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Navigating Tax Issues for Overseas Business Setup: Key Considerations

Setting up a business overseas entails various tax implications that need careful consideration. Key forms of doing business include representative offices, permanent establishments, subsidiaries, and joint ventures. Each has unique tax obligations, such as withholding taxes on fees and UK tax on profits with credits for overseas taxes. It’s essential to understand local filing requirements and payroll tax needs as well. Moreover, the unlikelihood of withholding tax on fees for subsidiaries and the tax treatment of profit distributions play crucial roles in your strategy.

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Navigating Tax Issues for Overseas Business Setup: Key Considerations

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  1. Tax issues on setting up overseas Robert Langston Tax Partner robert.langston@saffery.com 020 7841 4129

  2. Forms of doing business • Representative office • Permanent establishment • Subsidiary • Joint venture

  3. Representative office • Limited activities • No local filing requirements • Fees may be subject to withholding tax • UK tax on profits (with credit for withholding tax) • Payroll tax requirements

  4. Withholding tax on fees (1)

  5. Withholding tax on fees (2)

  6. Permanent establishment • Fixed place of business or dependent agent • Overseas tax on profits • Unlikely to be withholding tax on fees • Overseas filing requirements • UK tax on profits (with credit for overseas tax) • Subject to election for companies • Likely to be UK and overseas tax on disposal

  7. Subsidiary • Overseas tax on profits • Unlikely to be withholding tax on fees • Overseas filing requirements • No UK tax on distribution of profits to company • Unlikely to be tax on disposal by company • Incentivisation of local employees

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