Liam McKeevor (pictured), corporate tax partner at accountancy firm Buzzacott, stresses the importance of businesses expanding overseas being fully informed about their foreign tax exposures to avoid potential penalties. \u201cWorking abroad can offer many opportunities,\u201d McKeevor says. \u201cYou\u2019re entering a new market with an untapped area of growth which can be an exciting challenge. But it\u2019s important to plan ahead to ensure you are fully aware of all the costs and obligations.\u201d<\/p>\n
\u201cChallenges arise when we have meetings with companies post year-end and they mention that they are undertaking construction work overseas,\u201d he says. A contractor in this situation may have built up a raft of unnecessary or unplanned tax commitments that eradicate its margin.<\/p>\n
He advises businesses to make sure an overseas venture feeds into a strategic plan and they are comfortable with the returns they will get, which starts with understanding the costs. \u201cIt is important to do that right at the start,\u201d he says. \u201cIf you don\u2019t know what your tax costs are, how can you ensure an appropriate return?\u201d<\/p>\n
Tax rules vary by territory and review is strongly advised even for shorter projects. A permanent establishment and local corporate tax obligations can arise after six months of activity, although the UK has several double tax treaties that can extend the time to 12 months before a construction project creates a permanent establishment. However, McKeevor points out: \u201cEven if a company anticipates completing the work within the applicable window, projects can overrun \u2013 making ongoing review essential.\u201d<\/p>\n
In addition to corporation tax, there are likely to be local obligations to register and file for other taxes such as VAT and payroll. Planning ahead helps businesses avoid unexpected penalties and potential double taxation. For example, it may be possible to continue to pay UK National Insurance, rather than local social security, under agreements the UK has with many countries.<\/p>\n
Costs can be significant if local obligations are missed. Beyond corporation tax and its foreign equivalents, there are income taxes, social security schemes and sometimes other employment levies to be settled by local staff. \u201cIf you work for months while unaware of these levies, you might have overpaid staff and incurred late penalties,\u201d says McKeevor.<\/p>\n
Then there are industry-specific taxes. \u201cIn some cases you need to register for an equivalent of the UK\u2019s Construction Industry Scheme and withhold payments to your local subcontractors,\u201d says McKeevor. \u201cFailure to undertake appropriate withholding may mean you, as contractor, have a liability.\u201d<\/p>\n
Companies should also consider whether they are required to register for VAT locally, or if there may be a benefit in doing so. Finally, and of particular relevance in the current climate, how are materials and equipment being sourced and what are the import and export tariffs are on them?<\/p>\n
With so many considerations, it is important to seek expert opinion to help you plan strategically. \u201cIt is essential to ensure that whoever advises you, internally or externally, has experience in dealing with cross-border tax matters.”<\/p>\n","protected":false},"excerpt":{"rendered":"
Liam McKeevor (pictured), corporate tax partner at accountancy firm Buzzacott, stresses the importance of businesses expanding overseas being fully informed about their foreign tax exposures to avoid potential penalties. \u201cWorking abroad can offer many opportunities,\u201d McKeevor says. \u201cYou\u2019re entering a new market with an untapped area of growth which can be an exciting challenge. But …<\/p>\n","protected":false},"author":1,"featured_media":519565,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ep_exclude_from_search":false},"categories":[593],"tags":[],"yoast_head":"\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\t\n\t\n\t\n