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Navigating the complex area of international tax

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One of the main shifts post-Covid is the regularity in which companies have found themselves exploring cross border opportunities, whether that be through hiring staff in another country or taking opportunities to develop into different markets and business ventures overseas.

But with the reward of entering new markets comes the risk of getting it wrong from a tax compliance perspective; tax can be hard enough in the country in which you usually operate, never mind one that you are not familiar with.

One of the most common issues that businesses face is attracting and retaining quality staff, and the post-Covid world has made it a wider playing field. We are finding that it is not just the bigger companies that employ staff in different jurisdictions, with smaller companies also able to tap into the labour market in countries. While this has obvious savings on the bottom line, getting things wrong from a tax perspective can quickly eat into that profit and can also be a driving factor for staff leaving the business, which puts you back at the start.

Equity rewards

For start-up companies, where equity can be just as much of a driver as mainstream salary and bonus remuneration methods, understanding how a share scheme or remuneration package can be structured from a tax efficiency perspective across tax jurisdictions can also be important.

Equity rewards tend to be for those employees who are in it for the long term and are likely to be the individuals with the special skills or experience to build the business. Having key decision makers in other jurisdictions can create permanent establishment risks for the company, opening the entity up to both tax and employer compliance obligations overseas.

Cross border VAT

Cross border VAT is a particularly complex area with differing rules and reporting limits in different jurisdictions. For companies with high turnover, getting your VAT analysis wrong can quickly become a painfully expensive issue and one that needs to be put right quickly. It can also play a part in business decisions depending on your service line.

Scoping out the big picture and getting good advice before you take on employees overseas can be the key to ensuring you do not face costly problems down the road or come under scrutiny from either tax authorities or potential investors. This is certainly one of the areas in which paying for good quality advice initially pays off by laying solid foundations on which to build your business overseas.

If you would like any advice or guidance on any of the above, take a look at our International Tax pages or get in touch with one of our experts on 0333 123 7171.