An international tax review can prove to be a valuable exercise for any business operating across borders. The complexity and intricacy of international tax rules, set against organisational challenges, play out against wider changes in the global regulatory, commercial and political environment. Together, these make a compelling case for carrying out an international tax review.
1. Changes in international tax regimes
Companies that operate within multiple jurisdictions must necessarily keep pace with developments in all relevant local tax regimes.
Across the globe, tax authorities have become nothing short of dogged in their approach to enforcing compliance amongst taxpayers.
The taxation of cross-border corporate structures is highly topical. The current focus on the international tax position of ‘Big Tech’ firms Amazon, Google, Apple, shows how authorities are hungry to change and create tax rules to meet their expectations of corporate tax contribution and to limit the impact of perceived international tax avoidance practices.
While the big brands take the initial heat and unwanted attended media attention on the issue, any company with cross-border tax liability should take note and be prepared to take stock of their tax arrangements and how these sit against any new rules that emerge to hit international corporate tax.
Reviewing your position on a regular basis, usually annually, will help in avoiding international tax authority scrutiny.
International tax is not only challenging in terms of scale, but the specific tax issues at play are typically complex in themselves, and subject to continued scrutiny and change.
BEPS, transfer pricing, indirect taxation, outsourcing – these are all substantial areas affecting the tax position of any company operating internationally.
An international tax review can help analyse and compare the available tax benefits and incentives within relevant jurisdictions, and the associated issues concerning movement of capital and income flows across international borders.
Of course you do not generally speaking need to have a physical presence within a jurisdiction to be caught by local tax rules; being operational in some form is enough to create liability. Which means it’s important to check that your tax position correctly reflects your actual tax liabilities.
2. The role of the tax function
There is an awful lot involved in making sure you are paying the right amount of tax in the right place at the right time!
This has precipitated a shift in the role of the tax function from beyond the traditional domain of spreadsheets to encompass the strategic and operational handling of the increasingly complex rules, risk and compliance issues, in the context of wider commercial concerns and priorities.
For many organisations, this is resulting in a shift in how the tax function is structured, for example adopting a ‘centralised’ approach whereby local finance managers (e.g. in China) report directly to the director of finance at corporate headquarters (e.g. in France).
Any change in operations should be accounted for within an international tax review to ensure all roles and responsibilities are clearly defined and assigned by, for example, stress-testing processes, communication and interplay between the tax functions based in local branches and headquarters.
3. Company objectives
If the role of tax is moving beyond accounting, there is an opportunity for tax to add value to wider business goals.
In the most fundamental sense, we advocate starting any form of tax planning from your objectives. This applies to the corporate environment.
An understanding of where the wider organisation wants to go will provide the foundations and parameters for tax planning to contribute and align to these goals.
Organisational priorities may be focused on overseas expansion, or growth through M&A. Mergers and acquisitions can challenge a company’s tax position. Tax should be brought in at the formative stage of the transaction, alongside wider legal, and business planning, as part of the due diligence.
It’s about making tax work for you by adopting a commercial and competitive approach. This can be achieved through tax advice that encompasses tax risk management, tax accounting and tax planning.
An international tax review can help you to understand how your tax position, the infrastructure, processes and controls, are aligning – or not – to corporate goals.
This insight can help you to shape plans, confident in the knowledge you are operating on the right basis and in line with company needs, or it can identify where you need to focus to get on track.
4. Role of technology for international tax
Are you keeping up?
If the tax function’s evolving role is based on adding critical value to the company’s overall strategy, there are a number of tech-related issues to consider:
- Data – sourcing and handling quality data is a challenge particularly since tax processes rely on data from other departments.
- Processes – finance and tax processes are highly interdependent – but are they still effective?
- Tech inc automation – identifying needs is a challenge, as is matching these to available solutions, and finding the budget.
- Timings – how flexible can processes and workflow be where critical dates dictate activity (year-end, quarterly financial statements processes, Budget announcements)? Multiply this across jurisdictions.
- Technical expertise and know-how – attracting and retaining or outsourcing tax talent – specialist expertise is in short supply!
An international tax review would again provide insight into how your organisation can approach these challenges. If there are particular strengths or weaknesses in your current situation, where is focus and investment required to meet goals around compliance and tax-efficiency?
Enterprise Tax Consultants can assist with an international tax review
Carrying out an international tax review should be seen as part of your company’s wider tax planning strategy – supporting focus on managing tax risks, improving tax efficiency and ensuring compliance across borders.
We advise business with international tax liabilities to help them realise their commercial objectives in what is a highly competitive and fast-changing environment. Our services include:
- International tax advice
- Expanding overseas
- Corporate tax
- Expat tax advice
- Offshore trust advice
- Employee share schemes
For more information, get in touch with one of our specialist tax advisers.