A non-UK resident director, BEST kept secret to lower UK corp. tax from the UK or any high taxed country?

Hi,

You may be aware that the UK has many double tax treaty agreements in place with many countries. These treaties have all the same OECD template. They mention that a permanent establishment exist where a "place of management" or "office" exists. The same logic could be applied to many other countries.
example:
https://view.officeapps.live.com/op...le-Taxation-Agreement.odt&wdOrigin=BROWSELINK
So, in theory, I could appoint a Hungarian national as a nominee director, the Hungarian Tax authority could say that a place of management exists in Hungary and I could ask this nominee director to pay the Hungarian coporation tax on the profits of the UK company. Hungarian corporation tax is 9% // so by the way i live in a high tax country and it does not make sense for me to appoint myself as a non UK resident.

I looked up on the Internet, and found that I could get UK nominee directors for my UK company via Upwork or via an agent at a lower price because they don't live in the UK.

I ask the perplexity AI and here is the answer. It means that a registered office in a domiciliation address isn't enough to constitute an office.

According to the OECD Model Tax Convention, a permanent establishment is defined as a fixed place of business through which the business of an enterprise is wholly or partly carried on. This definition includes various types of establishments such as a place of management, a branch, an office, a factory, a workshop, and other specific locations like mines, oil or gas wells, quarries, or places of natural resource extraction. Additionally, a building site or construction project is considered a permanent establishment only if it lasts for more than twelve months.The definition of a permanent establishment also excludes certain activities from being classified as such. These exclusions include the use of facilities solely for storage, display, or delivery of goods belonging to the enterprise, maintenance of stock solely for storage or processing by another enterprise, and the maintenance of fixed places of business for specific preparatory or auxiliary activities. Furthermore, the presence of an office alone may not constitute a permanent establishment if its activities are of a preparatory or auxiliary character. In summary, an office can be considered a permanent establishment under the OECD Model Tax Convention if it meets the criteria of being a fixed place of business through which the enterprise conducts its activities, as outlined in the convention's definition of a permanent establishment.

Let me sum up the setup of such company:
1. you choose a nominee director in a low corp tax country like Hungary, EAU, Cyprus, Hong Kong, barbados, montenegro
2. you incorporate the company and appoint this individual as nominee director and yourself as shareholder
3. you don't register corporate tax in the country of incorporation but the country of the nominee director.

What are your thoughts about it?

Last edited: Mar 8, 2024