CFC Penalty?

[inector]

If someone sets up a company in like UK (25% CIT), living in a high-tax country, like Belgium (25% CIT)

Assuming he doesn't care about PE / CFC, just sets up a UK company because it's convenient

What kind of penalty can there be (since he doesn't avoid any tax)?

 

[Martin Everson]

You firstly need to examine the Double Taxation Agreement (DTA) between UK and Belgium in regards to corporate tax and where it should be paid. You may not care about PE but it matters.

If the tax rate is the same for a foreign company like a UK company (while your resident in Belgium) then it does not meet the two tests of control and low taxation to deem it a CFC.

In terms of penalties it depends what they charge you with. Under ATAD the tax man can pretty much deem any setup a non-genuine arrangement based on a whim if they sniff any advantage in the arrangement from obtaining a lower UK VAT rate over Belgium's to ability to obtain more favourable tax deducation with a UK company.....who knows.

Best to consult a tax professional.