Business Tax: Trading internationally

Nick Farmer - Menzies Accountant

Nick Farmer – International Tax Partner

Trading internationally provides many businesses with an opportunity to grow sales and increase profitability. On the flip side, it also exposes businesses to a different trading environment, and this brings inherent complexities and risks to the operations. Balancing this risk reward equation is crucial if businesses are going to make the most of the opportunities available to them, and before rushing into overseas markets its important to really understand the model of operation and how best to achieve the commercial objectives.  

Developing a thorough knowledge of the overseas business landscape, including tax and legal implications, and adopting strategies to mitigate risk, will be required if full value is going to be extracted from the international trading activities.  

Tax issues should always be addressed in an up-front way, otherwise unexpected tax consequences can arise. For instance, an overseas customer may withhold taxes prior to paying invoices for goods or services, or a surprise VAT liability could be imposed. Depending on the nature of the activities, a local tax presence may be created, and businesses will need to be sure of the relevant taxing rights under a double tax treaty. By addressing foreign tax implications early and building them into the trading arrangements, businesses can not only ensure local compliance but also that the costs are included in forecasts and viability assessments.   

Businesses that get it right will have a clear understanding in advance of exactly what payments will be received and what the tax position will be in both the UK and overseas market. Local advice in the foreign jurisdiction is key, and Menzies through its membership of HLB International can ensure that this is obtained and co-ordinated. Taking this approach will help optimise profits and protect the cash position which will be essential if businesses are to realise their international ambitions.

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