International business tax advice

Corporate residency

A company normally pays tax in the country it is tax resident in. However, a company may not only be resident in the country it’s incorporated if it is centrally managed and controlled from another country. Being dual resident can create additional tax filing obligations. This may mean the company is taxed in two areas, leading to double taxation, unless relief can be obtained (e.g. under a double tax agreement or via a tax credit).

Permanent establishments

A permanent establishment (PE) can be created where a company is resident in one country (as above) but also conducts its business from a fixed base (e.g. office, warehouse etc) or agent (employees, directors, some contractors) in another country. If a permanent establishment is created, the company may create an obligation to file and pay tax in that new country on attributable profits.

Before doing business in a new country, our international tax team can help you understand the residence and PE position of companies you control. They can help you navigate making tax relief claims where required and provide advice about whether a permanent establishment will be created.

Withholding tax

Companies may have a duty to withhold tax on certain payments to a company or person resident in another country. This includes:

• Interest
• Royalties
• Dividends
• Services

Double tax treaties may reduce withholding tax but they can be complex to navigate. Where relief applies, formal confirmation is usually required to be obtained from HMRC. We recommend seeking advice to support you with your withholding tax obligations.

Transfer pricing

Transfer pricing is the pricing of a transaction between connected parties. In the UK, transfer pricing rules are based on the arms-length principle, which determines the price as if the transaction was carried out by independent parties.

The UK’s transfer pricing rules apply to all companies or groups with more than 250 staff and either an aggregate annual turnover of over than €50 million or a balance sheet total of over €43 million.

The UK tax regime for transfer pricing makes the taxpayer responsible for verifying arm’s-length prices on all related-party transactions. Our international tax team can help review your transfer pricing policies to ensure they meet the arms-length test.

Profit return

One of the most complex parts of international business is how to transfer funds back to your home country. Whilst it may seem straightforward, the consequences of non-compliance can be costly. We can help you consider your most tax efficient profit return options and provide guidance where required.

Indirect tax

Developments in international marketing and logistics have made it possible to reach many more customers effectively. However, to maintain national security and protect local industries there are often documentation, compliance and tax requirements imposed when moving goods internationally. Our VAT team has helped many clients navigate through the complexities of doing business overseas to ensure they are aware of the costs and obligations involved.