While there are many opportunities available to companies doing International business, it can also present many challenges. Taking time to plan your international business move will help insure that you’ve considered the important tax and non-tax implications and save you needless worry later on.
Here are some questions to think about when you consider how to structure your global business:
- Should we sell our products overseas through an independent foreign agent?
- Should we use our own salespeople to sell our products overseas?
- Should we set up a foreign branch? How about a foreign subsidiary?
The answer to these questions depends on the future plans of the business, what you’re trying to accomplish, how committed you are to developing your business on an international scale, and of course, the cost/benefit associated with each of the scenarios.
The global structure that you choose will impact how much it will cost you to do business in the international marketplace. Selling your products overseas through an independent foreign agent or through use of your own salespeople is an excellent way to get started. Before you begin, however, you should determine whether you need to register to do business in the foreign country as well as what your responsibilities are for charging, withholding and remitting various taxes, e.g. income tax, value added tax. Generally, in foreign countries with which the U.S. has an income tax treaty, there are provisions for operating through an independent foreign agent or your own salespeople without subjecting your company to corporate income tax. It’s important to understand how an income tax treaty will affect your business before you set foot in a foreign country.
Operating in a foreign country through a branch or subsidiary requires much more of a commitment than the two previous alternatives. You’ll have to determine how much capital to invest and the permanent nature of the investment will require that your company pay income taxes in the foreign country and file an income tax return.
Doing business in a foreign country requires analysis of tax and non-tax considerations which may be very complex. The professionals on Freed Maxick’s International Tax Team have assisted many U.S. companies considering business in the international marketplace. Let us help you determine the most appropriate global structure for your company so that you may achieve your goals in the most cost effective manner.