Over many years working with various clients, our experience is that companies are often unaware of, or ignore, the tax obligations that they, and/or their employees, may have when working overseas. Failing to properly understand the tax consequences of working internationally can prove costly for companies. Problems arising can include unexpected tax liabilities; interest and penalties for failure to comply with in-country legislation; and expensive professional fees and management time to rectify the position, all of which erodes hard-earned profits.
Once contracts are signed, there are no prospects of renegotiating with customers. So where tax has not been considered in advance, expected profits may not materialise and some contracts may actually end up being loss-making. This is where AAB can help:
When clients work overseas we always impress upon them our key objectives:
- Be proactive
- Be commercial
To ‘Be proactive’, we recommend our International Tax team’s involvement as early as possible in the tender process, before any contract is signed, so we can advise the likely tax and compliance costs they will suffer as a result of working in that overseas country.
This allows the client to properly, and competitively, price their tender, satisfying our ‘Be commercial’ objective, and maximising our value to the client, by ensuring they comply with all their overseas tax reporting and paying responsibilities, whilst passing on the overseas compliance costs in their pricing to their customer.
The following bullets summarise how we achieve these objectives by way of a ‘process map’ we generally follow:
- Understand the project
- Review the draft contract
- Understand the resultant tax consequences
- Factor in additional tax and compliance costs
- Avoid tax compliance failure
In a series of international tax blogs over the coming months we'll explain each of these areas in more detail. Ifyou require further information at this stage, please contact Ruth MacNamee, Assistant Manager, (email@example.com) or your usual AAB contact.