incorporates in the UK, In HK or Cyprus. This individual appoints himself as the director of the company. The french tax authority detects him. According to all double tax treaties, The place of the board of management is the place where the company should pay its corporate income tax. German and Italian tax authorities do the same. The problem can rise everywhere, especially when the Double tax treaty is in place between the country where the company is incorporated and the country where the director lives.
I have read the cases, there aren't any stories related to the UBO (shareholder). The major problem is when the director is a french fiscal resident. in 100% of the cases, when I have read all these cases and looked in the company house registries of UK, HK, Cyprus to check. I found that the directors of all these companies were french resident. So, example: I looked up a company in the hong Kong company registry. I looked at the director and found that the director was a French resident living in France.
In the remaining 10% of cases, The tax authorities got hold of contracts at a business partner's place of the accused person and found out that in the said contracts they used a French address rather than the address of the offshore company.
I know that the German and Italian tax authorities have the exact same techniques because I have had a meeting with a virtual agent in Ireland. he told me he used to receive a lot of mails from the German and Italian authorities asking to deny or confirm the fact that a company was managed from Ireland rather than Germany or Italy.
They use the following databases:
DUN & BRADSTREET
FAME
From these databases, they browse the lists of virtual office addresses with the highest number of companies. Then, they check the nationality of the director. That's how they find their targets. So for instance, they found that an address had 100 registered companies in it. They don't try to know whether people work remotely and don't have an office. They look up for offshore directors right away.
They even don't visit official company house registries. They get the information from these 2 databases.
So, for instance, for the UK, the director should a local director is the most important. All cases are linked to a french director, not a UK director and a french shareholder.
A local shareholder & director would be for sure in this context the best solution to be on the safe side. Article 5 and Article 7 of any Double tax treaty agreement.
UPDATE 2024/03/13:
=> For French residents, it appears that the tax investigators look for prints, USB sticks, hard drives and SSD primarly because they aren't encrypted. Bitlocker on PC is your best friend. Everything should be digitalized. A web server domiciled in another country is also your best friend. VPN? Still not useful.
Virtual office address => when the virtual office company that hosts share the same address than the hosted company, they see it and they use it as an evidence. I have read numerous reports saying: "Dear judge we would like to draw the attention to the following: the UK company "jojo ltd" is domiciled in an office where "my virtual agency ltd" is also domiciled. "My virtual agency ltd" offers nominee and virtual address services. This leads us to believe that jojo ltd benefits from the services of my virtual agency ltd"
I didn't find any case where the beneficial owner was the problem when a nominee director was in place. However, the tax investigators have access to the document records of company registries from all over the world except some countries like Belize. If a company was incorporated with the real ultimate beneficial owner before the nominee director or vice versa, they will see it. So, if you are a french resident (but would be the same for Germans, Italians, Dutch...) you must appoint a director that is not you RIGHT FROM THE BEGINNING. If you didn't move to the country where you incorporated the company, never appoint yourself as a director. I have seen several cases in which someone created a HK company with a local HK director and then, decided to appoint himself as the director of the company. However, he didn't move to the country where he was the director (Hong Kong). The French tax authorities saw it and sued him for not paying French corporate tax. So, if this happens to you, there is not other options than winding up the company and starting a new company. So, you could tell me that the tax authorities could still see that an individual was the director of an "offshore" company in the past. They need a financial proof between the director and the offshore company. If the offshore company does not exist anymore and if there is no money transfer to the personal account of the company owner, you mitigate the risk.
UPDATE 2:
90% of the cases are related to permanent establishment. A french resident incorporates in the UK, In HK or Cyprus. This individual appoints himself as the director of the company. The french tax authority detects him. According to all double tax treaties, The place of the board of management is the place where the company should pay its corporate income tax. German and Italian tax authorities do the same. The problem can rise everywhere, especially when the Double tax treaty is in place between the country where the company is incorporated and the country where the director lives.
I have read the cases, there aren't any stories related to the UBO (shareholder). The major problem is when the director is a french fiscal resident. in 100% of the cases, when I have read all these cases and looked in the company house registries of UK, HK, Cyprus to check. I found that the directors of all these companies were french resident. So, example: I looked up a company in the hong Kong company registry. I looked at the director and found that the director was a French resident living in France.
In the remaining 10% of cases, The tax authorities got hold of contracts at a business partner's place of the accused person and found out that in the said contracts they used a French address rather than the address of the offshore company.
I know that the German and Italian tax authorities have the exact same techniques because I have had a meeting with a virtual agent in Ireland. he told me he used to receive a lot of mails from the German and Italian authorities asking to deny or confirm the fact that a company was managed from Ireland rather than Germany or Italy.
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