What does it take to expand a business overseas?

Getting a business off the ground is tough, yet it is by no means where the hard work ends. Running any kind of venture requires ongoing effort and commitment, especially when you’re trying to grow. So, what happens when you reach the point that expanding overseas becomes a viable option?

For an Australian business, there are several key processes to take into consideration, predominately based around tax. The Australian Taxation Office (ATO) outlines the areas that businesses should be across in the event of offshore expansion.

Decision making process

This involves key decisions that will affect new tax risks and explaining commercial reasons and any future plans.

Overseas tax registrations

Other countries will have different registration processes to Australia, so ensuring this is completed correctly is essential.

New overseas tax issues

Make sure you update any international tax policies and procedures to address any potential tax issues, which may include the following:

Thin capitalisation
Attributable foreign income
Tax on repatriation of profits to Australia
Non-resident withholding tax
Foreign trust tax provisions
Residency
Low-tax jurisdictions
Impact of tax treaties.

Related-party dealings

International related-party transactions should be based on arm’s length conditions and transfer pricing policies should:

Cover all international related-party transactions
Be prepared or reviewed by experienced external advisers
Be fully documented
Be reviewed annually to ensure it remains up to date.

Employing Australians offshore

You may have to second Australian personnel overseas to establish your subsidiary, which can involve the following elements:

Residency
Pay as you go withholding
Superannuation
Fringe benefits tax
Transfer pricing
Deductibility.

Non-resident beneficiaries

Tax issues can arise from some people involved in the business becoming a foreign resident, whether it is on a temporary or permanent basis. These include:

Liability for capital gains tax (CGT) on becoming a non-resident
Residency consequences for corporate entities
Liability for non-resident withholding tax.

For a more detailed account of these different aspects, visit the Australian Taxation Office website.