International taxation requires considering not only tax rates in individual countries, but also how tax obligations are allocated between them. When working with non-residents, foreign companies, and cross-border transactions, it is important to assess the tax implications of the chosen structure in advance.
Beforis helps develop tailored solutions for international tax planning and structuring. We analyze the business’s objectives, the specifics of its operations, and the jurisdictions involved in order to minimize unjustified tax losses and related risks within the framework of applicable legislation.
What Is International Taxation?
In simple terms, international taxation is a set of rules, treaties, and national laws that determine where and to what extent a company must pay taxes when operating in multiple countries. It is a complex system governing the allocation of taxing rights between states.
The key elements of this system include:
- Double Tax Treaties (DTTs). These determine preferential withholding tax rates on dividends, royalties, and interest.
- Transparency and information exchange standards (CRS and CbCR). Mechanisms for the automatic reporting of information about non-residents’ accounts and the activities of multinational businesses to tax authorities.
- Controlled Foreign Company (CFC) rules. Requirements obliging taxpayers to disclose income generated by foreign entities.
- OECD transfer pricing principles. Rules governing the fairness of prices in transactions between related parties.
A well-designed international tax strategy allows businesses to maintain profitability during global expansion while protecting them from significant regulatory risks, including penalties for non-compliance with transparency requirements or additional tax assessments resulting from transfer pricing errors. As global tax oversight becomes increasingly stringent, understanding how these mechanisms interact has evolved from a supporting function into a key element of financial stability and investment security.
When Does a Business Need Tax Structuring?
Tax structuring may be required at different stages of an international business’s development — from choosing a country in which to register a company to analyzing a specific cross-border transaction. Beforis helps assess the tax implications in advance and select an appropriate model based on the client’s objectives.
If You Are Planning to Register a Company Abroad
We help compare available jurisdictions in terms of tax burden and ease of administration. The choice takes into account the type of business activity, the expected geographical scope of operations, tax residency requirements, and the company’s ongoing maintenance and compliance needs.
If You Work with Non-Resident Companies
We analyze planned or existing transactions from the perspective of taxation and legal security. This makes it possible to identify potential tax obligations and compliance requirements in advance when dealing with a foreign company.
If Foreign Financing Is Planned
We help develop a legally compliant model for working with a non-resident structure, taking into account applicable double tax treaties. The specific solution depends on the source of financing, the business structure, and the tax status of the parties involved.
If You Need to Reduce the Tax Burden and Currency Risks
We provide advice on international tax legislation, including VAT, VAT on transactions within the EU, as well as tax and currency controls applicable to transactions with non-residents.
How Is Tax Structuring Carried Out?
Business tax structuring begins with an analysis of the specific situation. There is no universal solution suitable for every company: the appropriate approach depends on the jurisdictions involved, the nature of the business, the ownership structure, and the movement of funds.
As part of its work, Beforis:
- Analyzes the business’s objectives and the issues that need to be addressed.
- Develops and agrees on the terms of reference based on the initial consultation.
- Analyzes the situation and prepares an opinion taking into account applicable tax regulations and the specifics of the project.
- Provides recommendations on further steps and the proposed structure.
This approach allows tax structuring to be viewed not as a standalone tax calculation, but as an integral part of the business’s overall corporate structure.
Tax Residency and Choice of Jurisdiction
When structuring an international business, it is important to consider more than just the place of company registration. The tax residency of the legal entity and its beneficial owner, the actual place where business activities are conducted, the nature of transactions, and the requirements of a particular country may all affect tax obligations.
Therefore, the choice of jurisdiction is based on a combination of factors, including:
- the applicable tax regime and rates;
- double tax treaties;
- requirements concerning the company’s economic substance;
- tax and currency control rules;
- compliance and reporting requirements;
- specific rules governing transactions with non-residents.
An offshore jurisdiction is not, in itself, a universal solution for reducing the tax burden. For a particular business, what matters more is ensuring that the structure is consistent with its activities, applicable legislation, and the owner’s objectives.
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