International Taxes

There are some key considerations for any company entering a foreign market for the first time, or for existing companies reviewing their operations overseas. Here are a few questions every founder will need to consider: 

Is a subsidiary needed? 

One of the most common approaches many businesses take is to establish an overseas subsidiary which is owned by the UK company. Doing so means the overseas entity has a separate legal identity to the parent company; this can mitigate the risk the parent company has from any liabilities which may arise in the subsidiary. In addition, customers and investors in overseas businesses often prefer to deal with a subsidiary, rather than a branch.  

Creating a subsidiary overseas does give rise to several important issues which must be considered. Our short guide gives a handy overview of these.

These are all essential considerations, and the answers will vary on a case-by-case basis. Our International team will look at these issues and work with you from the outset to create a subsidiary that is tax efficient and delivers your commercial goals. 

Alternative options 

While there are several alternative options to a subsidiary to enter overseas markets, many tech companies choose to expand internationally by creating a branch, or permanent establishment (PE), overseas. 

Broadly, a PE is a taxable presence in a country that is created by the UK company having a fixed place of business there. What constitutes a PE varies on a country-by-country basis, but commonly includes: 

• Fixed places of management 
• Branches 
• Offices 
• Factories 

As a PE is not a separate legal entity it is often more straightforward to create than a subsidiary, but this lack of legal identity removes the legal protection from which a subsidiary benefits. Like a subsidiary entity, any PE will have to file tax returns and may have to file financial statements.  

Where a PE is used, it is a requirement under UK law for profits attributable to the overseas PE to be calculated as if it were a separate legal entity. This attribution can be complex as it requires an analysis of the role and function that each part of the business carries out, as well as a consideration of the market value of these services.  

Alongside this, each of the highlighted considerations above are equally valid to a PE, and it is equally as important that they are considered by any business setting up a PE overseas. 

Reviewing your existing business 

These considerations are relevant whether your company is expanding into overseas markets or is already there. Being proactive and identifying these issues before they become problems can save your business considerable time and costs in the long-term. 

How we’ll support you 

Our experienced International Taxes team will work alongside our dedicated tech sector group to support you at all stages in the process; whether you are a newly created company and are unsure of your next steps, or are an established business seeking to ensure your operations are as tax efficient as possible.  

As members of Moore Global, Johnston Carmichael also has a range of contacts around the globe: so whatever your destination of choice, these in-country experts can work with you to provide invaluable expertise and local insight.