Finance and Accounting
Strategic tax planning for global expansion initiatives
In today's globalised marketplace, global expansion can be a great source of competitive advantage and growth opportunities. It gives companies access to new markets and customers, more efficient technologies and manufacturing opportunities, and a larger talent pool. However, these opportunities also enhance the complexity of strategic tax planning.
Tax considerations for global expansion can affect many facets of business, from accounting practices to pricing structures. An effective international tax planning and management strategy becomes imperative for global success.
Tax planning for multinational corporations
Strategic tax planning is a complex enough process without having to account for the varying tax laws in different international markets. When multinational corporations aim to expand into global markets, they must carefully consider the tax laws of each country and the relevant tax treaties to ensure efficient tax planning.
This thorough understanding can help multinational companies structure their finances and navigate international tax burdens while minimising tax obligations, ensuring compliance, and reducing the risk of penalties. Conversely, failing to understand the tax considerations for global expansion can make the business less competitive, leading to the failure of their global venture.
Strategic tax planning for global tax minimisation
Multinational corporations are often tempted to focus only on one or two countries – the home country and the primary foreign market – and take a year-by-year approach when planning the tax strategy. However, since each country has its own set of tax laws, this approach can leave companies exposed to higher tax obligations or even tax penalties in multiple jurisdictions. Here, a robust global tax strategy becomes an effective tool for balancing and minimising tax obligations across multiple countries and simplifies expansion in new markets.
A global approach to strategic tax planning offers many benefits, including:
- Minimising the overall global tax obligation by optimising tax liabilities in every country you file in.
- Identifying opportunities to reduce costs associated with reporting, filing, paying, and withholding tax.
- Structuring effective bookkeeping and accounting policies and procedures to meet reporting requirements and ensure compliance.
- Reducing the risk of non-compliance in different international markets.
- Simplifying international expansion with a comprehensive global tax strategy.
- Optimising pricing policies to comply with international tax regulations.
- Implementing an effective approach to transfer pricing policies.
The right tax planning strategy for multinational corporations can result in global tax minimisation, where companies fully comply with the tax regulations in each country of operation while reducing the worldwide tax liability to the lowest possible amount. Although such a strategy is unique for each company, some common features include the following:
- Maximising the profits reported in low-tax countries while minimising them in high-tax countries.
- Planning operations to benefit from cross-border tax treaties
- Working with tax advisors to lower local taxes in each country
Working with tax professionals and taxation services can help you understand the nuanced facets of the tax framework of different international markets and ensure global tax minimisation with the right international business structure and tax strategy.
Choosing the right business structure and international tax strategy
As you consider the tax considerations for global expansion, choosing the right structure and tax strategy becomes crucial. Many factors influence the business structure design, including if the company is public or private, if the company classifies as pass-through or corporation, which international markets it is expanding into, and more.
Careful consideration of these factors becomes crucial, especially when understanding and leveraging the benefits of international tax treaties, managing pricing strategies, and optimising tax liabilities. Tax strategies like cash repatriation or intangible property migration can help you achieve the right balance between tax exposure and cost for implementing your international tax strategy.
Role of taxation services in international tax planning
Understanding tax considerations for global expansion requires deep domain expertise and support from international tax planning professionals to ensure an effective international tax strategy. Efficient taxation services allow businesses wanting to enter international markets access to the network of experts, technological tools, and strategic support to:
- Optimise international tax planning
- Identify opportunities for international expansion
- Develop accounting and financial practices
- Ensure legal and regulatory compliance
- Address a range of commercial issues
How can Infosys BPM help in strategic tax planning?
Taxation services play a crucial role in helping companies optimise their tax liabilities and ensure compliance in global markets. Infosys BPM offers end-to-end tax process support, from tax coding and tax accounting to return filing, audit support, and knowledge management, offering a holistic approach to strategic tax planning and compliance. Integrating automation, RPA, and AI tools in tax planning for multinational corporations can help achieve global tax minimisation while simplifying global expansion and tax compliance.
