Place of effective management

Place of effective management (POEM) is the place where the key management and commercial decisions needed to run a company’s business as a whole are, in substance, made. The idea comes from the OECD Model Tax Convention and its commentary.

It matters because some countries treat a company as tax-resident where it is managed, not only where it is incorporated. Say the only board member of an Estonian OÜ makes every decision from another country. That country may then consider the company resident there, so two countries could both claim it. Tax treaties deal with these dual-residence cases. Many older treaties give the company residence where its place of effective management is. Under the current OECD Model, the tax authorities settle them by mutual agreement, weighing the place of effective management alongside other factors.

Where decisions are made is a question of fact, not of where the company is registered. Read What is “place of effective management”? and run the fit check.