After the OECD (Organization of Economic Cooperation and Development) presented its plan to base erosion and profit shifting requirements in 2013, it has achieved great results: requirements for controlled foreign companies (CFCs) have been tightened, transfer prices have been strengthened, CRS has been implemented, etc. One of the stages of the plan implementation was the necessity to limit the abuse of tax treaties and the transfer of profits. Thus, the OECD started fighting against companies that don’t have confirmation of substance (shelf companies), specifically the real company office, employees and assets. In this regard, now companies are required to confirm substance in the country of registration.

What is substance?

Substance is the requirement for the real presence of a company on the territory of the country of its registration or its business activity. In other terms, it is necessary that the registered company has not only registration documents, but have the business activity in the country of its registration.

 Different countries have their own laws regarding substance, but the key requirements for all countries can be identified as: 

• Real office in the country of registration
• Employees - residents of the country
• Non-nominal director - resident of the country
• A valid contact phone number, email
• Company website

Liability for the absence of substance?

It is almost impossible to open a bank account without confirmation of substance.
If a company violates the requirements for substance, it can be fined and even excluded from the register.
Without substance, a company will not be able to take advantage of double tax treaties. Many countries started provision of the tax resident status with the confirmation of substance.

West Union offers its clients the provision of substance in Hong Kong, Cyprus and Germany at the lowest prices, since we have our own offices in these jurisdictions.

In addition, we are ready to assist in the provision of substance in the following jurisdictions:

• Singapore
• China
• Seychelles
• Belize
• BVO
• UAE
• Great Britain

You can always contact our specialists by the phone +852 3702 7632 or just send a request and we will call you back.

For more information, call +852 3702 7632