Offshore Tax with HTJ.tax

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Oct 2026

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- Updated daily, we help 6, 7 and 8 figure International Entrepreneurs, Expats, Digital Nomads and Investors legally minimize their global tax burden and protect their wealth. - Join Amazon best selling author, Derren Joseph, in exploring the offshore financial world. Visit www.htj.tax

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October 25, 20264 min

The Death of the Letterbox Entity: Why Substance Matters

The Death of the Letterbox Entity: Why Substance Matters For years, internationally mobile founders, digital service providers and private wealth clients have used low-tax jurisdictions, nominee directors and registered-office services to structure their cross-border affairs. But incorporation alone does not guarantee tax advantages. At HTJ.Tax, we emphasize that entities lacking genuine commercial purpose, effective governance or activities consistent with their stated role may face increased scrutiny from tax authorities. Depending on the applicable law and treaty, these weaknesses can undermine treaty benefits, create corporate residence disputes or trigger additional reporting and tax obligations. The issue is not whether a company operates in a low-tax jurisdiction. It is whether its legal structure, decision-making and actual activities stand up to scrutiny. The Regulatory Pressure 1. OECD Anti-Treaty-Abuse Rules The OECD’s Base Erosion and Profit Shifting (BEPS) project introduced measures intended to prevent the inappropriate use of tax treaties. BEPS Action 6 and the Multilateral Instrument (MLI) have helped implement anti-treaty-abuse provisions, including the Principal Purpose Test (PPT) where applicable. Under the PPT, a treaty benefit may be denied if, having regard to all relevant facts and circumstances, it is reasonable to conclude that obtaining that benefit was one of the principal purposes of an arrangement or transaction, unless granting the benefit would be consistent with the object and purpose of the relevant treaty provisions. This is not a universal rule that automatically disqualifies every low-tax or holding company. The outcome depends on the treaty, the provisions in force and the facts of the arrangement. Why it matters: A structure that exists primarily to obtain treaty advantages, without a convincing commercial or legal rationale, may be more vulnerable to challenge. 2. International Information Exchange Cross-border information exchange has increased the ability of tax authorities to obtain and compare information about financial accounts, entities and individuals. The Common Reporting Standard (CRS), beneficial ownership requirements and other information-sharing mechanisms can help authorities identify discrepancies between reported ownership, account information and tax declarations. These systems do not automatically make a structure unlawful. However, they make it increasingly important that ownership, control, residency and income reporting are accurate and consistent. Why it matters: Confidentiality should never be confused with an absence of reporting obligations. 3. CRS, FATCA and Data Matching CRS and the US Foreign Account Tax Compliance Act (FATCA) are distinct reporting frameworks with different scopes and requirements. Depending on the relevant rules and reporting relationships, financial institutions may report information that helps tax authorities assess whether an individual or entity has correctly disclosed its tax residence, account ownership or relevant income. A mismatch does not automatically establish tax avoidance or wrongdoing, but it can prompt questions and requests for supporting documentation. Why it matters: Information supplied to banks, tax authorities and corporate registries should be reviewed for consistency, with appropriate corrections made where necessary. The HTJ.Tax Substance Standard A resilient international structure should reflect the business or investment activity it is designed to support. The appropriate level of substance depends on the entity’s function, the jurisdiction’s laws and the tax benefits being claimed. 1. Effective Management and Governance Directors should understand their responsibilities and exercise genuine decision-making authority appropriate to their roles. Supporting evidence may include: Meaningful board discussions and properly recorded decisions. Clear delegation of authority and oversight responsibilities. Governance records consistent with how decisions are actually made. Appropriate supervision of service providers and business activities. Appointing a nominee director or holding formal board meetings is not, by itself, proof of effective management. 2. A Defensible Commercial Rationale The reasons for selecting a jurisdiction should be documented and consistent with the entity’s actual purpose. Relevant considerations may include access to customers or markets, investment strategy, financing arrangements, regulatory requirements, regional operations and legitimate risk management. Tax efficiency can be a valid consideration, but the structure should also be assessed against applicable anti-abuse rules and the substance of the underlying arrangement. 3. Operational Substance Proportionate to the Business The entity’s resources and activities should make sense in light of the functions it performs. Depending on the business, relevant factors may include: Personnel and decision-making capabilities. Premises or facilities where appropriate. Banking arrangements and operating expenditure. Contracts, assets and commercial relationships. Evidence that the entity performs the functions attributed to it. Not every company needs a large local office or extensive staff. A holding company, investment vehicle and operating business may have very different legitimate substance requirements. The objective is not to create an artificial appearance of activity. It is to ensure that the structure accurately reflects the functions it performs and meets the requirements that apply to it. 4. Consistent Residency and Ownership Reporting Personal tax residence, corporate tax residence, beneficial ownership and treaty entitlement are related but distinct questions. Review whether filings, bank records, corporate documents and tax returns consistently reflect the relevant facts. Where personal and corporate arrangements span multiple jurisdictions, assess the interaction between domestic rules and applicable treaties. A registered office does not, by itself, establish corporate tax residence or guarantee treaty entitlement. The HTJ.Tax Practical Checklist Before establishing or restructuring an international entity, consider the following: Define the purpose: Document the commercial, operational or investment rationale for the structure. Map decision-making: Identify who actually makes key decisions, where they are made and how authority is exercised. Test treaty access: Review the relevant treaty, applicable PPT or other limitation-on-benefits provisions, and any additional entitlement requirements. Review reporting: Reconcile beneficial ownership, financial account and tax-residency information. Match substance to function: Ensure that governance, personnel, expenditure and operational arrangements are appropriate to the entity’s real activities. Reassess when circumstances change: Relocation, new business activities, changes in ownership or shifts in management can affect the analysis. Strategic Takeaway The era of relying on a registered address and formal incorporation alone to support an international tax strategy is increasingly difficult to sustain. A company does not necessarily need a large physical presence to be legitimate, and a low-tax jurisdiction is not inherently problematic. What matters is whether the entity’s purpose, governance, activities and reporting withstand the relevant legal tests. HTJ.Tax perspective: Sustainable international tax planning begins with the reality of the business—not just the paperwork. Structures should be commercially coherent, properly governed, accurately reported and assessed against the specific domestic laws and treaty provisions that apply. This overview is for general informational purposes. Treaty entitlement and substance requirements vary by jurisdiction and arrangement.

