Foreign Company and Remote Team: Where Is Business Management Actually Carried Out?

Consider a company registered in the UK, Estonia, or the UAE, with a director listed in the local registry, while its employees work remotely from various countries. Meanwhile, the business owner resides in a different state, personally approves contracts, oversees finances, and makes key decisions. In such a scenario, where is the company actually managed? For international businesses, this question carries not only organizational implications but also significant tax and legal consequences. The country of registration does not always coincide with the country where the company is actually managed. Under certain circumstances, tax authorities may challenge a company’s claimed tax residency, determine the existence of a permanent establishment, or impose additional obligations.

Let us examine the roles played by a local director, the location where decisions are made, corporate documentation, and actual economic substance. We will also look at what an owner managing a foreign company remotely should verify.

Registering a legal entity in a specific jurisdiction does not automatically resolve all issues regarding its tax residency. Different countries apply various criteria to determine a company’s tax residency. These may include the place of registration, the place of effective management, the place of central management and control, or other criteria stipulated by national legislation.

In this context, it is important to distinguish between two concepts:

• Registered office and country of registration — these are the formal characteristics of a company.
• Place of effective management — the circumstances that reveal where, and by whom, key managerial and commercial decisions are actually made. For example, a company might be registered in Estonia, while its owner resides in a different country, from where they manage all core business processes.

This does not automatically make the company a tax resident of the country where the owner resides. However, such a structure requires an analysis of local tax residency rules and the actual circumstances of management. It is particularly important to consider the provisions of double taxation avoidance agreements if multiple states simultaneously deem the company to be their tax resident.

1. Local Director: Actual Management or a Formal Position?

The presence of a local director does not, in itself, guarantee that the company is effectively managed from the country of registration. To evaluate the structure, it is essential to determine what authority the director possesses and whether they exercise it in practice.

Specifically, it is necessary to ascertain:

• whether the director participates in defining the company’s strategy;
• whether they analyze and approve significant contracts;
• whether they hold genuine authority regarding financial decisions;
• whether they participate in meetings of the governing bodies;
• whether they are empowered to make independent decisions within the scope of their authority;
• and whether their role is limited merely to signing documents at the owner's direction.

If a local director acts solely as a signatory—signing documents formally while all actual decisions are made abroad—this may create tax and corporate risks. At the same time, the company owner is entitled to participate in the company’s activities and exercise their legitimate rights as a shareholder. It is important to properly distinguish between decisions that fall within the owner’s purview and the management authority vested in the director.

2. Where Are Key Decisions Actually Made? One of the central issues is determining where the company’s managerial will is actually formed. Tax authorities may analyze not only formal minutes but also the actual manner in which business is conducted.

For instance, the following circumstances may be significant:

• who makes decisions regarding entry into new markets;
• who approves major contracts and investments;
• who defines the financial strategy;
• who controls significant expenditures;
• where the individuals who effectively manage the company are located;
• how the process of decision-making and implementation is organized.

Let’s consider an example. A company is registered in the United Kingdom and has a local director. However, its owner resides in Spain, personally conducts negotiations with key clients, approves all significant payments, and defines the commercial strategy. If the UK-based director merely follows instructions received, a question may arise as to whether the company is actually being managed from Spain. It is important to note that an owner working remotely from another country does not automatically result in the transfer of the company’s tax residency. The conclusion depends on national legislation, the allocation of authority, and the totality of the actual circumstances.

3. Corporate Documents: How to Substantiate the Actual Management System?

Properly drafted corporate documents help confirm who makes decisions on behalf of the company, where they are made, and on what basis. However, these documents must reflect actual practice rather than serving merely as a formal record of management.

The following may be relevant for analysis:

• The Articles of Association and corporate bylaws. These define the authority of the director, the board of directors, shareholders, and other governing bodies. Meeting minutes. These record the discussion of issues, decisions adopted, the list of participants, and other circumstances surrounding the meetings.
• Agreements with directors and executives. These help establish their actual functions, authority, and responsibilities.
• Internal policies. These govern the approval of payments, the execution of contracts, risk management, and strategic decision-making.
• Documents regarding the delegation of authority. These indicate which decisions a director may make independently and which require additional approval.

Particular attention should be paid to email correspondence, corporate approval systems, and other materials that may reflect the actual management process. A meeting minute from the country of registration does not eliminate risks if the actual decisions were made in advance by another person in a different country. Therefore, it is important not merely to maintain documentation, but to ensure alignment between the corporate structure and actual operations.

