What is substance readiness?

Substance readiness means a structure is able to evidence real presence: whether management, functions, people footprint and the tax position are aligned. The checklist helps assess whether the model can withstand an economic reality review, or whether substance exists only formally — as an office and nominal director without real functions or decision-making.

What does the substance checklist review?

The checklist reviews the key elements: where decisions are made, who performs real functions, how risks are allocated, whether there is a governance framework and evidentiary record for decisions. It helps identify where the stated structure diverges from actual activity and prepare to evidence substance before a bank, tax authority and in treaty-position contexts.

Are an office and a director enough for substance?

No. Banks, tax authorities and investors analyse functional substance, not formal substance. They focus on where decisions are actually made, who bears the risks and whether flows match the stated model. An office and nominal director without real functions do not create defendable substance and will not withstand serious review.

Checklist

Substance Readiness

Review of real presence, management and documentation of the structure.

1. Management

Where are the directors located?
Where are meetings held?
Is there a documented governance structure?

2. People and Functions

Do the functions match the stated role of the company?
Is there evidence that the functions are actually performed?
Does the profit allocation correspond to the functions and risks?

3. Documentation

Is there transfer pricing documentation?
Do the contracts reflect the factual model?
Is the banking narrative aligned?

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