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International Trade Business Surgery

International Trade Business Surgery. Wednesday 18th May 2011. Jim Fanshawe, Suffolk International Trade Group and UKTI Alex Davey, Birketts LLP Gordon Hopkins, PKF LLP Graham Coker, NatWest. International Trade Business Surgery. Wednesday 18th May 2011. Should I be an exporter

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International Trade Business Surgery

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  1. International Trade Business Surgery Wednesday 18th May 2011 • Jim Fanshawe, Suffolk International Trade Group and UKTI • Alex Davey, Birketts LLP • Gordon Hopkins, PKF LLP • Graham Coker, NatWest

  2. International Trade Business Surgery Wednesday 18th May 2011 • Should I be an exporter • Developing you export business

  3. Enhanced innovation Exporters

  4. Am I ready to export?

  5. Am I ready to export?

  6. Am I ready to export?

  7. Am I ready to export?

  8. Developing your export business vs Consider your time and personnel resources

  9. Developing your export business

  10. Developing your export business

  11. Developing your export business

  12. Developing your export business

  13. Developing your export business

  14. Developing your export business

  15. Developing your export business

  16. Developing your export business

  17. Developing your export business

  18. Are Your Contracts Watertight? Alex Davey - Partner

  19. About Birketts Corporate Private Client Property Corporate/ Commercial Banking/Finance Wills Tax & Trust Agriculture Commercial Residential Employment Contentious Support Litigation Shipping and Logistics Construction Corporate Immigration Health & Safety/Transport Regulatory Competition Law

  20. Topics • Why is a contract important? • Contents of Contracts • Incorporation of Terms • Conclusions and Tips

  21. Why is a Contract Important? • Relationships change • Regulates rights and responsibilities in law • Risk management • Time and costs

  22. International Trade Contracts • Sale Contracts • Payment - Letters of Credit - Guarantees - Factoring/invoicing Agreements • Transport contracts • Insurance contracts

  23. What sort of Contract? • Full bespoke signed contract • Signed Agreement and signed T & C’s • Signed Agreement plus T & C’s • Quote plus T & C’s • Quote • Verbal Agreement • No Contract

  24. A “good” contract? • Clear written record of the deal • Should be relevant to the transaction • Easily understood • Record essential terms to minimise risk of dispute

  25. Potential Pitfalls • Identify Parties • Liabilities/Limits and Exclusion of Liability • Terms and Termination • Law and Jurisdiction • Agents & Principals (Carriers and Forwarders) • Incorporation of Terms and Conditions

  26. Agent or Principal Customer (a) Principal (b) Sub- Contractor (c) Customer (a) Agent (b) Contractor (c)

  27. Incorporation of Terms • Introducing your contract at the right time in the transaction (i.e. the beginning) • Making sure your terms, not the other party’s, apply • Individual onerous or unused provisions.

  28. Conclusions • Why a contract is important? • Contents of a contract • Incorporation of terms • Tips - make sure you understand your contract and standard terms - amend stationery

  29. Alex Davey 24-26 Museum Street Ipswich Suffolk , IP1 1HZ Tel: 01473 406234 Fax: 01473 416915

  30. Maximise Your Tax Efficiency Cross Border Gordon Hopkins Senior Manager PKF (UK) LLP gordon.hopkins@uk.pkf.com

  31. Trading Overseas • Will the profits be taxed overseas? • What triggers this? • Can the profits be taxed overseas and in the UK? • Relief for overseas taxes? • Business structures • Losses – any relief? • Repatriating profits to UK • Other taxes? • Changes in taxation of cross border activities

  32. Will the profits be taxed overseas? • Key is whether the activities give rise to a taxable presence in the overseas country • Has a ‘Permanent Establishment’ been created? • First consider domestic tax law; then • Double tax agreement

  33. Permanent Establishment (PE) • Relevant Double Taxation Agreement will usually say what does and does not amount to a PE. • Often specifically included • Place of management – ability to conclude contracts • Branch • Office • Factory/workshop • Common exclusions • Facilities solely for • Storage and/or Delivery • Display • Purchasing of stock or goods • Advertising • Activities of preparatory nature • Business carried on through an independent broker/agent