4. Economic Presence: Is a Registered Address Sufficient?

For international companies, what matters is not only the place of management but also actual economic presence—referred to as "Economic Substance." The requirements for such presence depend on the specific jurisdiction, the nature of the business activities, and the applicable tax regime.

Factors that may be considered during an assessment include:

• the existence of an office or other operational infrastructure;
• the location of executives and employees;
• the actual performance of core business functions;
• the incurrence of operating expenses;
• the use of local contractors;
• the location where commercial activities are conducted.

It should be noted that "Economic Substance" and the "place of effective management" are not identical concepts.

A company might have a physical office and employees in its country of registration, yet key decisions could still be made in a different country. Conversely, the absence of a large office does not always constitute a violation; flexible operating models are permissible for certain types of activities and within specific jurisdictions. The key is to assess the requirements of the particular country rather than applying a one-size-fits-all rule to all foreign companies.

5. Remote Teams and the Risk of a Permanent Establishment (PE)

A distinct risk for international businesses is the creation of a "Permanent Establishment" (PE) in a country where employees or executives are based. For instance, a foreign company might have a team in Poland, Germany, or Spain, even though it is registered in a different state.

Under certain circumstances, the activities of such individuals can establish a tax presence for the company.

When conducting an assessment, it is important to consider:

• whether the company maintains a fixed place of business in the other country;
• whether an employee’s home office is effectively at the company’s disposal;
• what functions the employee performs;
• whether the employee has the authority to conclude contracts on behalf of the company;
• whether the employee plays a principal role in the conclusion of contracts;
• the frequency and regularity of such activities.

The mere fact that an employee works from home in another country does not automatically create a permanent establishment. The outcome depends on the specific circumstances, applicable local laws, and the provisions of any relevant international tax treaty. Furthermore, even in the absence of a permanent establishment, obligations may still arise regarding labor law, payroll taxation, and social security contributions.

6. What risks arise if management is effectively exercised from another country? A discrepancy between the formal corporate structure and the actual management model can have significant consequences.

Depending on the jurisdiction and specific circumstances, the following may arise:

• Dual tax residency. Two states may simultaneously consider a company to be their tax resident under their respective domestic laws.
• Creation of a permanent establishment. A portion of the company’s profits may become subject to taxation in the country where the relevant business activities are actually conducted.
• Additional tax liabilities. Requirements for registration, reporting, and tax payments may arise, along with the potential for fines and penalties.
• Scrutiny from banks and payment institutions. Financial institutions may verify the actual place of business, the management structure, and whether the declared business activities align with the actual circumstances.
• Corporate risks. An unclear division of authority between the owner and the director can lead to disputes regarding liability and the validity of decisions made.

It is also important to note that a company’s tax residency and the existence of a permanent establishment are distinct issues that require separate analysis.

7. What should an owner managing a foreign company remotely check?

Before developing an international structure or changing their country of residence, an owner should conduct a legal and tax assessment of the actual management model. We recommend, first and foremost, answering the following questions:

1. Who actually manages the company? Does the director make independent management decisions, or do they merely carry out the owner’s instructions?
2. Where are key decisions made? In which country are the individuals who determine strategy, finances, and key commercial terms actually located?
3. Do the corporate documents reflect reality? Are the authorizations, minutes, and approval procedures properly documented?
4. Where does the team work? Could the functions performed by employees or executives give rise to a permanent establishment or other local obligations? Is the company’s economic presence sufficient? Is it appropriate 
5. Do the company’s office, personnel, infrastructure, and operations meet the requirements of the jurisdiction?
6. Is there a risk of double taxation? How do national regulations and international tax treaties apply?
7. Does the structure align with banking and compliance requirements? Can the company demonstrate where its operations are actually conducted and who exercises management control?

Answering these questions helps identify risks before they become the focus of a tax audit or a bank inquiry.

How can Antwort Law assist in structuring the management of a foreign company? An international business can operate successfully with a remote team and an owner residing in a different country. However, this model requires a proper legal framework, a clear delineation of authority, and an assessment of tax implications.

Antwort Law’s attorneys can help you:

• analyze the management structure of your foreign company;
• assess risks related to tax residency and the creation of a permanent establishment;
• review the authority of the local director and the role of the owner;
• prepare corporate documents and internal management procedures;
• evaluate economic substance requirements;
• develop a legally sound operational model for an international team.

Do you own a foreign company but manage the business from another country? Contact Antwort Law! We will help you evaluate your actual management structure, identify potential legal and tax risks, and ensure the company’s operations comply with applicable laws.

Lidia Ivanova

International lawyer
Antwort Law