October 24, 20263 min

Accidental Permanent Establishment: The Hidden Risks of Remote Work

Accidental Permanent Establishment: The Hidden Risks of Remote Work For distributed technology companies, consultancies and internationally mobile executives, cross-border mobility is not just a personal tax issue. It can also expose an operating company to foreign corporate income tax, payroll withholding obligations and transfer-pricing scrutiny. At HTJ.Tax, we recognize that a founder’s or employee’s decision to work abroad can have consequences beyond individual tax residency. A home office, temporary rental or foreign client location may raise questions about whether a company has established a Permanent Establishment (PE) or created dependent-agent exposure in another jurisdiction. The outcome depends on the facts, local law and the applicable tax treaty. Remote work does not automatically create a PE, but failing to assess the risks before an international move can leave a business facing unexpected compliance costs. Three Operational Risks 1. Home-Office Permanent Establishment When an employee or founder regularly works from a home office abroad, tax authorities may examine whether that location qualifies as a fixed place of business of the enterprise. Relevant considerations can include the duration and regularity of the arrangement, the nature of the work performed, the company’s commercial reasons for the arrangement and whether the premises are effectively available to the business. The fact that an employee chooses to work abroad does not, by itself, settle the question. The analysis depends on the applicable treaty and the specific circumstances. Business risk: A company may need to register, file corporate tax returns or attribute profits to a foreign PE if the relevant legal conditions are met. 2. Dependent-Agent Permanent Establishment An employee or representative working abroad may create additional exposure if their activities satisfy the applicable treaty’s dependent-agent PE provisions. Risk factors can include negotiating important commercial terms, habitually concluding contracts or playing the principal role leading to contracts that are routinely concluded without material modification by the enterprise. The precise test varies by treaty. Contract-signing authority is not the only factor that may matter, and simply prohibiting an employee from signing contracts may not eliminate the risk if their actual activities fall within the applicable rules. Business risk: The company may face foreign corporate tax exposure, additional reporting obligations and questions about the profits attributable to its local activities. 3. Founder-Led Businesses and Effective Management Founder-led businesses can face more complex questions when key strategic, commercial or operational decisions are made from another country. Depending on local law and the applicable treaty, authorities may examine whether the company has a PE, whether its place of effective management affects corporate residence, or whether other local registration, payroll or reporting obligations arise. These are separate legal tests and should not be treated as interchangeable. A founder’s physical presence abroad does not automatically change the company’s tax residence or establish a PE. Business risk: A move intended to improve the founder’s personal tax position could create corporate tax exposure or additional compliance obligations for the operating business. The HTJ.Tax Risk-Management Strategy 1. Formalize Cross-Border Remote-Work Policies Establish a documented approval process before employees or founders begin working from another country. Policies should address: Permitted countries and expected duration of work. Whether the company requires or provides access to local premises. The employee’s commercial responsibilities and decision-making authority. Restrictions or approval requirements for negotiations and contract execution. Procedures for escalating arrangements that may create tax exposure. A written policy is useful, but actual working practices must be consistent with it. 2. Control Contracting and Commercial Activities Review who negotiates, approves and concludes contracts in each jurisdiction. Establish clear procedures for contract approvals and record where significant commercial decisions are made. Assess the substance of an individual’s activities rather than relying solely on formal job titles or contractual restrictions. 3. Monitor Presence and Business Functions Track international travel, working locations, days of presence and the functions performed by employees and founders. Do not rely exclusively on a single day-count threshold. PE exposure can arise under tests that focus on the nature, regularity and duration of business activities, while payroll, immigration and individual tax residence rules may use different criteria. 4. Review Corporate and Individual Tax Exposure Together Before approving a relocation or long-term remote-work arrangement, assess both the individual’s tax position and the company’s potential obligations. The review may need to cover: Corporate income tax and PE registration. Payroll withholding and employer social security obligations. Corporate residence and management location. Transfer pricing and the attribution of profits to local activities. Local employment, immigration and business-registration requirements. Not every issue will arise in every case, but considering them together helps prevent personal tax planning from creating overlooked business risks. Strategic Takeaway International mobility can create corporate tax consequences even when the original decision concerns only an employee or founder. For businesses operating across borders, the objective is not to prohibit remote work. It is to understand the relevant legal tests, document the commercial arrangement and assess exposure before the work begins. HTJ.Tax perspective: Personal tax planning and corporate tax risk must be assessed together. A structured cross-border remote-work policy, supported by monitoring and jurisdiction-specific advice, can help companies manage PE exposure before it becomes an expensive compliance problem. This overview is for general informational purposes. The outcome in any particular case depends on domestic law, the applicable tax treaty and the facts of the working arrangement.

