It’s no secret that businesses that operate across borders have to keep a close eye on their tax obligations. While some companies may feel like they’re always playing catch-up, there are ways to make the process a bit smoother. Here are five tactics international businesses can use to stay ahead of the curve and meet their tax goals this year.
Be aware of your global footprint
Keep track of where your business is operating, where you have customers and suppliers, and which countries your employees are working in. This will help you better understand which taxes apply to your company. Being aware of your global footprint is important because the rules surrounding tax filing requirements and taxation, in general, vary by country. Even if you don’t have any physical presence in a certain jurisdiction, you may still owe taxes there if your company is doing enough business with the local population.
Make capturing tax data easy
Every time you do business with an international customer or supplier, you should document it and send them details of what was sold and how much it was worth. By capturing this information early on, you may be able to reduce the amount of income taxes you’re liable for later on. For example, if you identified a future supplier or customer as part of your initial market research and documented the details at that time, you’ll be able to prove their value should an audit take place.
Taxes for international employees
Make it easy for international employees to file taxes. Every time you hire someone who will work outside of the country, you should make sure they’re aware of their tax obligations. For example, if an employee is working in Canada but paying Japanese income taxes, you’ll need to provide them with information about making their payments on time and how much they owe. Making sure employees know what to do and when to do it will help reduce your compliance costs and make a potential audit a less stressful event.
Adopt a global view of tax compliance
When you’re taking steps to meet international tax goals, you need to maintain a global perspective. This means thinking about all the elements involved in your tax obligations, including things like VAT tax on cross-border transactions. When you maintain this kind of worldwide view, it makes it easier to understand how the particulars in your home country relate to other countries’ tax rules.
Assess your current systems
Before you start working toward an international tax strategy, ask yourself some questions about your current tax practices. For example, do you have a system in place that tracks the tax obligations of your international customers and suppliers? If you don’t, now is the time to put one in place. Do you file taxes for your international employees every year? If not, make it a priority this year. By taking stock of your current tax procedures, you’ll be able to see where you need to make improvements and take steps toward a more effective tax strategy.
As businesses become more and more international, the need to stay aware of tax laws in different countries becomes increasingly important. You’ll want to be aware of your global footprint, make capturing tax data easy, and take advantage of the various compliance tools that are available to stay up-to-date on all pertinent information.
Taxation is no longer limited by national borders; it takes an understanding of what’s happening globally as well as regionally. These five tips are sound advice for multinational businesses that are looking to keep on top of their tax goals.
