Arrangement of the company`s presence

An important trend in international legislation remains the increase of transparency in the activities of enterprises in order to create a competitive business environment. The tax law of developed countries is on the side of those companies that operate officially and are physically present in the country. Jurisdictions require an actual office, a local bank account and periodic reporting of income earned for the current period. The presence of an address and other indications of a company’s actual presence in the country is commonly referred to by the English term substance.

The authorities of most States support the view that mere nominal registration for a company is not sufficient. The firm must provide evidence of active business activity, receipts for goods sold or services rendered. The number of employees who actually work for the company and are physically located in the country of registration is also taken into account. Proven activity opens the door for entrepreneurs to qualify for tax exemptions and corporate loans from local banks. Organization of the actual presence of the company in the country is quite costly, but quickly pays off with a competent approach to planning and implementation of the business project.
Intense activity of the firm in the jurisdiction of a particular state will be a positive factor in case of litigation and competition. Building up a client base in a country with a developed economy improves the company’s reputation and becomes an important advantage for finding new partners and/or suppliers. This is why incorporation is a popular option for registering a company compared to nominal legal entities in offshore jurisdictions.