Dual tax residence: Estonia vs Belgium
A company is legally incorporated and compliant in Estonia, fulfilling all corporate filings and legal requirements locally. The sole director, who is also the ultimate decision-maker, resides in Belgium and manages the business remotely. The company assumes its tax obligations remain solely in Estonia due to its formal incorporation. However, the director's residence and management activities from Belgium raise questions about additional corporate tax exposure under the 'place of effective management' principle.
Input Data
- Company type: EU-incorporated company
- Country of incorporation: Estonia
- Management location: director located in Belgium
Jurisdiction Conflict
Country of registration — The company is formally incorporated in Estonia, adhering to all local corporate filing and legal requirements. It assumes its tax obligations are confined to Estonia due to this formal incorporation.
Country of effective activity — The sole director resides in Belgium and conducts all management activities from there, which could suggest the place of effective management is in Belgium.
Conflict — The director's residence and management activities in Belgium may create a tax residency issue under the 'place of effective management' principle, potentially exposing the company to Belgian corporate tax obligations despite the absence of physical presence or employees in Belgium.
AI Analysis
Scenario A — Estonian Compliance Assumption
- Estonian tax authority considers the company compliant as it is incorporated and fulfills all local requirements.
- The company continues to pay taxes solely in Estonia.
- Risk: Overlooking potential Belgian tax obligations.
Scenario B — Belgian Tax Exposure
- Belgian tax authority interprets the director's management activities as creating a place of effective management in Belgium.
- The company becomes subject to corporate tax in Belgium.
- Risk: Dual taxation and penalties.
Scenario C — Documented Management Alignment
- Management activities are documented as aligned with Estonian operations.
- Potential tax exposure in Belgium is minimized.
- Risk: Inadequate documentation could lead to disputes.
Key risk indicators
- Director's residence in Belgium.
- Remote management activities conducted from Belgium.
Output of Richys AI Analysis
- AI assesses potential dual tax residency exposure.
- AI matches facts with tax treaty provisions.
- AI highlights need for expert escalation due to complex residency issues.
Expert Boundary
Involvement of a verified EU expert is required for:
- country-specific interpretation of the place of effective management
- application of the Estonia–Belgium tax treaty to concrete facts
- selection of a defensible filing position
- preparation for potential tax authority inquiries
Case Conclusion
Tax authorities observe the director's residence and management activities in Belgium. The company assumed tax obligations were limited to Estonia. This assumption is challenged by the principle of effective management. Risk becomes material if management activities are not documented in alignment with Estonian operations.
Start case analysisThis case is for illustration purposes only. Real outcomes depend on residence, income structure, documents and timing. For your specific situation, use structured case analysis with AI and verified EU experts.
Sophie Bizelle
AI assistant – Business Setup