October 23, 20264 min

Mobile Wealth Under Pressure: The New International Tax Landscape

Mobile Wealth Under Pressure: The New International Tax Landscape International tax cooperation is increasingly extending beyond multinational corporations to high-net-worth individuals (HNWIs), offshore assets and cross-border private wealth. The United Nations Framework Convention on International Tax Cooperation represents a significant step toward a more inclusive international tax system. Its negotiating agenda includes the taxation of HNWIs, reflecting growing interest in how countries can cooperate to address tax avoidance and evasion involving mobile wealth. However, the distinction between policy direction and enforceable law remains essential. The Convention is being negotiated, and proposals discussed through this process do not automatically create new tax liabilities for individuals. 1. The Policy Shift: From Corporate Taxation to Private Wealth International tax debates have traditionally focused heavily on multinational enterprises, profit allocation and the taxation of cross-border business activities. The UN process places additional emphasis on the taxation of HNWIs and the challenges created by international mobility. Potential areas of cooperation include: Tax transparency: Improving the exchange of information relevant to identifying income, assets and ownership. Beneficial ownership: Strengthening the ability of tax authorities to identify the individuals who ultimately own, control or benefit from legal structures. Cross-border tax compliance: Addressing arrangements that exploit differences between national tax systems. Residency-related planning: Examining the tax implications of changes in residence or citizenship where these affect tax obligations. These areas are part of an evolving policy discussion. The specific obligations that may ultimately apply will depend on the final international instruments and their implementation by participating jurisdictions. 2. Emerging Risks for Mobile Wealth A. Greater Transparency and Reporting International information exchange and beneficial ownership requirements can make it more difficult to rely on complex structures without adequate documentation. Trusts, private foundations, holding companies and other wealth vehicles may attract closer scrutiny where ownership, control, source of funds or tax treatment is unclear. Practical implication: Individuals should ensure that ownership records, tax filings, trust documentation and disclosures are accurate and consistent across relevant jurisdictions. A structure’s legal validity does not, by itself, establish that its tax treatment is correct. B. Exit Taxes and Changes in Tax Residence Some jurisdictions already impose exit taxes on certain unrealized capital gains when an individual ceases to be tax-resident. Other countries may consider changes to their rules as international tax cooperation develops. An exit tax can create a liability before an asset is sold, potentially leaving the taxpayer with a tax bill but limited cash available to pay it. Exposure depends on the jurisdiction’s legislation, the assets involved, the applicable valuation rules and any available deferral or relief provisions. Practical implication: A planned relocation should be reviewed before the move, particularly where the individual owns a business, substantial shareholdings, investment portfolios or other assets with significant unrealized gains. C. Conflicting Residence Claims and Double Taxation Two jurisdictions may consider the same individual tax-resident under their respective domestic rules. Tax treaties may provide residence tie-breaker rules, but the outcome depends on the treaty and the individual’s circumstances. Potential complications include: Different interpretations of personal and economic connections. Disagreement over the source or character of income and capital gains. Different rules for taxing trusts, distributions and investment income. Limited access to relief where domestic law and treaty procedures do not fully resolve the conflict. Practical implication: Residency planning must consider the complete factual picture, not simply the number of days spent in each country. 3. The HTJ.Tax Advisory Playbook Step 1: Establish a Defensible Tax Residency Position Review the relevant domestic residence tests and any applicable treaty provisions. Consider days of presence, habitual home, family and personal ties, economic interests, business activities and other legally relevant factors. Maintain contemporaneous evidence supporting the position taken. No single factor should be assumed to determine residence in every jurisdiction. Step 2: Review Wealth-Holding Structures Assess whether trusts, foundations, companies and other arrangements have a clear legal and commercial purpose and are administered consistently with their governing documents. Review beneficial ownership records, reporting obligations, governance arrangements and the tax consequences for founders, settlors, trustees, beneficiaries and shareholders as relevant. Step 3: Plan Major Liquidity Events Early Before a business sale, restructuring, substantial distribution or international relocation, evaluate the potential tax consequences. This may include exit taxes, capital gains tax, withholding taxes, valuation requirements, payment deadlines and the availability of treaty relief or tax deferrals. Step 4: Coordinate Advice Across Jurisdictions Where wealth spans multiple countries, separate advice from individual local advisers may not be enough. The analysis should consider how each jurisdiction treats the same person, asset, structure or transaction. Identify potential mismatches early and establish a coordinated compliance and documentation process. Step 5: Monitor Legislative Developments Distinguish between: Existing law: Rules already enacted and applicable to the taxpayer. Adopted international instruments: Agreements whose legal effect depends on their terms, entry into force and relevant implementation requirements. Negotiating proposals: Possible future commitments that may change before adoption. Planning should respond to current obligations while allowing for credible future developments, rather than treating every proposal as an immediate legal requirement. Strategic Takeaway Cross-border wealth planning increasingly requires defensible tax residency positions, transparent ownership records, careful liquidity planning and coordinated advice across jurisdictions. For HNWIs, the objective is not simply to select a favourable jurisdiction. It is to understand how multiple legal systems interact, comply with applicable reporting rules and anticipate tax consequences before a relocation or major transaction occurs. HTJ.Tax perspective: Robust international wealth planning combines legal substance, accurate disclosure and forward-looking tax analysis. Emerging UN initiatives deserve close attention, but proposed measures must remain clearly distinguished from enacted law and existing treaty obligations. Further Reading United Nations, Terms of Reference for a UN Framework Convention on International Tax Cooperation . United Nations, Fifth Session of the Intergovernmental Negotiating Committee, August 2026 . OECD, Taxing Capital Gains , including an overview of exit taxation approaches across jurisdictions.

