Can You Incorporate in a 0% Tax Country and Live Wherever You Want?

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A lot of advice in the online business space encourages people to incorporate a company in a low or zero tax jurisdiction - perhaps a Dubai freezone company, Delaware LLC, Panama, Hong Kong, Singapore, Cayman Islands etc. But this doesn't mean you're exempt from corporate tax and its vital to understand what pitfalls remain.
0:00 Introduction
0:28 Overview of typical advice
1:08 Why this could lead to problems
1:47 Example - Dubai company but live in the UK
2:35 Where is the company managed and controlled?
3:47 Management and control type rules apply in most developed countries
4:54 So what can I do to pay 0% corporate taxes legitimately?
5:41 Summary - it's not enough to simply have a 0% company
A BIT ABOUT ME
I've been advising on international tax since 2014, and qualified as a Chartered Accountant in 2018. I worked for consulting firms PricewaterhouseCoopers and BDO, before I started a remote international tax consultancy firm, Degen Tax Advisers, in 2020.
I work with online entrepreneurs to help them navigate the complex world of international tax. I work with e-commerce businesses, digital nomads, content creators, tech startups, crypto investors and many more in the digital space. Like my clients I'm pretty nomadic. I've lived in the UK, US, Japan, China, Malaysia, Thailand and Singapore. Currently I'm spending most of my time around Southeast Asia.
DISCLAIMER
My videos are for general guidance, education and providing you an introduction to the concepts of international tax. They in no way constitute specific advice to your specific circumstances. I accept no liability for any reliance placed upon the content of these videos or references, therein.

[@fernandoraymond]

Must looked tips. Well explained about the Dubai company setup for Brits

[@skranz7790]

What about the situation where I'm utilizing flag theory to spread my time in a few different countries throughout the year. Let's assume I have Italian citizenship via descent and have thus far never lived in Italy. I have permanent residence in Panama and official tax residence there. I also have an offshore corporation set up in Panama under which I trade S&P Futures via a US brokerage account, a structure in which I do not have any partners. I also have permanent residency status in the Philippines. My plan is each year to spend about 5 months in Panama, 3 months in the Philippines, and 3 months in Italy, with 1 month traveling for leisure to other destinations. I do not plan on registering in Italy as a resident, meaning no license and no registration with the local township. I'll basically be visiting Italy annually. For the most part, I will trade the markets on all available market days during US and London trading hours in whichever countries I happen to be in. My banking will be conducted in Panama, Switzerland, the USA, Singapore, and the Philippines (only in so much as I must keep a certain amount in a Philippine bank to maintain my SRRV residence visa). It seems to me that this would be a tax-free structure, unless I'm missing something.

[@bontosz]

And what if a company is incorporated in a tax haven country but has several shareholders/decision makers all living in different countries that is not that tax haven country? Would they all have to pay the corporation tax separately according to the local tax laws of their place of residence and in proportion to their shares? But what if they meet once a year in the incorporation country for an annual board meeting, would that be enough for the company to be considered “managed from that country”?
It’d be very nice to get more videos from you on this interesting topic!

[@WorldTaxAndy]

Hey, great question. Indeed its more complex when there's multiple 'managers' of the company in multiple countries.
However this tends to reduce the tax risk for the company on the whole. The reason being, each individual country will have a fairly weak claim that the company is 'centrally managed & controlled' (CMC) there. Lets say there's 10 shareholders with 10% holding each, and they all live in different countries. Now lets say one of them lives in the UK, and HMRC is assessing whether the CMC of the company is in the UK.
As long as the other 9 shareholders aren't visiting the UK, it's very difficult for HMRC to argue that CMC is in the UK. If we assume a simple structure e.g shareholding % = voting rights, then there's no control in the UK because the UK shareholder only controls 10%. Further there's unlikely to be 'central management' because presumably key decisions are being made by the other 9 shareholders as well throughout the year.
To put the icing on the cake, it would be recommended to still visit the tax haven jurisdiction for board meetings., with as many shareholders as possible attending. That then give you a very strong claim that only one location is where the central management occurs.
The same position is going to apply with all other shareholders and their respective countries. This is why it's typically easier for larger organisations to structure themselves around tax havens, whilst its more difficult when you are a sole business owner.

[@a88888888a]

What if it's covid-19 and I cannot fly to Dubai and all the meetings with the company's management team is all done online via video conference...as everything is remote. Decisions would still be coming out of Dubai. Keybisbro have all your funds in excess of cash flow outside of the you reside in. The more you have in the country you reside in the bigger the target you become for tax authorities

[@WorldTaxAndy]

It depends on the country in question, but most countries provided Covid exceptions for mitigating circumstances - for example the UK didn't count days spent in the UK on board meetings/decision making if that person was unable to leave the UK due to covid. So I'd imagine this would apply if there was a similar issue in future.

[@wayneedwards4445]

Hi Andy
I’ve been looking for someone who could advise. Do you do 1 on 1 ?
Cheers
Wayne

[@WorldTaxAndy]

Hi Wayne. Thanks for reaching out. I’ll be doing consultations from next month. Feel free to book via this link
calendly.com/degenwealth/taxconsultation?month=2023-08