Is Virtual Office a Real Substance?

virtual office

Is virtual office a real substance?

Business substance is described as the working reality of the corporate structures comprising of office, bank account, personnel, sale proceeds and top management’s decision making. It reflects the legitimacy of a business. The business substance is essentially about having the right infrastructure and personnel in the perfect place at the right time. In other words, the tax authority must see that a company is physically represented and/or is conducting some form of business activities in order to enjoy the tax benefits and incentives.

However, not every mid/offshore company make huge profits. There are some small-scaled international companies who focus on cross border businesses but use offshore company as their corporate structure. For a small scale or start up cross border business, setting up a full set of physical presence may become a burden. This is why virtual office is introduced.

A virtual office is suitable for small-scaled international companies to fulfil substance requirement with minimal cost. Virtual office packages generally include working space, conference area and administration support. Virtual office also enhances reputation and credibility of your company by means of owning legal address and telephone number.
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How virtual office become part of your real substance.
  • Legal address: Business address for your correspondence and business cards.
  • Call answering: Phone answering to avoid any sale missed out.
  • Mail and document forwarding: Forward physical documents like contracts and invoices from the legal address to any other companies.
  • Mail and document receiving: Receive any physical documents from other companies.
  • Working space: A working space that you can pop in once awhile.
  • Conference area: a place for you to do decision making.
  • Virtual support: Local account service, administration services.
The era of an offshore company merely using a registered address are about to become a practice of the past. No matter you are a huge profit-making company, or just a start up cross border business company, an economic substance is a must to prove your business legitimacy. It is also important to remember that virtual office might not be enough to provide sufficient economic substance to your business as it grows bigger, which is why it is important to maintain a balance between going fully virtual and running economic activities in physical space.
Disclaimer: The information provided does not constitute legal advice. You should obtain specific legal advice from a lawyer before taking any legal action. Although we try our best to ensure the accuracy of the information on this website, you rely on it at your own risk.
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