  34. Permanent Establishment (PE) • Definitions of a PE vary so always check relevant DTA • Advantages & Disadvantages of having a PE • Vary from country to country • No PE then subject to UK corporation tax only – good if UK tax rate lower but does this override commercial considerations? • If no PE it can mean that other taxes apply instead i.e. withholding tax, state taxes say in US

  35. Structures (1) • What vehicle to operate through? • Branch • Subsidiary • Other • Others might include: • Partnerships • LLCs • How treated in UK? • UK look for similarities in structures e.g. share capital • Does not have to be consistent with overseas treatment

  36. Structures (2) • Profitable? • If tax rate lower than UK may favour company • Loss making? • Losses of a branch available for offset against UK profits • Losses of a company potentially ring fenced in that company subject to residence status • Could incorporate the branch once profit making

  37. Company Residence • Where is the company resident for tax purposes? • Central management and control • High level decisions rather than day to day • Not automatically where the parent company is resident • HMRC taking an increasing interest – think they are missing out!

  38. Future Intentions • What are the longer term objectives – possible sale? • Where do you want the proceeds to go? • Ownership • By individual shareholders • Gain potentially taxable at 10% • As a subsidiary of the UK company • Gain potentially exempt under Substantial Shareholdings Exemption

  39. Measuring overseas profits • Pressure on respective governments to maximise tax take • Can lead to differences of opinion as to the profit made by the business in the overseas country • Apportionment of profit margin • Level of deductible management charges • Finance cost (whether more appropriate to view loan as share capital) • Mutual agreement clause in DTA

  40. Measuring the profit • Anti avoidance • Transfer Pricing • Documentation requirements depending on size of business • Controlled Foreign Companies • Low tax jurisdictions • Attribute profit back to UK

  41. Repatriation of profits • Dividend from overseas company potentially exempt from UK • Rules different depending on size • Withholding taxes • On exempt dividends = permanent tax cost

  42. VAT • Recent changes to the Place of Supply rules have reduced the risk/potential cost of compliance in the overseas country on some transactions. • B2B – now falls on the customer to reverse charge & account for VAT. • B2C – Supply of goods in EU country - subject to normal UK VAT charged under Distance Selling rules but watch for the limits (eg France €100,000). • B2C – Supply of services in EU country – subject to normal UK VAT. • Exceptions – land related supplies

  43. Other taxes • Payroll • Short term visitors • Different rules for tax & NI • Check local requirements • Withholding taxes • Not just applied to dividends • On management charges, services etc • Admissable taxes • Not all taxes can be offset against UK tax e.g. tax on sales

  44. Changes to tax rules • Foreign branch exemption • New rules coming in that will allow a company to elect for its foreign branch to exempt from UK tax • Forego relief for branch losses (includes those for earlier years) • Controlled Foreign Companies • Complex rules to be simplified

  45. PKF International - Publications • Number of Doing Business in … publications • Cover more than just Business Tax including: • Types of legal entities • Imports and exports • Grants etc • www.pkf.com/publications/doing-business-in

  46. Summary • Scale of overseas operations • Awareness • Don’t let unforeseen tax eliminate your profit margin • Getting the paperwork right • Getting the structure right – maximise your return

  47. This document is prepared solely for the use and benefit of Suffolk Chamber of Commerce. Neither the authors nor PKF accept or assume any responsibility or duty of care to any third party.

  48. Graham Coker Trade Director Global Transaction Services UK NatWest

  49. Low Risk High Risk Open A/C D/A Collection Importer Exporter D/P Collection Unconfirmed L/C Confirmed L/C Low Risk High Risk Cash in Advance

  50. L/C L/C L/C Supplier/Exporter Buyer/Importer Flowchart of a Typical Documentary Credit CONTRACT Sales Contract and Agreement to settle by L/C Payment Requests L/C Documents Goods shipped Payment Documents L/C advised As stipulated by L/C Advising/Confirming Bank Issuing Bank Issuing Bank Documents Payment

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