How risky is it to do business without a corporate tax residency certificate?

[JustAnotherNomad]

I see that I asked the same question three years ago and never got an answer:
https://www.offshorecorptalk.com/threads/corporate-tax-residency-certificate-required.29497/
Has anyone ever experienced this? What would be the implication if you can't produce a corporate TRC? Would your client be unable to claim deductions for the business expense?

 

[CyprusLawyer101]

I see that I asked the same question three years ago and never got an answer:
https://www.offshorecorptalk.com/threads/corporate-tax-residency-certificate-required.29497/
Has anyone ever experienced this? What would be the implication if you can't produce a corporate TRC? Would your client be unable to claim deductions for the business expense?

These certificates are mostly used for claiming double tax treaty benefits between countries. They may also be relevant to local tax rules however thia would depend on a particular jurisdiction's rules

 

[JustAnotherNomad]

I believe it's very typical in the EU that during an audit, this could be requested if there are doubts about an invoice?

 

[CyprusLawyer101]

I believe it's very typical in the EU that during an audit, this could be requested if there are doubts about an invoice?

I little bit fail to follow your reasoning. You are saying that an invoice issued from a company in one jurisdiction issued to a company in another jurisdiction, may not be accepted as deductible expense by the authorities of the latter jurisdiction. Are those two companies , associated / under common ownership?

 

[JustAnotherNomad]

No, the companies would not be associated. From what I have heard, it is very rare that a TRC would be requested. This would typically be the case only if there is an audit or they have some other reason to doubt that an invoice is legit. But I don't know how often this happens in practice and what the consequences can be.

 

[CyprusLawyer101]

No, the companies would not be associated. From what I have heard, it is very rare that a TRC would be requested. This would typically be the case only if there is an audit or they have some other reason to doubt that an invoice is legit. But I don't know how often this happens in practice and what the consequences can be.

If companies are unrelated, it would have been strange to requeat oe even deny a deduction for a genuine invoice. If companies are associated, it could probably be requested as an indication of the existence of a solid company abroad and that it is not a shell company under a substance assessment or other anti avoidance rules targeting artificial arrangements or tax fraud.

 

[JustAnotherNomad]

I know it doesn't usually happen, I'm only worried if there is an audit and then someone starts asking questions. Everything would be 100% legit, but I'm worried that the client could get into trouble/not be able to claim deductions etc.

 

[CyprusLawyer101]

I know it doesn't usually happen, I'm only worried if there is an audit and then someone starts asking questions. Everything would be 100% legit, but I'm worried that the client could get into trouble/not be able to claim deductions etc.

If i could think where it would happen it would be in some jurisdiction where the rule of law is not well adhered to and the tax office has a selective application of whatever they feel like in the moment. Where is your client based?