Becoming PoEM-fluent

Why You Need to Know Who’s Really Calling the Shots

In today’s global economy, companies can no longer rely solely on complying with local legislation in their jurisdiction of incorporation, particularly where such legislation is based on Central Management and Control (CMC) rather than Place of Effective Management (PoEM). In other words, you can’t only rely on CMC to safeguard your international tax residency as PoEM may need to be considered. Understanding and knowing how PoEM works can save you from a world of tax headaches. Just ask Dave…

The Pitfall: PoEM vs. CMC – It’s Not Just About the Boardroom

For many countries, including South Africa, a company’s tax residency is based on where its PoEM is located—but when you Google “PoEM” you’ll likely be faced with Shakesperean sonnets and Byron’s verses. Dave faced the same issue, only adding to his confusion. So, let’s break it down…

Place of Effective Management (PoEM) is often misunderstood and confused with Central Management and Control (CMC). While CMC focuses on where the company’s Board of Directors meets and makes decisions, PoEM goes beyond that. PoEM accounts for factors such as stakeholders, shareholders, key management personnel, and the day-to-day running of the business.

Essentially, PoEM asks the critical question: who truly “calls the shots” in the business? And from where? Unlike CMC, PoEM looks at a much wider range of activities. For instance, even if a company’s Board of Directors is based in Mauritius, if key decisions are influenced or made outside of Mauritius (like in Dave’s case), this could trigger PoEM and raise questions about the company’s tax residency.

While some countries like Mauritius base determining tax residency on CMC, other countries like South Africa use PoEM. It is essential to assess all areas of your company’s management and influence and ensure that all requirements are being met with regards to CMC and/or PoEM wherever relevant. Like in Dave’s case, even the slightest unintentional misstep could lead to significant stumbling blocks. CFO Insight Mauritius offers a wide range of solution-based services to help you navigate this, and mitigate the risks involved with getting it wrong.

The Problem: A Tax Tug-of-War

Here’s what Dave didn’t know: if your company is centrally controlled in Mauritius but those all-important decisions are being influenced by people outside the country (like South Africa), you could end up in a tax residency tug-of-war—and it’s not the fun, team-building kind. Quite the opposite. This could result in dual tax residency, where your business may be liable to pay taxes in both Mauritius and the other country where it is managed (Double Taxation).

Double Taxation is not only financially draining but can also complicate your business’s legal and regulatory obligations, not to mention your reputation. And let’s face it, no one wants that. Consequently, the company must consider the Double Taxation Agreement (DTA) between the two countries to determine its sole tax residency. Most DTAs use PoEM as a tie-breaker, which means to cut the tax tug-of-war rope, in most cases you’ll need to meet PoEM requirements.

The Solution: Get PoEM-fluent with CFO Insight Mauritius

Here’s the good news: you don’t have to figure this all out alone or be the expert. CFO Insight Mauritius is fluent in all things PoEM and all the complications that come with it. We know how to untangle the mess of tax residency and make certain that your business only pays tax in Mauritius. This is what happened with Dave when we cut the tax tug-of-war rope by getting him Primed for PoEM.

We will make sure your company’s PoEM stays right where it should be, helping you avoid dual taxation and making sure you comply with Mauritian and international tax laws. With our PoEM-fluent expertise, you won’t be left confused and questioning where your taxes are going. You’ll be in control, and you can let us handle the complexities.

It’s never too late to be Primed for PoEM.

Get Primed for PoEM