Tax
Place of effective management
Also known as POEM, central management and control, corporate tax residence
Place of effective management is the location where the key commercial and management decisions necessary for the conduct of a company's business are in substance made. Most countries use it, alone or alongside incorporation, to determine where a company is tax resident, regardless of where it was registered.
In plain terms: A company is usually taxed where it is actually run, not where the certificate was issued.
Why it matters
This is the doctrine that catches solo founders first. A company incorporated in one jurisdiction and run from a founder's home in another can become tax resident in the second — with a filing obligation, a tax charge, and no relief available if the two countries have no treaty.
Example
A founder living in Portugal is the sole director of a Wyoming LLC and makes every decision from Lisbon. Portugal has a strong argument that the company is managed, and therefore resident, in Portugal.
Common misunderstanding
Appointing a nominee director offshore to fix it. If the nominee follows your instructions, the decisions are still being made by you, where you are — and a paper trail of resolutions signed elsewhere is evidence of the arrangement rather than a defence to it.
Read the full guideCFC rules will find your offshore company