5 questions for your company’s international tax accountant
November 19, 2021
So, your company has finally managed to break into a new overseas market and expand to an international scale. It’s a sign that your business is doing well, and now that you have access to a new, untapped base of potential customers, your upward potential seems to be growing.
With that growth, though, comes all sorts of tax implications you might not be expecting. When it comes to managing them, you’ll want the help of an international tax accountant with the right expertise to help guide your company in the right financial direction.
Finding the right accountant is just step one, though. Getting the most out of their help means asking the right questions based on the moves your company plans to make in its future international operations.
The experienced tax accountants at Accountants Without Borders have gotten to know a few of the general concerns that come up when a company is planning an international expansion, and we’ve listed a few of them here for your future reference.
It’s by no means an exhaustive list, and more specific questions will depend on your particular company, industry, and market. It is, however, a great starting point when working with an accountant to cover your bases in your overseas operations.
What should I consider when choosing my company’s headquarters?
We’ve covered this point before in a past blog post, but essentially, an international business has an expanded list of options for placing its company headquarters. One of the biggest factors in your choice should be how tax-friendly your planned headquarters locations would be, as this can have a substantial impact on your company’s profits. An international tax accountant is the best kind of professional you can consult to determine this.
What tax implications are associated with sending my employees abroad?
A business operating internationally will naturally need to move some of its employees overseas. For some of them, this may end up being a permanent move. Others may find themselves doing a substantial amount of traveling as part of their job, speaking with international clients on your behalf. Either way, the amount of time an employee spends in a given country and the amount of money they’re paid during their time there will directly impact how the associated income is taxed.
Should I open a foreign bank account?
If you’re doing a lot of your business in a particular country, or for a variety of other reasons, you may find it worthwhile to open a foreign bank account. Keep in mind, though, that this will mean annual reporting through the Bank Secrecy Act for U.S. persons.
Should I do business through an international subsidiary?
On a related note of establishing assets for your company in foreign territories, it may be a beneficial move for your company to open an overseas division or subsidiary in a country where you’re frequently doing business. Revenue generated in that country by this subsidiary won’t be taxed under United States law unless it returns to the U.S. This is likely the best way to go when your company is making a dedicated effort to expand its presence in a particular overseas market, especially if that territory is a more tax-friendly one.
What are the withholding and reporting requirements for foreign transactions?
A big part of expanding internationally obviously involves transactions with foreign entities, be they individuals or other organizations. The default withholding rate is 30% on Fixed, Determinable, Annual, or Periodical income, including interest, unless a lower treaty rate applies, as covered in this article from Accounting Today. If there’s no withholding, you’ll still need to have Form W-8BEN on file.
Like we said at the beginning of this post, these questions should just be the beginning of your discussions with an international tax accountant as your business expands into new markets. For more personalized, expert guidance, you’ll want to work with a firm like Accountants Without Borders.
To get in touch, send us a message using our online contact form. We’re looking forward to working with you!