If you are looking to expand your business overseas, be sure to read and take into account the issues raised below, as well as considering the questions asked.
- What are your plans in relation to the expansion? Do you want to search for more talented people, access more cost-effective human resources, or want to tap into a new/niche market or specific demographic? Whether it will be a cost-centred or a profit-making operation, you need to work through your plan carefully and have a long-term view of how the expansion will look from a financial perspective – will it just break even or make a profit each year?
- Culture mix – what sort of culture does the overseas country embrace and will this have an impact on the way you run your business both overseas and locally? Do you have the right management team to lead and work with the people overseas – your team will need to have a good grounding and understanding of the local customs and operational practices.
- Will you need to send key staff from Australia to the overseas country and what source of living and accommodation arrangements will the staff need? Depending on whether the stay will be temporary or long-term, the Visa and working rights of the staff will need to be assessed individually for each country.
- What are the legal and administrative rules governing the overseas country? Not all countries (i.e. Asian countries) have requirements like compulsory superannuation guarantee and workers compensation.
- Will your business be looking to access Australia’s government grant called “Export Marketing and Development Grant” (EMDG)? Click here to read more on EMDG http://www.austrade.gov.au/Export/Export-Grants/What-is-EMDG
- What structure will you choose– branch, company, trust or partnership? Tax implications of each structure will vary and the decision you make will have a significant impact on how the income and profit of the operation will be treated.
- Here are a couple of key tax questions to ask your adviser on the company structure:
- What is the tax rate payable by the company on its profit?
- Is the company required to register for and charge GST/VAT?
- Are there any local shareholding requirements or restrictions? What type of entity can be a shareholder of the company?
- Are there any withholding tax or other tax issues you need to be aware of if you are to pay or charge a services/management fee between the overseas company and an Australian company.
- Are there any transfer pricing issues in the overseas company?
- If the overseas company was to pay a dividend (net profit after tax) to its Australian tax resident shareholders, is there any non-resident withholding tax payable in the overseas country? If so what is the withholding tax rate?
- Are there any auditing requirements in the overseas country? If so what is the typical audit cost?
- What sort of employee benefits or entitlements does a company have to pay to its staff?
- What are the tax rates levied on salaries in the overseas country?
This is a very complex area and Stanley & Williamson as part of the Kreston International network, can help you get in contact with the local expert accountants and tax advisors in over 100 countries worldwide. Please do not hesitate to contact us should you like to know more.
*Correct as of December 2014
*Disclaimer – this article has been produced by Kreston Stanley Williamson as a service to its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas contained in this article, it is imperative you seek specific advice relating to your particular circumstances. Liability limited by a scheme approved under professional standards legislation.