Top planning tips for international tax

Jane O’Berg

Jane O’Berg

Tax Director

With UK corporation tax due to go up to 25% in April 2023, now is the time to start considering or revisiting if a branch exemption is right for your company or group. We've explained this and other key points to consider for your international tax planning below:

Branch Exemption Reviews

With UK corporation tax due to go up to 25% in April 2023, now is the time to start considering or revisiting if a branch exemption is right for your company/Group. In short, if a UK company has profits in a permanent establishment or a branch, these profits are generally taxed twice. Firstly in the country the branch is located and secondly in the UK (with relief provided against your UK corporation tax liability). You can elect to exempt your branch profits from UK corporation tax, this means that the profits are only taxable in the overseas jurisdiction. If that overseas jurisdiction has a corporation tax rate of less than 25% then a branch election may be beneficial to make to reduce your global tax rate. There are other considerations when making a branch exemption, especially if you are a close company. You have to make the election in the previous accounting period for it to apply in the following period, i.e. a company with a 31 March 2022 year end can put in an election up to 31 March 2023 for the exemption to apply from 1 April 2023 onwards.

Transfer pricing

There has been a lot of press about the OECD’s agreement on an introduction of a “global” minimum tax rate which was agreed at 15%. As a result, many countries are looking at increasing their corporation tax rates over the next 24 months, for instance Ireland and Cyprus. As many other countries also look to increase their rates of corporation tax, now is an ideal time to review and refresh your transfer pricing requirements, documentation and pricing. Do your functions, assets and risks reflect the economic reward in each group entity / have staff had to move due to the pandemic? Have you carried out benchmarking recently to ensure that the arm’s length price of goods and services reflect the reality of the current global market? Has your group grown over the last few years and you may no longer qualify for the UK SME transfer pricing exemption?   

Doing Business in the Netherlands

We have been working closely with Oost NL, the East Netherlands Development Agency, who provide free advice and information about expanding into the Netherlands. They can assist for free with market research, arrangement of loans & local financing, sourcing of offices & warehouses, enrolment on an investor relations programmes, introductions to key sector contacts, management of travel arrangements (business visas) etc. If you are considering expanding into the EU/Netherlands and this may be of interest to you, please let us know and we can make the appropriate introductions.

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