What every Exporter should know about International Finance

Here’s some simple tips to help your company grow internationally while staying compliant with local finance and tax authorities. Don’t let accounting and tax issues deter you from expanding. It is not as difficult to manage them as you may think!

Agents & Distributors

Managing your overseas business entirely through third party agents or distributors keeps your finance overheads low. Why? Because usually this means you do not have to file local accounts or tax returns.

TIP: If you are using agents or distributors, get tax advice about:

  • Whether you should file and pay for overseas VAT (aka Sales Tax and GST).
  • Licensing deals with your overseas partner.

Staff travelling or located overseas

If your staff live or regularly travel overseas on business, then:

  • their actions overseas may cause your business local tax issues if they are not carefully controlled, e.g. where sales contracts are signed.
  • they can be individually liable for overseas employment taxes and social security if their time overseas exceeds the local thresholds. The rules vary by country and they apply even if your staff are paid from your HQ country

TIP: keep fully aware of exactly what your staff do overseas and how long they stay in each country. Make sure they do not exceed local stay tax thresholds.

Recruiting staff overseas?

If you recruit staff overseas, this creates a new layer of finance requirements. In every country where you employ staff, you should consider whether you need to:

  • register as an employer and setup payroll;
  • create a legal entity in the local country;
  • prepare and file tax returns and pay corporate income taxes;
  • register, file and pay VAT;
  • prepare and file local accounts; and
  • create or have access to a local bank account.

TIP: make sure you use experts with local country knowledge for each of payroll, accounting and tax, as every country has its own rules. Using a good local outsourcer will make these seemingly mountainous tasks much more manageable for you, at price which is often much cheaper than hiring your own local finance staff.

Does a PEO help?

Using a Professional Employer Organisation (PEO) is a very flexible way of setting up dedicated staffing in a new country. The PEO will be the legal employer on your behalf. This can be faster than creating your own legal entity and it can be cheaper for a small number of employees.

However you may still be liable for local corporate income tax even if you use a PEO. Also the costs of a PEO usually exceed the costs of setting up your own entity once you grow beyond a small number of staff.

Summary

In our experience exporters who receive good all-round finance advice can manage international finance and tax with much less effort and expense than they expected. If you would like to know more about how we can help you manage internationally, please get in touch on +44 (0)20 755 3706 or at contact@galvininternational.com.

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