As globalisation has gone mainstream, companies are looking to expand their jurisdiction. To become global leaders, entrepreneurs are grabbing on expansion opportunities. Many local companies are expanding operations overseas to establish themselves as multinational corporations. However, business expansion is not easy and invites many challenges. One of the biggest challenges for multinational corporations is taxation. Since the tax regime changes drastically from one country to another, multinational organisations often struggle to comply. It is why global companies require international tax services. Are you planning to expand your business in multiple jurisdictions/countries? Read on to understand the importance of international taxation for multinational corporations.
Why do companies need international tax services?
Here are some prominent reasons why a company might need international taxation services.
- To understand different tax regimes
There might be a difference in the tax regimes of the two countries. A business might be familiar with the tax regime in its native country. However, in-house accountants might know nothing about the tax laws in a foreign land. Since the business plans to expand in a foreign country, it must understand the target country’s tax regime. You cannot create an entry strategy for entering a new country and forget the tax laws. Since the business owner, senior management team, and the in-house accountant might not understand the global taxation landscape, they rely on experts. International tax experts will help a company understand the tax regime of the target company before expansion.
- To build an effective tax strategy
International tax planning is something global companies cannot ignore. Before expanding to other geographical locations, companies have to align their business activities with the existing tax regimes. Creating an international tax strategy might not be easy for a company. A company will have to bring some changes in its operations to adjust to a new country. A multinational corporation will never reduce its overall tax burden without a proper tax strategy.
The overall tax burden is reduced only when a company brings changes in its operations. After understanding a new country’s tax regime, companies must make their employees aware of the same. Then, business operations are conducted in a way that leads to a minimum tax burden. Are there any hidden tax charges in a new country? Sometimes, international tax experts will help you with loopholes in the system that can lower the tax burden. It is crucial to note that everything tax experts do is legal. In the long run, international tax experts will help a company decrease its tax burden significantly.
- To learn about tax schemes and benefits
Every country wants corporate entities to generate more revenue and increase the GDP. However, tax authorities know businesses might not perform as intended due to tax burden. Governments often release tax schemes and benefits to avoid the collapse of corporations due to tax burden. However, some foreign companies might not be aware of the tax schemes and miss the opportunity. With the help of international tax services, multinational corporations can understand the schemes. Tax schemes and offers from the authorities will help the company lower its tax obligation. For example, some countries offer discounts to corporations that pay annual returns before the deadline. If a company knows this, it will file tax returns timely to save on taxes.
- For ex-pat tax services
Many business owners renounce their citizenship after expanding their business in a foreign country. However, the owners might not have left their native citizenship. The same happens with many employees working in the corporate sector. Such business owners and employees might have to bear ex-pat taxes. International tax experts can help business owners understand the concept of expatriate taxes.
- For transfer pricing services
Transfer pricing is one of the trickiest concepts for multinational organisations. Companies transfer goods and services between their branches or subsidiaries to save taxes. Even though transfer pricing is legal, it comes with various challenges. Companies might set the wrong transfer or offer an undue advantage to their sub-company. Doing so will land a multinational corporation in legal trouble. With the help of international tax experts, a global company can set the correct transfer price and save on taxes.
Multinational organisations can outsource their international tax requirements to lower the overhead burden. So invest in international tax services now to plan your expansion!