BDO Belgium: Implications for Taxation

The OECD states that a company is taxable in the country where it is a tax resident unless it has a taxable permanent establishment in another treaty country. The location of the company’s directors/senior management/employees is a crucial element  for determining a company’s tax residence and the presence of a permanent establishment. Due to the COVID-19 measures and mandatory teleworking, they (possibly partly) carry out their activities abroad – even if this is at the employee’s home. This raises the question whether that has an impact on the place where the company’s profits will be taxed.

Tax residence of the company

In an international tax context and under most treaties, the tax residence of companies is determined by taking the place where the company is managed into account. This is the place where

  • the company’s policy decisions are made;
  • the Board of Directors holds its meetings;
  • senior executive management carries out its activities;
  • important commercial decisions are made;
  • the company’s daily management takes place;
  • the headquarters of the company (group) is located.

Obviously, none of these criteria is decisive per se and all of the factual circumstances must always be taken into account.

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