October 22, 20263 min

UN Protocol 1 & the Future of Remote Services

UN Protocol 1 & the Future of Remote Services What Cross-Border Businesses Need to Know The traditional assumption that a country generally needs a physical permanent establishment (PE) before taxing a foreign business's profits is facing increasing pressure. The United Nations is examining how international tax rules should address cross-border services in an increasingly digitalised economy. Its work on Protocol 1 under the proposed UN Framework Convention on International Tax Cooperation could influence how source countries tax certain payments to non-resident service providers. For SaaS companies, consulting firms, software agencies and remote-first businesses, the central question is whether the countries where their customers are located may gain additional taxing rights even when the service provider has no conventional physical presence there. The potential impact extends beyond tax rates. It could affect profit margins, contract negotiations, pricing strategies and the availability of foreign tax credits. 1. Gross Withholding and Profit Margins One of the principal concerns is taxation based on gross service fees rather than net business profits. Gross-basis withholding is calculated on the payment itself, without necessarily deducting the service provider's operating expenses. For a business with substantial payroll, software, subcontracting or infrastructure costs, this can create a disproportionate tax burden. Consider a consultancy that invoices €100,000 for international services and earns €15,000 in profit. If a hypothetical 10% gross withholding tax applied, the tax withheld would be €10,000 — approximately two-thirds of the consultancy's profit before considering any relief or other tax consequences. This illustrates why the tax base matters as much as the headline rate . The UN's Protocol 1 negotiations address the taxation of income from cross-border services. Their final outcome will determine the scope of any new obligations. The existing UN Model Tax Convention provisions on fees for technical services (Article 12AA) and automated digital services (Article 12B) provide relevant context, but they should not be treated as though every provision has automatically become part of Protocol 1. 2. US Foreign Tax Credit Risks For US taxpayers, foreign withholding taxes create a separate question: can the tax be credited against US tax? Under Internal Revenue Code Sections 901 and 903, certain foreign income taxes and qualifying taxes imposed in lieu of income taxes may be creditable. But the fact that a foreign tax has been withheld does not automatically make it eligible for a US foreign tax credit . The analysis depends on the character of the foreign levy, the applicable US creditability rules, the taxpayer's circumstances and any relevant treaty provisions. A gross-basis withholding tax may create double-taxation exposure if it does not qualify for a credit, if the credit is limited, or if the foreign tax exceeds the amount that can be credited against the corresponding US tax liability. For this reason, US businesses should assess foreign withholding exposure before entering into contracts or expanding into new markets. The IRS guidance on qualifying foreign taxes explains the principal requirements. 3. Contractual and Pricing Pressures Cross-border withholding can also affect commercial negotiations. A contract may specify that the customer must deduct any withholding tax required by local law. Alternatively, a gross-up clause may require the customer to increase the payment so that the supplier receives the agreed net amount. Neither approach eliminates the underlying tax. Instead, the contract determines who bears its economic cost. For example, if a customer is required to withhold tax from a €100,000 invoice, the supplier may receive less than the agreed amount unless the contract provides for a gross-up. However, customers may resist gross-up clauses, particularly when domestic competitors do not face equivalent withholding obligations. International service providers could consequently face three commercial pressures: Lower net revenue; Higher prices for foreign customers; Reduced competitiveness against local suppliers. The appropriate contractual response depends on the governing law, applicable tax rules, bargaining position and commercial relationship. 4. What Businesses Should Review Now The UN negotiations are not a reason to assume that new withholding obligations already apply to every remote service. Businesses should first identify their current exposure and then monitor developments that could change it. Audit cross-border payments Identify service fees, consulting payments, management charges, technical-service fees and digital-service revenue that may be subject to withholding under existing domestic law or treaties. Review contracts Check withholding clauses, gross-up obligations, tax indemnities, withholding certificates, refund cooperation and the allocation of responsibility for tax compliance. Assess structures commercially Consider whether local entities, regional hubs or other operating arrangements make commercial sense. Any restructuring should reflect genuine business needs and applicable substance, governance and reporting requirements. Document service delivery Maintain reliable records showing where services are performed, where personnel work, which entities enter into contracts, where management decisions occur and how revenue is earned. These records can be important when determining source, PE exposure, withholding obligations and entitlement to treaty relief. Review foreign tax credit exposure US taxpayers should evaluate creditability and potential limitations before assuming that taxes withheld overseas will be recoverable through the US tax system. 5. What to Watch in the UN Negotiations Businesses and advisers should distinguish three separate stages: Proposals under negotiation: These indicate possible future policy directions but do not, by themselves, create new tax liabilities. Adopted international instruments: Their legal effect depends on the instrument's terms, entry into force and any applicable ratification or acceptance requirements. Domestic implementation and treaty interaction: The rules that actually apply to a transaction depend on the relevant domestic law, existing treaty obligations and the legal effect of any new instrument. The UN's Protocol 1 negotiations have specifically considered the taxation of income derived from cross-border services in a digitalised and globalised economy. The final provisions, their implementation and their interaction with existing tax treaties will determine the practical consequences for businesses. Key Takeaway The future of remote-service taxation may involve a greater role for source-country taxing rights, including potential withholding taxes on payments to foreign service providers. For businesses operating internationally, the risks include reduced margins, contractual disputes, additional compliance costs and double taxation where foreign tax credits or treaty relief are unavailable or insufficient. But the appropriate response is not to treat every proposal as an existing obligation. The HTJ.Tax Client Playbook Identify exposure: Map cross-border payments and existing withholding obligations. Protect contractual positions: Review gross-up clauses, tax allocation and documentation requirements. Assess tax relief: Check treaty eligibility, refund mechanisms and foreign tax credit treatment. Document operations: Maintain evidence of where services are delivered and where business activities take place. Monitor legal developments: Track the final Protocol 1 text, adoption, implementation and interaction with existing treaties. The strategic lesson is to prepare for potential change without confusing a negotiated proposal with binding law. Cross-border businesses that understand their payment flows, contractual allocation of tax costs and available relief mechanisms will be better positioned to respond as international service-tax rules evolve.

October 21, 20262 min

OECD vs. UN: Who Shapes the Future of Global Tax?

