FTA Basics

Doing business

How to do business

A checklist of issues to consider before exporting

Business activities & risks

  • What will be your offshore function and how does this fit in your strategy?

  • Who will be responsible and in control of the offshore activities?

  • What modes of international expansion are available and which one would be most suitable to your business operations?

  • What is the process to set up the entity required? How much will it cost and how long does it take?

  • What are the current economic and regulatory risks in this foreign country?

  • Do you know when the public holidays are and how these will impact your operations?

  • Have you given consideration to your exit strategy?

Location

  • Where will you be establishing your offshore operations and why?

  • Have you investigated the regulatory requirements in that offshore location?

  • Have you considered the sovereign issues associated with doing business in that country?

  • To what extent are you reliant on local labour / resources / assistance?

Legal structure

  • What sort of legal / operating presence will you have there and why?

  • Are there any local resident requirements (e.g. if you are operating as a company, must it have a local director or local ownership)?

  • Have you investigated the various regulatory requirements of these options?

  • Have you considered the tax issues and opportunities associated with your selected legal structure in the offshore location, including your ability to repatriate any offshore profits?

  • Have you taken local legal and regulatory advice?

  • What reporting obligations exist in this foreign jurisdiction?

  • Are there any specific requirements for foreign registered entities?

  • Is there a requirement to have the local entity audited?

  • Will the money laundering rules (if any) affect the flow of funds between the related entities in your group?

  • What are the rules on privacy and data protection?

Direct tax

  • On what basis is income taxed in the foreign jurisdiction? For example, is income taxed on a residence or worldwide basis?

  • What is the corporate tax rate/s in the foreign jurisdiction and what income does it apply to?

  • When does the foreign tax year commence and end?

  • What deductions are available in the foreign jurisdiction and how are they calculated?

  • What are the rules on tax losses and will your local entity be able to utilise any losses generated from the offshore operations?

  • Are there any rules that apply to transfer pricing arrangements between associated entities?

  • Are foreign tax offsets available in relation to taxes paid in the foreign tax jurisdiction? Are there any restrictions on the amount of foreign tax offsets that can be claimed?

  • Is there any form of exchange control?

  • Do you understand the general tax system and tax administration requirements of the foreign jurisdiction? (i.e. What tax registrations are required, what tax payments are required and when, what are the filing due dates for relevant tax forms.)

Funding

  • How will the offshore business be funded?

  • Who will finance the offshore businesses start-up?

  • Has any consideration been given to the nature and form of the funding / investment?

  • Are there any restrictions (e.g. thin capitalisation rules) on using debt to finance offshore operations?

Repatriation of profits

  • Has any consideration been given to how you will repatriate the returns from the offshore business?

  • Does the income stream from the foreign entity meet Australia and the foreign country's transfer pricing requirements?

Transfer pricing

  • Does the foreign jurisdiction have any transfer pricing legislation and how is it applied?

  • In determining arm's length amounts, are the OECD's models followed?

  • What assets will be used and / or generated in the offshore business?

  • To what extent will the offshore operation be utilising or leveraging assets or intangibles owned or created by the Australian business?

  • Have you identified areas of risk that your offshore operations may have faced with and how you will address them?

  • Do you need to prepare transfer pricing documentation in Australia or in the foreign jurisdiction?

Withholding tax

  • What income streams (e.g. dividends, interest and royalties) are subject to withholding tax under local tax laws?

  • Is there a double taxation agreement between Australia and the foreign country which mitigates the impact of withholding taxes?

  • Do you have an understanding of the foreign jurisdictions withholding tax administration requirements? (i.e. What when and how are withholding payments made, when is the withholding return due?)

Indirect tax

  • Does the foreign jurisdiction have VAT/GST (or an equivalent tax on consumption), sales taxes, customs duties, excise duties and environmental taxes? How are these taxes levied?

  • Is there any form of stamp duty and when does it apply?

  • Are there any payroll tax obligations and when do these apply?

  • Is there a levy on the share capital of the company or its parent company?

  • What are the key tax incentives or grants that your offshore operation can access?

Staffing

  • Will you transfer any employees from Australia to the foreign country and if so, on what terms?

  • How will local tax laws and tax treaties impact their after-tax income? Will you compensate staff for any after tax shortfalls in their income?

  • What tax and social security obligations will your business have in respect of staff in the foreign country?

  • Does your business still have obligations in Australia in respect of PAYG withholding, Fringe Benefits Tax, payroll tax and superannuation in respect of such staff?

  • How will immigration laws apply to expatriates working in your business? i.e. will they require visas in order to work in the foreign country and are there any restrictions that will be imposed?

  • Is there a requirement to use local staff? What are these and how do they impact your operations in the foreign jurisdiction?