International Subsidiary Management
PraxisIFM has assisted a large number of clients looking to expand their businesses and investments globally over recent years and we are often asked what matters need to be considered prior to setting up international subsidiaries as well as in regard to ongoing management.
As a result we thought we'd share some of our insights based on our experience with international expansion.
The first step is to consult with legal and tax experts to prepare a business plan for your international expansion initiative however once in place there are a number of practical considerations that should be at the forefront when you are ready to set up your subsidiary such as the following:
- How quickly do you need to be set up? This should be compared against local incorporation/registration requirements to ensure that it is feasible as every jurisdiction differs.
- Are you able to register a foreign domiciled subsidiary or do you need to incorporate a new company in the jurisdiction of choice?
- Do you need an incorporation agent or registration agent in the subsidiary jurisdiction?
- What are the local requirements in terms of domiciliation (i.e. do you need a registered office address in the jurisdiction of choice and/or a company secretary/do directors need to be resident in the jurisdiction)?
- Is there a public register where the subsidiary will be visible and if so what information is publicly available? This may impact on your choice of location.
- Ascertain what due diligence information will be required to handover to the incorporation/registration agent at the outset in order for local compliance requirements to be satisfied and understand ongoing requirements of the legislation.
- If your new subsidiary will also act as an employer are there any visa requirements for any workers relocating and what are the local employment law requirements? You will also need to consider operating a payroll which may need to be conducted in the jurisdiction of choice. Personal tax consequences of any existing staff who might be seconded or transferred should also be considered and communicated clearly.
- If 7 above applies do you require office space? We recommend you find a local agent to assist with sourcing something suitable as they will know the market and will most likely find a better price.
It's often best to have a corporate service provider on the ground where your business is conducted to act as your incorporation agent and provide ongoing administration and support services at least at the outset until you are familiar with all of the requirements. They'll be familiar with the regulatory environment and will have the jurisdictional knowledge to help you navigate all requirements and get you set up as quickly as possible.
Once you've set up your international subsidiaries and in order to trade legally it's important to ensure that these companies are compliant with local regulation to remain in good standing.
Here are four key requirements to keep in mind when managing your international portfolio of companies:1. Registered Office
Most international jurisdictions will require your company to have a local registered office or address in that country. A registered office is responsible for receiving and responding to mail from tax authorities notices from your company registry and receiving tax information and compliance communications. In many jurisdictions your registered office will also be required to retain your company's statutory registers and minutes.
A registered office is not the same as a trading address which is used for general business correspondence. If this is required an agreement will be put in place with your service provider as additional resources maybe required depending on the level of correspondence.2. Company Secretary
In many common law jurisdictions the position of a company secretary is a requirement under the relevant corporate legislation. It also helps to evidence substance as a legitimate business operation in the location it is set-up in.
What is the role of a company secretary?
- To file and update the Companies Registry should there be any key changes to the directorship ownership or constitution of your company
- To act as a liaison between the Registry and your company
- To record the corporate actions taken by your company (i.e. approved minutes)
- To keep the statutory registers of your company regularly updated
Annual compliance requirements will differ between jurisdictions and if you have subsidiaries in multiple countries it can be difficult to keep track of the relevant deadlines and regularity. Many jurisdictions will also require you to file or report changes to the constitution or officers of the company as well as financial statements within a certain time frame which is where a professional service provider can really add value.4. Tax Compliance
Determining the corporate taxes that are payable within the jurisdiction of choice is very important and most jurisdictions will require the Company to register with the relevant tax authorities once the subsidiary has been incorporated. There will likely be ongoing tax compliance on an annual basis to consider and it is advisable to appoint a local tax agent who can handle the company's tax affairs and ensure filings are made on time.
If setting up in certain jurisdictions VAT may also be a consideration depending on the business activities of the subsidiary. The same considerations as for corporate tax will need to be borne in mind with registration and ongoing VAT compliance being relevant.