Here, we examine the importance of organising taxation correctly within international businesses.
Optimising tax liabilities
If your company trades internationally and supplies products or provides services beyond the country in which it is geographically situated or has its headquarters, it is important to plan ahead. Financial arrangements and structures can often be optimised, in order to avoid paying too much tax. Additionally, local tax incentives and other advantages may be available.
Tax accountancy can be time-consuming and present an onerous learning curve. Many businesses prefer to focus on core business activities and, therefore, take advantage of the wider and specialist knowledge, skills and experience of a tax professional. This enables them to fully comply with tax regimes while also avoiding sanctions and penalties.
Differing systems – navigating the minefield
Taxation systems vary considerably between different countries. Additionally, sometimes exclusions are available to holding companies for dividends received from foreign subsidiaries. Therefore, a proactive approach is required. The UK has a territorial taxation system, contrasting with the USA which is presently the only remaining major economy that tries to charge tax on all worldwide income. Additionally, tax rates vary between different jurisdictions and from year to year.
Tax on international earnings
Currently, several companies distribute economic activity and profits – and even divert them – depending on the most efficient location for taxing corporate income. Some taxes are charged at flat rates and others are progressive, increasing in proportion at higher levels of income. Increasingly, accusations of tax avoidance and using schemes to minimise tax liabilities have been levied against multinationals, leading to suggestions for reforms to the current rules for taxing foreign profits. However, some accountancy and tax experts argue that corporate income should not be taxed domestically.
GTG Advocates can help with comprehensive, reliable and current tax advice for holding companies, international trading and how to benefit from low tax rates.