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In international taxation, the true test of a company’s legitimacy is not its incorporation documents, but its fiscal independence — its ability to stand alone, make its own decisions, and operate economically without being controlled or directed from another jurisdiction.
For entrepreneurs, investors, and crypto holders using international structures, this concept is critical. If a tax authority determines that your company is not fiscally independent, it may be “requalified” as a foreign-controlled entity or even as a transparent extension of your personal tax residency. The result: loss of tax benefits, retroactive assessments, and exposure to double taxation.
In the post-BEPS world, the burden of proof lies with the taxpayer. It’s no longer enough to say your company is independent — you must demonstrate it with facts, governance, and documentation.
In this article, we’ll explain what fiscal independence means, why it matters, and how to build an audit-proof company under the modern OECD standards — including how SBH Capital Partners ensures that locally managed entities in Saint-Barthélemy meet every legal test of independence.
Fiscal independence refers to a company’s autonomous tax personality — its ability to make decisions, manage operations, and bear economic risk in its own name.
Under OECD guidance and domestic tax laws, a company is considered fiscally independent when:
This distinction defines the place of effective management (POEM), which determines where the company is tax resident.
If your company lacks fiscal independence — for example, if decisions are taken from abroad — tax authorities can:
For individuals structuring holdings or crypto conversions, fiscal dependence is fatal: the entire structure collapses back into their personal tax jurisdiction.
The OECD defines the POEM as “the place where key management and commercial decisions necessary for the conduct of the business are made.”
Indicators include:
If all of these occur in one jurisdiction, that jurisdiction is where the company is fiscally resident.
Tax authorities apply the doctrine of substance over form: they disregard legal appearances if reality shows control elsewhere. A company registered abroad but directed from another country will be fiscally dependent.
Even if there is a local director, independence fails if that person acts under the instructions of a foreign principal. The manager must have real authority, evidenced by decisions, contracts, and correspondence signed locally.
To demonstrate independence, a company must build tangible and documented substance. Below are the key factors that tax authorities examine:
Each of these elements forms part of the evidentiary record that tax authorities use to assess fiscal residence. The more coherent and complete the record, the stronger the claim of independence.
Managing all affairs by email from your home country undermines the company’s local control. Authorities trace IP addresses, flight records, and digital footprints to prove foreign direction.
Appointing a local director who merely signs papers is ineffective. The director must have discretion, fiduciary duty, and evidence of active decision-making.
Using personal accounts for corporate transactions or funding the company directly from abroad without proper documentation destroys separation.
Failing to keep books locally or ignoring mandatory filings signals an artificial structure. Even if tax-free, the company must operate under the local legal framework to be recognized as resident.
If all clients, contracts, and operations are in another country, while the entity has no real activity locally, it will likely be requalified as fiscally dependent on the foreign jurisdiction.
Saint-Barthélemy, as a French overseas collectivity, provides the perfect legal environment to establish fiscally independent entities. Under French civil law but with its own tax regime, the island offers both credibility and autonomy.
Companies registered and managed on the island are:
SBH Capital Partners ensures fiscal independence through a comprehensive governance model:
This approach guarantees that the company’s centre of management, control, and documentation resides entirely within Saint-Barthélemy — fulfilling all OECD substance and POEM criteria.
Select a location like Saint-Barthélemy that offers both tax autonomy and legal legitimacy. Avoid non-cooperative jurisdictions or pure shell havens.
Open a registered office, hire local administrators, and contract local service providers. Substance must be visible.
Ensure your manager resides locally and can act without foreign instruction. SBH’s gérance model satisfies this requirement.
All inflows and outflows must pass through local banking channels, not foreign accounts.
Prepare annual financial statements under local accounting standards.
Hold meetings, sign contracts, and maintain governance logs locally.
Maintain a compliance file with meeting minutes, contracts, invoices, and bank statements proving that all core activities occur within your company’s jurisdiction.
Following this roadmap ensures that your company can stand alone before any tax authority — fiscally, legally, and economically.
In a world of automatic data exchange and cross-border audits, fiscal independence is the cornerstone of credibility. It’s what separates lawful international planning from artificial tax avoidance.
To prove independence, you need more than paperwork: you need presence, governance, and documentation that speak for themselves.
With SBH Capital Partners, fiscal independence is not a claim — it’s a structure. We provide the local management, compliance infrastructure, and legal framework that make your company recognizably autonomous under French and OECD standards.
Because in modern taxation, independence isn’t what you declare. It’s what you can prove.
1. What is fiscal independence?
It’s a company’s ability to operate and make decisions autonomously within its jurisdiction, without foreign control or management.
2. Why does fiscal independence matter?
It determines where the company is tax-resident and protects against requalification or double taxation.
3. What proves fiscal independence?
Local management, bank accounts, accounting, contracts, and documented decision-making — all within the same jurisdiction.
4. Can a company be fiscally independent if managed remotely?
No. Remote management usually makes the company tax-resident in the manager’s home country.
5. How does SBH Capital Partners guarantee fiscal independence?
By managing clients’ companies locally in Saint-Barthélemy, ensuring all decisions, conversions, and filings occur under French law and local fiscal jurisdiction.
Discretion, compliance, and excellence in Saint-Barthélemy.
Fill out the form below to access a private consultation with our expert team.
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