When contracting for work overseas, ensuring companies are aware of the potential taxes they will be faced with is of critical importance, so they can build a contract price which factors in as much additional tax and compliance costs which the business and its personnel may face in that overseas location, as is possible.
When undertaking activities overseas, the work scope can give rise to a requirement to register for taxes in that location. In cases where work in country is long term in nature and a more permanent presence is sought, companies may look to register a branch, or entity, in that location.
In such cases, we have seen some corporate groups which grow organically over time, through adding overseas branches and subsidiaries, without giving due consideration to the tax implications of their overseas structures.
Looking at the structuring of an overseas presence at an early stage, before committing to the set up, can present opportunities to create tax and other cost efficiencies. For example, there can be significant differences in the overseas tax treatment of branches versus subsidiaries, in relation to both corporate and withholding tax rates.
Some additional questions which should come to mind when looking at the appropriate set up overseas include: if an entity is deemed to be the best method, what choices of entity exist? Is there a group entity which already exists in that overseas location, or one which already undertakes filings there through a branch? Can a tax effective use of secondment agreements be used to deal with a provision of personnel to a particular location?
Different options can also impact on indirect and employment taxes, so it is essential that all taxes are considered before arriving at a decision. Companies operating internationally should ensure that they work with an advisor which has an in depth understanding not only of matters relating to all international taxes, but also of the particular company and their wider group, to assist in seeking efficiencies where possible.
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