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22 April 2020 / article

The impact of the COVID-19 crisis: corporate tax residence and substance

On 3 April 2020, the OECD Secretariat issued its analysis on tax treaties and the impact of the COVID-19 crisis. The guidance deals with (a) concerns related to the corporate residence status (place of effective management); (b) concerns related to the creation of Permanent Establishments; (c) concerns related to cross-border workers, and (d) concerns related to the residence status of individuals. In this special edition we focus on the issue of corporate tax residence and substance.

The COVID-19 crisis may raise concerns about a potential change in the “place of effective management” of a company as a result of a relocation, or inability to travel, of chief executive officers or other senior executives. Such change may impact the company’s residence status under the relevant domestic laws and also affect the country where a company is regarded as a resident for tax treaty purposes. In addition, it may impact the application of anti-abuse rules and beneficial ownership. Below we deal with the OECD analysis as well as the perspective of our L&L home markets – Belgium, Luxembourg, Netherlands and Switzerland – on corporate tax residence and substance.

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