OECD vs. UN: Who Shapes the Future of Global Tax? The OECD–UN Divide: Strategic Risks for Cross-Border Businesses International taxation is entering a period of significant change. For internationally mobile entrepreneurs, digital service providers and cross-border businesses, the debate is no longer only about where profits are taxed. It is also about which countries should have taxing rights, how cross-border services should be treated, and what happens when different jurisdictions impose competing tax claims . Two major institutions are shaping this debate: the Organisation for Economic Co-operation and Development (OECD) and the United Nations (UN). Their approaches reflect different priorities in international tax governance. For businesses operating across borders, the resulting divergence could create legal uncertainty, additional compliance costs and greater exposure to double taxation. 1. The Fundamental Divide: Residence vs. Source The OECD approach The OECD has traditionally played a central role in coordinating international corporate taxation through: Permanent establishment (PE) rules; Transfer pricing and the arm’s-length principle; Measures addressing base erosion and profit shifting (BEPS); Treaty-based dispute resolution; The Two-Pillar Framework addressing the tax challenges of digitalisation. These mechanisms seek to coordinate taxing rights, reduce profit shifting and provide a degree of consistency across national tax systems. However, the OECD framework has continued to evolve, including through proposals that seek to allocate some taxing rights to market jurisdictions. The UN approach The UN places greater emphasis on inclusive international tax governance and the interests of source countries, particularly developing economies. UN General Assembly Resolution 78/230 initiated negotiations towards a UN Framework Convention on International Tax Cooperation. The process includes work on the taxation of income from cross-border services and the prevention and resolution of international tax disputes. The negotiations could influence how countries allocate taxing rights over services supplied across borders, including in increasingly digitalised business environments. As of August 2026, the UN negotiations had progressed to detailed draft texts, with final texts targeted for submission to the General Assembly in 2027. These remain negotiated instruments rather than automatically applicable tax rules. United Nations: Framework Convention negotiations 2. Why Cross-Border Services Are a Key Battleground Consider a software-as-a-service (SaaS) business incorporated in one country, with developers working remotely and customers spread across several markets. Under traditional treaty principles, the source country's ability to tax business profits may depend on whether the business has a permanent establishment there. However, withholding taxes and specific treaty provisions can operate differently. The UN's work on cross-border services raises the possibility of changes to how source countries tax certain payments to non-resident service providers. For businesses, the central questions include: Can a country tax payments to a foreign service provider without requiring a conventional physical presence? Could withholding tax apply to gross service fees rather than net profits? How would the new rules interact with existing tax treaties? What relief would be available if two countries tax the same income? These are policy and implementation questions, not a statement that all cross-border services are already subject to new UN withholding taxes. 3. Operational Risk: US Foreign Tax Credits For US taxpayers with international income, the interaction between foreign withholding taxes and the US foreign tax credit system is particularly important. Under Internal Revenue Code Sections 901 and 903, qualifying foreign income taxes — and certain taxes imposed in lieu of income taxes — may be creditable against US tax, subject to applicable requirements. However, not every foreign tax qualifies for a US foreign tax credit . The analysis generally considers whether the tax is imposed on the taxpayer, represents their legal and actual foreign tax liability, and satisfies the applicable requirements for a creditable income tax or tax imposed in lieu of an income tax. A gross-basis withholding tax can therefore create a potential double-taxation problem. Its creditability depends on the nature and design of the levy, the applicable US rules and the circumstances of the taxpayer. For example, a US business might pay tax on its net profits at home while a foreign jurisdiction withholds tax from the full amount of a service invoice. If the foreign levy does not qualify for a US foreign tax credit, or the available credit is limited, some of that foreign tax may become an additional cost. Businesses should not assume that every amount withheld overseas will automatically be creditable in the United States. IRS: Foreign taxes that qualify for the foreign tax credit 4. Dispute Resolution: When Tax Authorities Disagree Another challenge arises when jurisdictions disagree about the allocation of taxing rights. One country may consider income taxable because the business has a local taxable presence. Another may treat the same income as attributable to a different jurisdiction. Disagreements can concern: The existence of a permanent establishment; The source and character of income; Transfer pricing adjustments; Withholding tax obligations; Eligibility for treaty relief; The availability and calculation of foreign tax credits. Existing tax treaties may provide mutual agreement procedures (MAP) through which competent authorities seek to resolve disputes. However, the availability of binding arbitration and other dispute-resolution mechanisms varies by treaty and instrument. The UN negotiations include a dedicated workstream on preventing and resolving international tax disputes. Their eventual effect will depend on the agreed text, adoption, implementation and interaction with existing treaties. For cross-border businesses, the practical priority is to understand the dispute-resolution mechanisms that apply to each relevant jurisdiction today. 5. Why Middle-Market Businesses May Be Particularly Exposed Large multinational groups often have specialist tax teams and the resources to manage complex international compliance. Smaller and middle-market businesses may have fewer resources, even when they operate across multiple jurisdictions. This is particularly relevant for: Distributed SaaS businesses: Revenue, employees, intellectual property and customers may be spread across different countries. International consultancies: Service fees may be subject to different source-country withholding rules and documentation requirements. Remote-first companies: Employees and founders working from different jurisdictions can create questions around personal residence, payroll and corporate taxable presence. International family offices: Multiple entities, investments and cross-border payments can increase the complexity of reporting and tax coordination. The risk is not limited to the amount of tax payable. It also includes the cost of professional advice, registrations, filings, documentation and resolving disputes. 6. Strategic Priorities for International Tax Advisers Businesses should prepare for possible changes without treating proposals as though they are already binding law. Review service agreements Examine withholding-tax clauses, tax gross-up provisions, responsibility for local taxes and the allocation of VAT or GST obligations. Map cross-border payments Identify where customers are located, where services are performed, which entity invoices the customer and whether withholding obligations may arise. Assess foreign tax credit eligibility For US taxpayers, determine whether foreign taxes meet the applicable creditability requirements. Consider whether treaty relief, a reduced withholding rate, a refund claim or another mechanism may be available. Review corporate presence and tax residence Assess where key management decisions are made, where employees work, and whether business activities could create tax obligations in additional jurisdictions. Monitor international developments Distinguish between proposals under negotiation, adopted international instruments, enacted domestic legislation and rules already in force. The objective is to prepare for credible risks without restructuring a business solely in anticipation of provisions that may change. Key Takeaway The OECD–UN divide reflects a broader debate about the future of international taxation. The OECD has developed extensive frameworks for coordinating corporate taxation, addressing profit shifting and resolving cross-border disputes. The UN is negotiating a broader international framework that places greater emphasis on inclusive participation, source-country taxing rights and international cooperation. For...

