Key considerations on making the move overseas
So you’ve set your sights on expanding overseas – go you!
But what are some key considerations to ensure that the move goes smoothly?
What’s your objective?
Number one on the list is to get clarity around what you are trying to achieve with the overseas expansion and the level of risk you are willing to take in carrying out that objective.
If you are at a testing stage do you need to set up an official presence or can you set up a sales channel to test demand first?
Do you want to lock in an anchor client before you commit to that territory?
Getting clear on these aspects will guide the following decisions you make and the timing of acting on those decisions
Seek tax advice for your plans
Seeking tax advice before you commit to a plan will help minimise painful mistakes or expensive unwinding parts of your setup later down the track.
If you are going to set up an entity overseas who are the shareholders in that new entity? Is it the existing main operating company or direct shareholders or is now the time to look at a holding company structure?
If you don’t set up a formal entity overseas there are still actions that could result in the local tax office assessing that you have set up a permanent establishment which brings with it many of the same tax consequences as setting up an entity. Understanding the parameters to operate within in the early days of expansion are important.
As the founder or major shareholder, if you are going to play a key part in that expansion and are going to base yourselves overseas for a time make sure you understand the personal tax consequences that might be triggered in doing that.
What funding is available for you to support your overseas expansion?
There are a number of government related schemes available to support expansion overseas.
- Tier 1: Ready to export
- Tier 2: Exporting and expanding
- Tier 3: Exporting, expanding and strategic shift
Export Finance Australia are the Government’s credit export agency and can provide loans, guarantees,bonds or structured financing for a variety of different investment criteria. They are generally more accessible and at more attractive terms than commercial options.
Other options to fund growth are
- Capital raise
- Commercial loan
- Good old operating cashflow!
But in order to work out how to fund expansion first work out your plan to work out how much you need to fund.
How do i employ/engage resources overseas?
This is a big question for most businesses looking to expand overseas and there are a range of options.
Direct employment – If you set up an entity overseas then you can employ or engage directly. In order to stay on top of your compliance obligations it is advisable to engage a local outsourced provider to run your payroll.
Employer of Record (EOR) – This is a (relatively) new way of engaging resources that allows you to do it in a way that shortcuts the usual employment infrastructure (ie. setting up bank accounts, government accounts for compliance etc). Technically the employees are not yours but the EOR issues the employment contracts and takes care of all employee and compliance responsibilities. It comes at a cost but less than setting up an employment entity yourself and most importantly ensures you stay on the right side of the law in an unfamiliar territory.
Consultants – A valid option for a first step into a new territory and on the face of it the lowest touch. However most countries have a similar view as the ATO in terms of the classification of employees and contractors so you may unwittingly become an employer just based on the nature of the relationship. Another reason why so its important to get the right advice when picking this option.
Do you have the right local support?
We often assist our clients in getting the right local support in country. Our international networks extend to tax and accounting, legal and HR support to ensure to make those first steps into a new territory without putting your existing business at risk!
Small differences in legislation or typical business practice can be the difference between success and failure in the early days.
What are the cultural differences in life and business in your new territory?
Even in countries that on the face of it might be quite similar can throw up unexpected challenges. Particularly if on the face of it you speak the same language. This chart has been doing the rounds for a few years and always makes me laugh as well as being a very good illustration of cultural differences in communication! Having grown up in the UK i’m always devastated when someone starts a sentence “With the greatest respect…..”
Read more about that here: What the British really mean when they say things and what other people hear
Cultivating a support network of business owners who have ventured into your new territory before is a really great idea. They will be full of tips and tricks on avoiding, and not creating, minefields!