Key considerations for scaling your company in a new market

‘Fortune favours the brave,’ says the adage. It’s certainly true in the context of entrepreneurs looking to expand globally. Geo-political tensions, regulatory and compliance hurdles, people and cultural considerations – scaling your ambition to grow global certainly isn’t for the faint-hearted.

That said, for businesses wanting to reach their full potential. It is often a key consideration and when done well, the benefits can far outweigh the challenges.

ZEDRA’s corporate team spends most of its time working with ambitious, high growth companies expanding into new markets. Here, we share some of our top takeaways…

Setting up a company overseas – getting your corporate structure right

First you will need to figure out which of several corporate structures is best for your company. As part of this decision, you’ll want to look at the purpose of the corporate structure, ownership, liabilities, and company management.

Setting up a bank account in your new chosen market will be a vital consideration which you will need to make early on given the time it can take to open a corporate bank account and local bank account set-up requirements.

You’ll also want to look at how to manage your overseas taxable presence. This includes the foundational question of what constitutes establishing a taxable presence (also known as a permanent establishment).

It’s important to do a deep dive tax analysis, including establishing any double taxation treaties and then choosing a corporate structure that is most tax-efficient whilst meeting your evolving needs.

Wherever you decide to expand into, our team can help you with corporate structuring, incorporation, corporate secretarial and Director services.

Handling foreign company income tax and indirect taxes

At each stage of the expansion process, you will be thinking about tax. And if you’re not – you need to be.

Timing comes into play again here. Do you need to register for certain taxes at the beginning? Does your company need to make regular filings or payments during the year to different government agencies? How much time do you have after year end to prepare a tax return?

At different times you might need help with:

• VAT (import, export, B2C sales online, SAF-T, Real Time Reporting)
• Employer taxes and social security (payroll obligations, taxing equity awards and stock plans)
• Corporation tax (transfer pricing, withholding taxes, non-deductible expenses and help identifying and using any local tax reliefs or incentives).

Tax questions are high on many of our clients’ lists when they come to us looking for advice on expanding overseas. We can guide you through all of these matters and create a concise tax compliance calendar.

Hiring international employees

Your people are your most important asset – so you need to think very carefully about the logistics of labour. Recruiting the right talent is an essential part of your expansion strategy. On the ground, local professionals can help navigate the business environment, culture, and regulations. They’ll also open doors to their networks, help sell your products or services, and help you win contracts.

When hiring, keep in mind there are differences in employment law around the world.

For example, US companies are used to “at will” employment, a simple, flexible, and employer-friendly status. On the other hand, employee protection laws in other locations like Europe are generally more stringent. This differentiation also extends to how you hire, the way contracts are prepared, and employees’ rights.

If you are sending employees to help you hit the ground running in a new market, there are also important considerations around visas, compensation, equity, cost of living allowance, and payroll and taxation, among other issues.

It is important to consider your expatriates’ personal circumstances too. They will require professional tax guidance, planning, and assistance with personal tax reporting.

You’ll also need to consider:

• Possible immigration issues
• Local employment law, including incentive and pension plans
• Expatriate tax and insurance
• Payroll compliance

At ZEDRA, we know and understand why top talent matters. Our own expansive global footprint with a local lens means we know exactly what it takes to attract and retain the best business minds, anywhere in the world. We know how vital it is to collaborate seamlessly, across boardrooms and across borders.

Managing international corporate compliance

Compliance can be difficult to navigate due to the complexity of regulatory frameworks. However, it can be managed effectively if you’re guided by the right advisers and understand the local regulations.

You’ll need to consider local statutory account filings, statutory and voluntary audits, and who will keep track of the finances of your new international office, specifically as it relates to adhering to local accounting standards, filing deadlines and supplier invoice management.

Questions to ask your global expansion advisers and local service providers 

Below are some questions to ask your advisers at the start of your journey to expanding abroad:

• What legal structures are available and which one will best protect my business?
• How quickly can I set up a bank account?
• How do local taxes differ to those at headquarters?
• How can we establish a competitive hiring and staff-retention strategy?
• What type of visas are required if we expatriate key employees to the new location?
• What is the process to hire and terminate employees?
• What are the corporate tax rates in the target country? Are there any tax incentives or exemptions available for foreign businesses investing or operating in the target countries?
• What are the rules regarding transfer pricing, and how might they impact our international operations and tax liabilities?

There are plenty of competing priorities to keep those in the pursuit of expansion awake at night. But an entrepreneur doesn’t have to fly solo. Founders, CEOs, CFOs and HR Directors we talk to tell us their minds are whirling with thoughts of strategy, governance, and operational matters. Alongside that, there are cultural differences to understand and new nuances to navigate.

How ZEDRA can help

If you are a business leader looking to grow global, no matter how brave you are feeling – the amount to juggle is significant. And all the while you will be trying to maintain laser sharp focus on winning new work, signing on new customers and building your brand in a new market.

Like so many things in business, timing is crucial. Good judgement, the ability to coordinate, understand lead times and to hit key inflection points at just the right moment only really comes with experience.

Finding the right partner to help you navigate governance, tax, accounting, human capital, and compliance matters during the critical early-stages of your company’s expansion is a vital initial step to help manage expectations and avoid costly mistakes.

Contact us to find out more.