The Tax Implications of Global Trade

In this age of truly global mobility it is easier than ever for UK companies to exploit opportunities overseas.  But whilst this can lead to new markets and growth for UK businesses, directors should be wary of overseas tax compliance, which can lead to significant problems if the tax implications are not considered properly.

The world is getting smaller.  Many UK companies are taking advantage of this by actively seeking to do business overseas.  Whether it be entering a new overseas sales market, setting up a local sales or distribution presence or appointing an overseas agent, there are likely to be tax compliance requirements in the local jurisdiction that need to be considered. 

Some of the types of taxes that can apply include:

• Sales taxes (e.g. VAT) when distance selling into a country or setting up a sales operation locally.
• Business taxes on profits arising from sales made in that jurisdiction.
• Employment taxes, for example, when employing people locally. In addition, sending a UK employee overseas to work can result in a requirement to set up a local payroll in that country, and taxing part of the employee’s salary there.

Failure to comply with local tax laws can lead to significant penalties, interest and underlying tax liabilities.  This particularly applies to doing business in the US, which has different Federal, State and City tax laws, depending on where the activity is based.

We recommend companies seek advice before undertaking global trade, whether that be entering a new sales market, setting up an agency or local presence, or sending employees overseas. 

Shorts are part of Praxity, a Global Alliance of like-minded professional firms , who can provide a truly holistic compliance service when doing business overseas.  Together we can guide companies through this exciting chapter of growth. 

If you feel that you or your business might be affected by the tax implications of Global Trade, then please do not hesitate to get in touch and a member of our business taxes team will be able to help.

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