BVI substance sofware development

[agentsriba]

Is software development as a contractor for another company a relevant activity in the scope of ES requirements? Also what substance is needed if so?

 

[daniels27]

Is software development as a contractor for another company a relevant activity in the scope of ES requirements? Also what substance is needed if so?

If the other company connected to you? Like same owner or your brother?

If yes, you either relocate there or look for a company elsewhere.

If no, read below as you won't be subject to es rules.

What is 'Distribution and Service Center Business'?
'Distribution and service center business' in the Economic Substance Act is defined to mean the business of either or both of the following:

(a) purchasing from foreign affiliates;

(i) component parts or materials for goods; or

(ii) goods ready for sale; and

(iii) reselling such component parts, materials or goods;

(b) providing services to foreign affiliates in connection with the business, but does not include any activity included in any other relevant activity except holding business.

'Affiliate' is defined in section 2 of the Economic Substance Act as having the same meaning as an 'affiliated company' specified in regulation 2(2) of the BVI Business Companies Regulations, 2012, which in turn provides (at Regulation 2(2)) that a company is affiliated with another company if it is in the same group as the other company. In addition, references to a company include references to a limited partnership, and other expressions appropriate to companies are construed as including references to the corresponding persons, documents or organs, as the case may be, appropriate to limited partnerships.

 

[agentsriba]

If the other company connected to you? Like same owner or your brother?

The other company is not connected to me as in family member. I am doing legit software development for a person that I was introduced with, so our relationship is purely business.

If the other company connected to you? Like same owner or your brother?

Seems like you are knowledgeable. The payment will be possibly done using cryptocurrencies, will the company need a special license to be be able to trade them on behalf of the company?

 

[daniels27]

The other company is not connected to me as in family member. I am doing legit software development for a person that I was introduced with, so our relationship is purely business.

Ok then no worries about ES.

Seems like you are knowledgeable. The payment will be possibly done using cryptocurrencies, will the company need a special license to be be able to trade them on behalf of the company?

You mean your company's client pays your company in crypto? You won't need a license for that. But the client may need some compliance depending on his jurisdiction, so that the expenses are tax deductible.

 

[inector]

The other company is not connected to me as in family member. I am doing legit software development for a person that I was introduced with

If it's a solo business, then the substance requirements depend on the owner's place of management. If he lives in Thailand managing BVI - then no problems. If he lives in EU managing BVI - he needs an employee (or maybe even two) in BVI.

If it's a business with a few people employees/contractors, then it becomes less of owner's place of management, and more of employees locations. Again would need 10-15% of people in BVI preferably.

 

[agentsriba]

Does director services solve this issue, as in company being managed and directed in BVI?

 

[daniels27]

Does director services solve this issue, as in company being managed and directed in BVI?

Which country do you actually live?

 

[inector]

Does director services solve this issue, as in company being managed and directed in BVI?

Only if he is not a nominee, but an actual salaried employee.

He can be employed in other companies at the same time (multiple jobs), but it's necessary that he gets social benefits, etc.

 

[agentsriba]

Which country do you actually live?

Can I DM you somehow?

Only if he is not a nominee, but an actual salaried employee.

He can be employed in other companies at the same time (multiple jobs), but it's necessary that he gets social benefits, etc.

Only if he is not a nominee, but an actual salaried employee.

He can be employed in other companies at the same time (multiple jobs), but it's necessary that he gets social benefits, et

Only if he is not a nominee, but an actual salaried employee.

He can be employed in other companies at the same time (multiple jobs), but it's necessary that he gets social benefits, etc.

So does BVI care about him being a nominee, or my country?

 

[inector]

So does BVI care about him being a nominee, or my country?

Owner's / employee's country, whichever you can justify as place of management.

BVI by default recognizes that company as tax resident in BVI.

 

[agentsriba]

But can they prove that the director is only “nominal” if he actually takes place in management of company eg. Signs contractor deals and so on

 

[daniels27]

Can I DM you somehow?

I sent you a message.

So does BVI care about him being a nominee, or my country?

BVI has no issues. The problem @inector is mentioning is that if you operate a BVI company from EUSSR, your home country will claim that the BVI company is actually a German company as it is manged from Germany. This is what is called place of effective management and under those local rules, even foreign companies become a local tax resident. If you are in an emerging country, if you travel a lot or if you are otherwise not really living permanently somewhere, you won't have issues. If you are born and raised in Germany, your BVI company is actually a German tax resident. Yes, of course you can solve this with cryptos etc. and hiding, but this would not be exactly legal.

 

[agentsriba]

I sent you a message.


BVI has no issues. The problem @inector is mentioning is that if you operate a BVI company from EUSSR, your home country will claim that the BVI company is actually a German company as it is manged from Germany. This is what is called place of effective management and under those local rules, even foreign companies become a local tax resident. If you are in an emerging country, if you travel a lot or if you are otherwise not really living permanently somewhere, you won't have issues. If you are born and raised in Germany, your BVI company is actually a German tax resident. Yes, of course you can solve this with cryptos etc. and hiding, but this would not be exactly legal.

Can you tell me more. How would one go about this if I am not a resident of my home country. For example if I am a digital nomad using Thailand as a base. What visa do I have to get for Thailand?

I sent you a message.