October 20, 20267 min

The OECD–UN Tax Divide: What Global Entrepreneurs Need to Know

The OECD–UN Tax Divide: What Global Entrepreneurs Need to Know International taxation is entering a new phase. For founders, digital service providers, internationally mobile entrepreneurs and remote businesses, the debate is no longer only about where profits are taxed. It is increasingly about which countries should have taxing rights, how cross-border services should be taxed, and how disputes between tax authorities should be resolved. Two major initiatives are shaping this debate: the OECD's Two-Pillar Framework and the United Nations Framework Convention on International Tax Cooperation. Both seek to address challenges in international taxation, but they reflect different priorities and approaches to allocating taxing rights. The UN framework remains under negotiation, and its proposed provisions should not be confused with binding domestic tax rules. United Nations, August 2026 1. Two Competing Approaches to International Tax Governance The OECD: coordinating the existing international tax system The OECD's work focuses on international tax coordination, corporate profit allocation, transfer pricing, and mechanisms designed to reduce tax avoidance and resolve cross-border disputes. Its Two-Pillar Framework addresses two major issues: Pillar One: seeks to reallocate certain taxing rights over the profits of the largest and most profitable multinational enterprises toward market jurisdictions. Pillar Two: introduces a global minimum-tax framework for large multinational groups, generally those with consolidated annual revenues of at least €750 million. The OECD framework builds on existing international tax arrangements while attempting to adapt them to increasingly digital and globally integrated business models. OECD: International Tax The UN: a broader, more inclusive framework The UN Framework Convention on International Tax Cooperation emerged from UN General Assembly Resolution 78/230. Its objective is to develop a more inclusive international tax framework, with greater participation by countries that believe existing arrangements do not adequately reflect their interests. The negotiations include proposed instruments addressing: International tax cooperation and governance; Taxation of cross-border services; Prevention and resolution of international tax disputes. In August 2026, UN member states negotiated draft texts covering these workstreams. The process is ongoing, with the aim of delivering final texts to the General Assembly by 2027. These drafts are proposals under negotiation, not automatically applicable tax rules. United Nations: Framework Convention 2. Why Cross-Border Services Are a Major Flashpoint For internationally mobile entrepreneurs, the most immediate concern may be the taxation of cross-border services. Consider a consulting business based in Portugal that provides digital services to customers in another country. The business has no office, employees or other physical establishment in the customer's jurisdiction. Under traditional treaty principles, the source country's ability to tax the business profits may depend on whether the business has a permanent establishment there, although withholding taxes and special treaty provisions can apply differently. The UN negotiations consider approaches that could expand source-country taxing rights over certain cross-border services, including circumstances where the provider has no physical presence in the market country. This is a significant policy debate. The International Chamber of Commerce has warned that broad gross-basis withholding taxes on service fees could increase administrative complexity, create double-taxation risks and disproportionately affect businesses operating on narrow margins. ICC: Cross-Border Services The outcome will depend on the final negotiated provisions, their adoption, domestic implementation and their interaction with existing tax treaties. 3. The Main Risks for International Entrepreneurs Withholding taxes A source country may seek to withhold tax from payments made to a foreign service provider. Where tax is calculated on gross fees rather than net profits, a business with substantial operating expenses could face a tax cost disproportionate to its actual profit. For example, a business invoicing €100,000 but earning only €15,000 in profit could experience a significant reduction in its margin if a gross-basis withholding tax applied and no effective relief were available. This is a potential exposure, not a universal rule under the proposed UN framework. Double taxation Two countries may assert taxing rights over the same income. Relief may be available through domestic foreign-tax-credit provisions, tax treaties or mutual agreement procedures, but relief is not always automatic or complete. Differences in definitions, timing and the characterisation of income can make the problem more complicated. Greater compliance costs International businesses may need to review: Customer locations and payment flows; Service classifications and applicable withholding rates; Tax treaty eligibility; VAT and GST obligations; Local registration and filing requirements; Documentation supporting foreign-tax credits. For smaller businesses, the cost of identifying and managing these obligations can be significant even when the underlying tax liability is modest. 4. What About Mobile Wealth and Beneficial Ownership? The international tax debate extends beyond corporate profits. Governments are increasingly interested in transparency, beneficial ownership, cross-border financial information and the effectiveness of international tax cooperation. These developments may affect internationally mobile founders and high-net-worth individuals, particularly where they use companies, trusts or other arrangements across multiple jurisdictions. However, it is important to distinguish between transparency initiatives and substantive tax rules. An information-exchange agreement does not automatically create a tax liability. Nor does a proposal for greater cooperation automatically impose new reporting obligations on every internationally mobile individual. The relevant questions remain: Where is the individual tax resident? What income or gains arise? Which jurisdiction has taxing rights? What reporting requirements apply? Are foreign-tax credits or treaty relief available? 5. The Dispute-Resolution Problem A further challenge is what happens when two tax authorities disagree. A business may face competing claims over the source of income, the existence of a taxable presence, the applicable withholding rate or the availability of treaty relief. The UN negotiations include a dedicated workstream on preventing and resolving tax disputes. For businesses, the objective should be clear: international tax rules must provide not only taxing rights but also workable mechanisms to prevent and resolve double taxation. The ICC has called for stronger dispute-prevention measures, clearer rules and more effective mutual agreement procedures. ICC: Tax Dispute Resolution Until the relevant instruments are finalised and implemented, businesses should assess their exposure under the law currently applicable to each transaction. 6. What Businesses Should Do Now The appropriate response is not to restructure every international business in anticipation of proposals that may change during negotiations. Instead, businesses should strengthen their existing cross-border tax analysis. Review contracts. Clarify who bears withholding taxes, whether gross-up clauses apply, and how VAT or GST obligations are allocated. Map payment flows. Identify where customers are located, where services are performed or used, and whether local withholding rules may apply. Review tax residency and corporate presence. Ensure personal residence, company management, employees and commercial operations are analysed consistently. Maintain commercial substance. Ensure entities and arrangements reflect genuine business activity, appropriate governance and accurate records. Review treaty relief. Check whether a relevant treaty applies, whether the income qualifies for protection, and what documentation is required. Monitor developments. Distinguish draft proposals from adopted instruments, enacted domestic legislation and rules that are already effective. 7. What the ICC Is Advocating Business advocacy has focused on making international tax rules predictable and commercially workable. Key priorities include: Clear and...

October 18, 20262 min

Cook Islands vs. SBA: Fight the Claim or Stop It at the Door?

