Expanding Overseas

Expanding overseas remains high on the UK business agenda, despite economic, political and social challenges across the globe.

Did you know?

With transparency high on the global agenda, companies with international operations are actively reviewing their tax practices.

Need to know…

Where a UK business has plans for expanding overseas, tax issues and opportunities are almost certainly going to arise.

SMEs and entrepreneurs seeking to do business overseas need to understand, and prepare for, the nuances of conducting international business – including overseas tax planning and compliance.

But rules and regulations vary by country and jurisdiction, and they are constantly changing.

Regardless of where you choose to operate across the globe, it is a certainty that the local authority will be focused on seeking a tax contribution from your business.


What are the key tax issues to be considered when expanding overseas?

There is a broad range of tax issues to consider when expanding your business overseas into new markets.

Some of the initial areas to consider include:

  • Do double tax treaties exist in the markets you are looking at, to avoid paying double taxes?
  • What are the rules relating to withholding and other local taxes?
  • Transfer pricing rules – how do they operate? What about the impact of the BEPS measures?
  • Is VAT registration required, or a local equivalent?
  • How will profits be repatriated to the UK and UK shareholders?
  • How might existing assets be transferred overseas without triggering any undesirable tax charges?

Seeking professional tax advice will ensure all relevant issues, liabilities and reliefs are identified from the outset, enabling appropriate strategies to be devised and implemented in support of your overseas expansion plan.


How is tax liability triggered in an overseas market?

The act of trading or selling to consumers within an overseas market may be enough to trigger local tax and regulatory liabilities. You do not necessarily have to have established a formal presence within the jurisdiction.

As such, the manner in which you operate in a jurisdiction will be critical in determining your tax liability.

Usually, a company will have a taxable base if it is resident in a country in which it is doing business or, instead, has a permanent establishment in the country.

As we have seen from the public commentary regarding Google and other online businesses, it is quite possible to have significant sales in a jurisdiction without creating such a taxable base.

How will profits be repatriated?

For most SMES, the key issues will be:

  • How to extract value from the business tax efficiently?
  • How to sell the business tax efficiently?
  • How to pass on the business tax efficiently?

This is no different for international SMEs.

However, a question might be where the ultimate value ‘resides’. Should funds be brought back in to the UK tax net, or can value be left offshore efficiently? We can advise on all possible options.

How is intellectual property dealt with when expanding overseas?

Intellectual property (“IP”), such as trademarks and know-how, will often be some of the most valuable assets held by the business.

These will be integral to the generation of profit by the business across various jurisdictions.

A key consideration will be where these assets are held. It is acceptable for these assets to be held in a holding company in an appropriate and tax efficient jurisdiction. Operating companies in, perhaps, higher taxed jurisdictions could pay a licence fee for the exploitation of the IP. Usually, such a payment will be tax deductible for the paying company.

Local tax rules must be taken into account, and also the provisions of any double tax treaties and other international tax considerations.

Of course, there are other considerations. Many jurisdictions, including the UK’s own attractive regime, offer tax incentives to encourage research and development (“R&D”). Such reliefs should be considered from every angle when devising a structure.

What are the tax issues of moving employees overseas as part of growth plans?

Expanding your operations overseas will impact your tax and reporting requirements in respect of local and globally-mobile employees.

For example, if you hire from the local market, what are your duties relating to payroll?

For UK employees deployed overseas, tax residence will need to be clarified and resulting implications for tax liability, including payroll withholding and employment taxes, and ensuring employees avoid double taxation.

Tax planning will help ensure payroll withholding and remittance obligations in the overseas location are met.

An additional area of complication is employee share and incentive schemes. Operating such schemes across borders without effective tax planning could raise excessive or unfavourable tax bills.

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Here to help

ETC Tax supports UK businesses and entrepreneurs across a range of sectors and industries in expanding their activities beyond the borders of the UK.

As experienced tax consultants, we advise on all aspects of international tax management and planning. The aim being to minimise the amount of tax payable on international profits, while ensuring adherence to local and international tax rules and obligations.

We work with businesses from established multinationals through to start-ups and SMEs to help structure their tax and financial strategies across multiple tax jurisdictions.

As with all our clients, we work with such businesses to understand the objectives behind their plans for international growth and expansion. What are the key jurisdictions they are looking to develop in, is there a desire to repatriate profits to the UK and what, if any, is the ultimate exit route?

Whatever your commercial driver, effective international tax advice should act as a critical enabler for expanding overseas.

We advise on the full range of international tax issues and other matters relating to expanding overseas. This will include designing international group structures; managing profits across borders; identifying suitable jurisdictions in which to hold intellectual property; advising on movement of staff between jurisidictions; and advising on how funds might be returned to shareholders.

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