Going global can be a significant driver of growth. However, the first step to going international can be daunting as you will be faced with an overwhelming number of regulatory, legal and tax issues. There is no cookie-cutter approach due to the fluid nature of tax and legal issues in the foreign countries. However, by taking a life cycle approach, you can address and manage such issues in a step-by-step manner.
A life cycle approach is a systematic process of identifying and managing the regulatory issues at each phase of a business entity’s life, namely, the pre-establishment, start-up, growth, investment, profit & asset repatriation and exit phases.
As a first step, companies must decide exactly how they plan to do business abroad. In the pre-establishment phase, depending on the type of activities that are planned to be carried out in the foreign jurisdiction, it may be mandatory to set up a legal presence in that jurisdiction. Such legal presence could be in the form of a branch, company limited by shares, partnership, sole-proprietorship, etc. In some jurisdictions it is even possible to carry on a business through a trust.
Given the choices in the type of entity that can be established, companies would want to identify the most appropriate corporate structure considering tax and non-tax factors. This article looks at a few broad tax issues to be considered by a Singapore company in evaluating the different foreign entity structures or legal presence.