Cook Islands vs. SBA: Fight the Claim or Stop It at the Door? Are the Cook Islands and the Sovereign Base Areas (SBA) competing to solve the same asset-protection problem? Not necessarily. They offer different legal frameworks, and the distinction lies in where the legal analysis begins. The Cook Islands makes the creditor's challenge difficult. The SBA approach asks whether the creditor has established a route into the court in the first place. Different armour. Different gate. 1. Cook Islands: purpose-built statutory protection The Cook Islands has developed a specialised statutory framework for protecting trusts against creditor challenges. Its legislation addresses issues such as limitation periods, evidentiary requirements and the treatment of foreign judgments. Decades of litigation have also produced a body of case law that helps advisers understand how the framework operates in practice. That does not make every Cook Islands trust immune from challenge. It means the creditor must navigate a demanding statutory framework, and the outcome depends on the particular claim, evidence and applicable provisions. The central question is: Can the creditor satisfy the legal requirements necessary to succeed? 2. SBA: establish the jurisdictional route The SBA approach raises a different initial question. Before the substantive merits of a creditor's claim are considered, the claimant may need to establish that an SBA court has jurisdiction over the dispute. That requires examining the applicable jurisdictional rules and the actual connection between the proceedings and the Sovereign Base Areas. A trust deed selecting SBA law does not, by itself, necessarily establish that an SBA court can hear every dispute involving the trust. The central question becomes: What gives this court the legal authority to hear this particular claim? 3. Two different starting points The distinction is easier to see side by side. <box border radius="lg" padding={3} gap={3}> <box gap={1}> <title size="md">Cook Islands</title> <text color="secondary" size="sm">The statutory defence</text> The analysis focuses on the creditor's claim, the applicable statutory barriers, the evidence required and the relevant case law. **Key question:** Can the creditor overcome the legal hurdles? </box> <divider color="subtle" /> <box gap={1}> <title size="md">SBA</title> <text color="secondary" size="sm">The jurisdictional gateway</text> The analysis begins by identifying the legal basis on which an SBA court could hear the dispute. **Key question:** Has the claimant established the necessary jurisdictional connection? </box> </box> 4. Neither approach guarantees the outcome This distinction should not be exaggerated. The SBA has substantive law, and a creditor who establishes jurisdiction may still face further legal questions and defences. Likewise, the Cook Islands' developed case law does not mean that a creditor automatically succeeds simply by getting before a court. The frameworks must be assessed under their own legislation, with attention to the facts of the dispute. The SBA also has a more limited reported litigation history on the particular asset-protection questions being discussed. That creates uncertainty about how some arguments might be resolved; it does not prove that the jurisdictional approach will succeed. Key Takeaway The Cook Islands and SBA should not be reduced to a simple contest over which jurisdiction has the strongest asset-protection law. They raise different questions at different stages of the legal process. Cook Islands: The creditor faces a specialised statutory framework designed to make certain challenges difficult. SBA: The claimant must first establish a proper jurisdictional basis before the court can proceed to the substantive dispute. In practice When comparing the two, ask: What statutory protections apply to the creditor's claim? What must the creditor prove? How are foreign judgments treated? What gives the relevant court jurisdiction? What does existing case law establish — and what remains untested? Those questions provide a more useful comparison than a headline claim that one jurisdiction is simply stronger than the other. Different armour. Different gate. The Cook Islands focuses heavily on the fight once the legal challenge is underway. The SBA argument focuses first on whether the claimant has established the legal route into the courtroom. The strength of either argument ultimately depends on the applicable law and the facts.

October 17, 20262 min

SBA & Cook Islands: Why Has One Never Been Tested?

SBA & Cook Islands: Why Has One Never Been Tested? The Sovereign Base Areas (SBA) and the Cook Islands have very different litigation histories. The Cook Islands has decades of case law involving its asset-protection framework. The SBA does not have the same established body of reported decisions testing its approach. That is a meaningful difference. But the absence of case law does not, by itself, tell us how a court would decide the issue. 1. What does “untested” actually mean? There are at least two possible explanations. The first is uncertainty: without relevant judgments, it is difficult to know exactly how a court would interpret and apply the law when faced with a particular creditor challenge. The second is that relatively few disputes have reached the point where a court has had to decide those questions. But neither explanation proves itself. A lack of reported litigation does not establish that the legal framework is stronger. Equally, it does not establish that the framework would fail when tested. Untested means the evidence is limited. It does not tell us what the outcome would be. 2. The Cook Islands has a developed litigation record The Cook Islands' advantage in this comparison is that its legislation has been examined through actual disputes. That gives advisers and litigants a body of judicial decisions to consider when analysing statutory requirements, evidentiary burdens, limitation periods and creditor challenges. Case law does not eliminate uncertainty, but it helps show how legal provisions have been interpreted in practice. The SBA does not offer the same depth of reported judicial experience on the specific asset-protection questions being discussed. That difference should be acknowledged rather than explained away. 3. Why might the SBA remain untested? It is tempting to assume that the absence of litigation must have a particular explanation. Perhaps creditors have had little reason to bring these cases. Perhaps the jurisdictional arguments have discouraged proceedings. Perhaps there simply have not been enough disputes to produce a meaningful body of case law. Those are possible explanations, not established conclusions. Without sufficient evidence, it would be misleading to claim that the SBA has remained untested because its jurisdictional framework is effective — or because it is ineffective. The honest position is that the absence of decisions leaves important questions unresolved. 4. The legal question remains jurisdiction For the SBA, the starting point is the jurisdictional framework. A creditor may have a substantive claim against a trustee or another party. But that does not automatically establish that an SBA court can hear it. The claimant must identify a valid jurisdictional basis under the applicable law. That means examining the relevant statutory provisions, the identity and location of the defendant, the nature of the claim, and the connection between the dispute and the Sovereign Base Areas. A governing-law clause alone should not be assumed to establish jurisdiction. 5. Which section gets the creditor through the door? This is the question that matters most. Rather than asking whether the SBA is theoretically stronger or weaker than the Cook Islands, start with the actual claim. Who would the creditor sue? What relief would the creditor seek? Where did the relevant events occur? Where does the defendant reside or conduct business? Does the dispute concern property situated in the SBA? Which statutory provision gives the court jurisdiction? The answers will depend on the facts and the precise statutory wording. And if the claimant establishes jurisdiction, the analysis does not end there. The court must still consider the substantive legal issues and any applicable defences. Key Takeaway The Cook Islands has a substantial body of case law against which its statutory framework can be assessed. The SBA has not developed the same reported litigation record for the particular issues under discussion. That is a genuine distinction, but it does not establish why the difference exists or predict how a future case would be decided. The absence of a test is not proof of success — or failure. In practice The most useful comparison is not simply: “Which jurisdiction has the stronger asset-protection law?” It is: “If a creditor brought this particular claim, what legal route would allow the case to proceed, and what would the court have to decide next?” For the SBA, that means identifying the applicable jurisdictional provision first, then examining the substantive claim. For the Cook Islands, it means understanding the statutory framework in light of its existing case law. Until the relevant issues are tested, distinguish what the law says, what courts have actually decided, and what remains an argument.

October 16, 20262 min

SBA & Cook Islands: Where Does the Legal Battle Begin?

