Navigating the international tax landscape

The taxman can appear as an intimidating shadow, lurking behind you. Understandably, tax is an issue many shy away from, labelling it ‘complex’ and ‘scary’. No matter your company’s size, cross-border tax issues are now more critical than ever, with significant consequences for the unwary.

However, the right guidance from trusted and knowledgeable advisers, you can also find a way to make tax work for you, whilst ensuring compliance.

What is international tax? 

International tax is not a single entity. When considering the foreign landscape, tax becomes a plural concept. With each new jurisdiction, you must overcome and implement different tax codes and legislation, making it a tricky topic to understand, remain compliant and be efficient in managing tax exposures. 

Tax is important, but it’s not that scary. It’s not just an issue, but an opportunity.

As we attempt to navigate complicated rules in new regions, it’s easy to get lost. This is where an adviser is so important, but more than that you need tailored, on-the-ground advice to not only support, but to educate on the differences in tax requirements you will face as you expand globally. 

For example, while the UK is more mature in its tax rules than some jurisdictions, there are certainly some territories which can be far more aggressive in their approach. As an adviser we must consider the range of legislations, and weigh this up against what the business is trying to achieve commercially speaking – because there’s no point implementing advice if it conflicts with the commercial reality or objectives.

Invest to protect

If you have a problem with one area of tax then you probably will with others

Tax management is one of the most challenging complexities of selling products and services around the world. Digital commerce has become an evolving challenge, both for businesses and tax legislators, as consumers continue to expect flawless ecommerce experiences. Having an exposure to one area of tax is often an indicator of other potential areas of risk, both tax and non-tax related, although this is not guaranteed.

In addition to tax advice, it is important to take measured steps in investing in areas such as legal and IT to protect the business. Accurate tax calculations will provide the visibility to keep you aware of tax risks and their cashflow impact and businesses need to be very involved in how they manage and pay their taxes. Failure to do so, can lead to significant costs, which too often can spell the end for some businesses.

The major things to consider:

Rules and regulations Rules and regulations will differ between jurisdictions and can be exhausting to navigate
Cultural awareness Cultural awareness comes from the ground; you need local staff and advisory teams on your side to manage your overseas tax risks.
Pitfalls of local operational practices How do you navigate the pitfalls of local operational practices and expectations when remunerating key talent?
Tax doesn't have to be scary Tax doesn’t have to be scary, but you do need to manage expectations. 

Make the tax man work for you

One of the first questions to address for both your staff and the business, is whether you are working ‘in’ a jurisdiction or ‘with’ a jurisdiction. This can completely alter the way in which you are exposed to local taxes and how you benefit from available reliefs. For example, presuming tax codes and cross-border transactions are accurate can have disastrous consequences for everyone involved. 

Sometimes businesses or staff will pay too much tax as they fail to understand the local processes, leading to a cautious overpaying scenario. Therefore, as a business you must look at the opportunities that become available from gaining local insight, as tax can be helpful to sustaining your company and its future. Early advice means prevention and prosperity, if you seek help right at the beginning, advisers can get in touch with their local contacts and authorities and get the information that’s right for you.

Remember, advisers are your ally. They will ensure that you benefit from the opportunities available to you, whilst at the same time, help mitigate the risks you face. Always bear in mind the following: 

Check your international interaction  Check whether your international interaction is ‘in’ or ‘with’ a jurisdiction.
Consider the implications  Consider the implications for your key talent and business.
Ensure you operate in a commercial manner  Ensure you operate in a commercial manner, but mindful of managing profit sharing across jurisdictions appropriately.
Extract profit  Extracting profit whilst minimising local tax leakage.
Understand all your local filing obligations  Ensure you understand all your local filing obligations – ignorance is not a defence.

Meet your expert – Ryan Broomfield

Ryan is a member of RSMs international tax team and has over a decade of experience in advising clients on international and UK tax matters.