Offshore Company Taxation in EU country

[chaltron]

Lets take for example that one person have an Offshore Company (IBC) in one of the typical tax heavens (BVI, Belize, Seychelles) for Asset Protection purposes generating only passive income from dividends, capital gains, rental income. etc.

In this case it's obvious that the company would be tax resident where the principal place of management is being conducted, which is probably where the UBO is resident.

However what I don't understand is how one typically can do this tax return, i.e. take for example an EU country like Italy/UK: one needs to make a tax return in the name of the offshore company and pay business tax? Or instead one includes the income of the offshore company on it's personal tax declaration?

Thanks!

 

[Sols]

The company itself becomes tax resident and must pay taxes like any other local company. The exact forms used might vary. In some countries, this is easy. In some, it's not.

Then anything you pay yourself from that company also becomes taxable the same way dividends or salary from a local company would.

If you're using a pass-through entity, such as an LLC or partnership, you might not need to pay corporate income tax — if the entity under your local laws remains treated as a pass-through, tax neutral entity.

A local attorney/tax adviser can sort out the exact details for you.

 

[JustAnotherNomad]

Just to make what @Sols more explicit: Even if the entity is registered as a pass-through entity, it does not guarantee that your home country will treat it like that.
Most countries will try to find the local equivalent, and in many cases, pass-through entities (partnerships) do not award limited liability.
So some tax authorities will tax the company as a local corporation, simply because it has limited liability.