SBA & Cook Islands: Where Does the Legal Battle Begin? When comparing the Sovereign Base Areas (SBA) with the Cook Islands, it is important to understand that these jurisdictions approach the legal problem from different starting points. The argument is not that the SBA has a stronger fraudulent-transfer statute than the Cook Islands. It is that the legal battle may begin at a different stage altogether . 1. The Cook Islands: a purpose-built creditor-defence framework The Cook Islands developed a specialised statutory framework addressing creditor challenges to asset-protection trusts. Its legislation establishes specific rules governing fraudulent dispositions, including requirements relating to the creditor's claim, applicable time limits and the evidence needed to establish the relevant statutory elements. The result is a framework designed to address creditor challenges directly. The central question becomes: Can the creditor satisfy the requirements imposed by the Cook Islands legislation? 2. The SBA: a different legal tradition The SBA approach should not be presented as though it were simply another version of the Cook Islands' creditor-defence statute. The Sovereign Base Areas operate within a different legal framework, drawing substantially on the English common-law tradition. The argument for considering the SBA therefore begins elsewhere. Rather than assuming that a claimant can bring proceedings before an SBA court and then focusing immediately on the substantive creditor-defence rules, the analysis asks whether the court has jurisdiction over the particular dispute. That requires examining the relevant statutory provisions and the connection between the dispute and the SBA. 3. Jurisdiction comes before the merits This is the key distinction. A court may have jurisdiction over a dispute and ultimately reject the claim on its merits. Alternatively, a court may lack jurisdiction to hear the dispute, meaning the substantive issues need not be decided by that court. Those are different legal outcomes based on different questions. For the SBA, the relevant inquiry includes whether the claimant can establish a recognised jurisdictional basis under the applicable law. A governing-law clause alone should not be assumed to answer that question. 4. This is not a claim that the SBA has a superior fraud statute It is important to be precise about what the comparison does — and does not — establish. The argument is not: “The SBA's fraudulent-transfer law is stronger than the Cook Islands'.” Nor is it that a creditor can never bring proceedings involving an SBA-law trust. The argument is: “Before debating the substantive claim, establish whether the SBA court is the proper forum to hear it.” That is a jurisdictional argument, not a claim of automatic immunity from creditor proceedings. 5. Why the starting point matters The order in which legal questions are addressed can affect the strategy of a dispute. A Cook Islands analysis may focus on the statutory requirements for challenging a disposition, including the applicable limitation periods and evidentiary burden. An SBA analysis may first require the parties to establish the court's jurisdictional basis before turning to the underlying merits. Neither approach makes the outcome automatic. The relevant statutory provisions, facts and procedural rules still determine the result. Key Takeaway The Cook Islands and SBA should not be compared as though they were competing versions of the same statute. Cook Islands: a specialised statutory framework for creditor challenges. SBA: a jurisdictional analysis that asks whether the claimant has a proper route into the court before the substantive dispute is addressed. The distinction is not necessarily about which jurisdiction has the stronger fraud law. It is about where the legal battle begins . In practice When analysing a dispute involving an SBA-law trust, begin with the forum: What is the claim? Who is the defendant? What connects the dispute to the SBA? Which statutory provision establishes jurisdiction? Does the governing-law clause have any separate jurisdictional effect? If jurisdiction exists, what substantive law governs the claim? Only then can the substantive creditor-defence arguments be assessed properly. The first question is not always whether the creditor can win. Sometimes it is whether the claimant has established the legal basis for bringing the case before that court in the first place.

October 15, 20262 min

SBA & Cook Islands: The 2-Year Rule Isn’t What You Think

SBA & Cook Islands: The 2-Year Rule Isn’t What You Think When people discuss offshore asset protection, the phrase “two-year rule” comes up frequently. But reducing the Cook Islands and Sovereign Base Areas (SBA) frameworks to a single two-year deadline can be misleading. The real analysis involves several distinct questions: when the transfer occurred, when the creditor's claim arose, and when legal proceedings were commenced. Those are not necessarily the same date — and the distinction can matter enormously. 1. Transfers made before a claim exists The timing of the transfer in relation to the creditor's claim is an important starting point. A transfer made before a particular creditor's claim arose may receive stronger statutory protection than a transfer made after the claim already existed. Why? Because the relevant legal provisions may distinguish between transfers challenged by existing creditors and transfers challenged by future creditors. However, the precise protection depends on the wording of the applicable legislation and the facts. A transfer made before a claim arose should not automatically be treated as immune from every possible challenge. 2. When did the creditor's claim arise? The next question is when the relevant claim actually arose. This is different from asking when the creditor obtained a judgment, discovered the transfer or commenced proceedings. Depending on the applicable law, the relevant date may be connected to when the underlying cause of action accrued. That distinction can change the timing analysis. For example, a creditor may obtain a judgment several years after the underlying events occurred. The judgment date does not necessarily determine when the claim first arose for statutory limitation purposes. 3. When must proceedings be commenced? A further question is whether the legislation imposes a separate deadline for commencing proceedings. This is where the familiar “two-year rule” can become oversimplified. A statute may distinguish between: the period measured from the transfer; the timing of the creditor's claim; and the deadline for bringing a particular legal action. These rules may interact, but they should not be collapsed into one general statement that every creditor has exactly two years from the transfer to act. 4. Cook Islands and SBA rules must be analysed separately Although the Cook Islands and SBA may both be discussed in the context of international asset protection, their statutory frameworks should not be assumed to operate identically. The applicable legislation, the type of transfer, the nature of the creditor's claim and the procedural requirements must each be examined separately. A deadline under one jurisdiction's legislation cannot simply be imported into the other jurisdiction's analysis. Key Takeaway The phrase “two-year rule” may be a useful shorthand, but it is not a complete legal analysis. The questions to ask are: When was the transfer made? Did the creditor's claim already exist at that time? When did the cause of action accrue? What statutory period applies to the particular claim? When must proceedings be commenced? Which jurisdiction's legislation governs the dispute? In practice Before concluding that a creditor has missed a deadline, build a timeline of the transfer, the underlying events, the accrual of the claim and the commencement of proceedings. Then apply the relevant statutory provisions to those dates. The real question is not simply whether two years have passed. It is which two-year period applies, what triggers it, and what legal consequence follows.