A Taxing Problem: How to deal with different tax and audit regimes.
For companies eager to enter new markets, tapping into the global, digitised world is an exciting opportunity. With the latest predictions of cross-border deals set to increase five-fold to $130 billion by 2020, the promise of signing off new international investments will continue to motivate and inspire ambitious entrepreneurs and corporate chief executives.
Nevertheless, despite the opportunities for growth into global markets, all acquisitive individuals and enterprises will need to jump through various legal and financial hoops if they are to ensure their endeavours will bring back the profits. Needless to say, taxation is possibly one of the most intricate and complex issues a company needs to understand once on the ground in a new jurisdiction.With the threat of stiff penalties, it’s hugely important you take time to figure out to whom, how much and when you need to pay your taxes.
Even the most seasoned international business chiefs often find the local taxation and audit regimes a source of mindboggling complexity as they become mired in the labyrinth of local compliance procedures. In every jurisdiction, the regulatory, compliance and tax environments change radically and on a regular, sometimes daily, basis. As a result, company directors new in country need sound advice on the ground if they are to obtain the relevant information. It’s worth noting that as well as understanding fiscal regimes, often even language can be a major hurdle from one country to another – or even inside one country.
Among others, Yves Lecot, owner of the Comptafid-Group, provides a fascinating insight into the highly complex world of Belgian taxation. It turns out Belgium is a model of how complicated taxation regimes can be created within a state. Indeed, Belgium’s tax environment can be viewed as a microcosm of Europe with its diverse taxation and audit regimes that change wherever you are in the country. For example, Belgian languages change depending on where you are in Belgium. In Flanders only Dutch is spoken, while in Wallonia French and Walloon are spoken. Elsewhere, you’ll find German and Flemish as a first language. And each of these cultures has a different legal and taxation system. So, for instance, inheritance tax will change from one region to another, as will employment and personal taxation. Try explaining all this to an American entrepreneur who’s just turned up in the country for the first time.
Meanwhile, John Glover, the owner/ operator of Pendragon Management, advises that if you’re setting up in the UK or Australia you need to understand the differences in VAT and GST; GST is 10%, while VAT in the UK is 20%, for instance. Goods that have GST in Australia may differ to what goods have VAT in the UK. Furthermore, what’s classed internationally as a GST or VAT invoice may differ depending on where the work is performed globally – no one size fits all. The cost for a product or service in the UK would have to be re-costed for the Australian market to make sure you’re making the correct profit.
For all companies setting up overseas or selling products and services in different markets, factors for how you’re taxed could include the size of your company, where it’s headquartered, where it intends to sell the products and services, the type of quantity of goods to be sold, the type of goods and services to be sold. All of these factors will have an impact on your tax obligations. And remember, this could become significantly more complicated each time you set foot in a different country or region of a country. So no matter how quickly you want to develop your new enterprise, it’s paramount you invest time and attention to understand exactly what tax you’re liable to pay and where.
The following publication features jurisdiction-specific advice from 16 companies with expertise in local taxation and audit regimes. The information they provide gives you invaluable advice on the tax and compliance issues you need to know if you’re thinking of trading with a local enterprise or setting up in different jurisdiction.
Read the rest of the document and find expert advice by Urs Breitsprecher by downloading the pdf https://aquan.com/wp-content/uploads/2019/11/IR-Global-Guide-Doing-Business-Globally-Common-Mistakes.pdf