As multinational companies face increasingly complex tax rules, economic substance requirements, and cross-border employment challenges, advisory firms are adopting digital twin models—virtual representations of legal, financial, and operational structures—to simulate corporate setups and test strategic plans before real-world implementation. These models are set to transform how entities prepare for international expansion, mitigate risk, and ensure compliance.
What Are Digital Twins in a Business Advisory Context?
In engineering, digital twins replicate physical systems to monitor and improve performance. In business advisory and corporate structuring, a digital twin is a virtual replica of an organisation's legal, tax, and employment setup. It allows firms to model a proposed business scenario—such as setting up an entity in the UAE or relocating key personnel—and test its tax and operational outcomes across multiple jurisdictions.
The model draws on:
- OECD and local tax laws, including BEPS, CFC, and transfer pricing regimes;
- Double tax treaties and withholding tax provisions;
- Employment legislation and social security implications;
- Corporate governance requirements and regulatory timelines;
- Substance, management & control, and PE risk.
Key Use Cases for Advisory Firms
1. Cross-Border Tax Strategy Simulation
By mapping corporate flows within the twin (e.g. royalties, dividends, services), advisors can forecast effective tax rates and compliance triggers across jurisdictions, highlighting areas of leakage or inefficiency.
2. Transfer Pricing Risk Assessment
The twin can model intercompany transactions and test how they appear to tax authorities, identifying if current pricing could trigger audits or adjustments.
3. Employment Model Testing (EOR, Remote Work, Hybrid)
With global mobility on the rise, advisory firms use digital twins to analyse whether employment models would create a permanent establishment, require local registrations, or trigger tax residency risks.
4. Entity Relocation or Holding Structure Redesign
Before moving a holding company from, say, Cyprus to the Netherlands or UAE, a digital twin can simulate how this would affect the group's IP regime, profit repatriation flows, and access to tax treaties.
5. Regulatory Impact Forecasting
By updating the twin with regulatory changes (e.g. new EU DAC directives, UAE CT updates), advisors can keep clients' models current and forward-looking.
The Technology Behind It
These simulations are supported by:
- Rule-based engines built on real-time legislative databases;
- Data visualisation tools for mapping cross-border structures;
- AI scenario generation to suggest optimisations (e.g. structure X vs. structure Y);
- Compliance libraries integrating local legal calendars and licensing regimes.
Such tools are increasingly aligned with platforms like OECD Tax Inspectors Without Borders, EU BEFIT, and UNCTAD's investment policy hub, ensuring regulatory alignment.
Why It Matters Now
Regulatory scrutiny is intensifying. The OECD Pillar Two framework for minimum tax, rising substance enforcement in low-tax jurisdictions, and the acceleration of digital labour all create planning complexity. Traditional static modelling cannot keep up.
Digital twins provide a living simulation environment—constantly updated—where advisors and clients can run scenarios, assess risk, and optimise structures with precision.
Eurofast's Take – how we help our clients
At Eurofast, we understand the future of advisory lies in combining technical excellence with data-driven modelling. With our regional presence in over 21 jurisdictions and expertise in tax, corporate, payroll, and mobility, we are investing in tools and frameworks that help our clients:
- Build compliant and resilient structures in advance of regulatory changes;
- Simulate real-time entity or employment changes across borders;
- Optimise tax and operational models using digital forecasting.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
