Tax and Legal Issues to Consider Before Relocating Your Company to Another Country

Moving to another country can often be the best possible solution for your business. For instance, the talent pool at your target destination may be more rewarding, hiring laws more in your favor, tax deductions worth the move and of course the target market more accepting to your services/products. Nonetheless, these are just some of the reasons why moving to a different country may sound like a solid plan.

On the other hand, relocating to a different country is not like moving to a different city. Laws and regulations between countries are much different than those between regions and there are so many tax and legal issues to consider before making the move. Needless to say, here are a couple of things you need to inquire before even starting the move.

Relocating and opening an international office is not the same thing

The first you need to keep in mind is that opening an international office is not the same thing as relocating. While your company still operates in its country of origin, your foreign income might be treated differently than the one earned domestically. The first thing you should look out for is the fact that earned income is not the same thing as the investment income or dividends. This is important, seeing as how only the earned income is eligible for this tax exclusion.

Still, in order for this foreign income to be excluded from the tax domestically, your tax home needs to be abroad and this foreign office needs to be listed as your main place of business. Furthermore, you must reside in that country for the most part of the year. At the end of the day, this mostly comes down to cost-effectiveness, seeing as how you might not want to relocate to the location that earns only a fraction of your company’s total income.

Check the immigration laws

Keep in mind, however, that most of your current workforce won’t be able to follow you to your target destination. As for those that do, you additionally have to consult immigration laws. In the introduction, we specifically mentioned that your target destination may have a larger talent pool, which means that replenishing your manpower shouldn’t be an issue.

On the other hand, you will probably want to bring your senior management along, in which case it might be for the best to get some local legal counseling on this form of immigration. For instance, those relocating to Australia might need some assistance from experts like those from WithstandLawyers, well-versed in local immigration laws and policies.

Self-employment taxes

Furthermore, if you are a company owner you will still have to pay self-employment tax back at home. On the other hand, if you do have an employer from whom you receive this foreign income, there is a chance to get an exemption from paying the tax for it. Once again, this mostly comes down to the laws of your country of origin and may not be applicable in every situation. In the United States, this is regulated by the IRS Form 673, while some other countries may have their own regulations.

You may not need to relocate

The next thing you might want to consider is the fact that you may not need to relocate at all. Provided that you can actually find someone you can trust at your target destination; you can make them the manager of this offshore branch of your company. In fact, you can even shut down the mother-chapter of your company and move your business abroad without actually relocating yourself.

Nevertheless, this requires you to have someone at the target destination who is willing to do all the work for you, which is not a simple thing to find. Furthermore, you would have to either proclaim them as a registered agent or give them the power of attorney. In this way, they can legally represent the interests of your company at the target destination.

Consider the cost

At the end of the day, you are running a business, which means that most factors you are about to encounter the need to be put on paper. Workload increase projection on your target destination, as well as your overhead, need to be compared to local taxes and legal fees. Sure, you can’t consider absolutely everything but in this way, you can get some basic idea of whether or not this move will actually be worth all the hassle.

As you can see, while it can definitely be worth your while, moving requires a lot of investment and even more effort on your side. Therefore, you need to be 100 percent sure that you are making the right call. You see, this is one of those decisions that could either ruin your company or propel it into its unprecedented growth. This is why you need all the help you can possibly get.

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