BVI has no issues. The problem @inector is mentioning is that if you operate a BVI company from EUSSR, your home country will claim that the BVI company is actually a German company as it is manged from Germany. This is what is called place of effective management and under those local rules, even foreign companies become a local tax resident. If you are in an emerging country, if you travel a lot or if you are otherwise not really living permanently somewhere, you won't have issues. If you are born and raised in Germany, your BVI company is actually a German tax resident. Yes, of course you can solve this with cryptos etc. and hiding, but this would not be exactly legal.

Btw I also confirmed that in my country managing my company from there won’t be seen as a local company. CFC rules do not apply to natural person where I am from, so only dividend tax. How will the money flow go if I am a digital nomad? Pay taxes where? If I am on a tourist visa in Thailand I obviously can’t work there

 

[diro]

But can they prove that the director is only “nominal” if he actually takes place in management of company eg. Signs contractor deals and so on

If you live in Europe you will quickly figure out that the Tax office in your country will hunt you down, you won't get a chance to proof anything unless you have the following in place:
Registered office
Employees
Utility
Internet subscription
at least 20 - 50 square meter of office space for your employees.

If you can't afford this expect to visit some nice room the tax office will find for you after they have taken all your money.

 

[EliasIT]

I was going to write something similar to you. I have personal experience with the tax authorities in Denmark, as many others here do have in other coutnries. Since 2020, perhaps even earlier, the tax offices have been granted the authority to act as both judge and prosecutor at the same time. They have also been given immense power that ordinary people simply cannot contend with.

You can spend 100K euros on lawyers and accountants to shed light on a case, and yet they still fabricate stories as they see fit or ignore what countless hours have been spent demonstrating, not to mention the thousands that go to advisors.

I can only warn you: the tax authorities are the real bandits and criminals. The times have changed - it’s no longer them chasing criminals, but rather criminals chasing innocent people.

So, OP, think carefully about what you're doing to save a few hundred euros in taxes. And if you proceed, make sure you do it properly.

 

[daniels27]

Can you tell me more. How would one go about this if I am not a resident of my home country. For example if I am a digital nomad using Thailand as a base. What visa do I have to get for Thailand?

Btw I also confirmed that in my country managing my company from there won’t be seen as a local company. CFC rules do not apply to natural person where I am from, so only dividend tax. How will the money flow go if I am a digital nomad? Pay taxes where? If I am on a tourist visa in Thailand I obviously can’t work there

It is not about CFC rules. Switzerland, Hong Kong etc. all have no CFC rules but they have very clear laws stipulating that running a foreign company from there makes the foreign company a local company in terms of filing, tax, etc. We would have to know which country you are talking about in order to give any solid advice.

But I personally would probably recommend Singapore, etc. they cost a bit more but have better reputation.

So, OP, think carefully about what you're doing to save a few hundred euros in taxes. And if you proceed, make sure you do it properly.

If he does not live in Europe, the issues are not that big, but we still would need to know more details.

 

[agentsriba]

I was going to write something similar to you. I have personal experience with the tax authorities in Denmark, as many others here do have in other coutnries. Since 2020, perhaps even earlier, the tax offices have been granted the authority to act as both judge and prosecutor at the same time. They have also been given immense power that ordinary people simply cannot contend with.

You can spend 100K euros on lawyers and accountants to shed light on a case, and yet they still fabricate stories as they see fit or ignore what countless hours have been spent demonstrating, not to mention the thousands that go to advisors.

I can only warn you: the tax authorities are the real bandits and criminals. The times have changed - it’s no longer them chasing criminals, but rather criminals chasing innocent people.

So, OP, think carefully about what you're doing to save a few hundred euros in taxes. And if you proceed, make sure you do it properly.

I am asking about being a digital nomad how would

It is not about CFC rules. Switzerland, Hong Kong etc. all have no CFC rules but they have very clear laws stipulating that running a foreign company from there makes the foreign company a local company in terms of filing, tax, etc. We would have to know which country you are talking about in order to give any solid advice.

But I personally would probably recommend Singapore, etc. they cost a bit more but have better reputation.


If he does not live in Europe, the issues are not that big, but we still would need to know more details.

I live in Bulgaria. The land of infinite opportunities. While in Europe I would say its the wild west here. I will have a legit director, doing the contracts, signing them. I would not control the company myself.

 

[daniels27]

I am asking about being a digital nomad how would

Just open the company, and go travel. Not much is needed. What do you need to know? How to start? Contact Sovereign or anybody else to incorporate a Singapore company.

 

[agentsriba]

Just open the company, and go travel. Not much is needed. What do you need to know? How to start? Contact Sovereign or anybody else to incorporate a Singapore company.

What about paying myself dividends? How would that go? Having a bank account in my home country wouldn’t make me tax liable there?

 

[daniels27]

What about paying myself dividends? How would that go? Having a bank account in my home country wouldn’t make me tax liable there?

Yes, you incorporat in Singapore, file annual returns there and then you pay out all the profits as dividends when you need the money.

You will need to have a resident nominee director, which is not you. You will be the director and you must comply with all country regulations so that you do not become tax resident with your company anywhere. Then, it is completely legal.

You can also do BVI instead of Singapore, you may have a much harder time to get a bank account and maybe issues with your clients. But that's about it. No ES required unless you transact with other companies you own.