The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:
Trading in another jurisdiction involves many issues, only some of which involve taxation. Advice should be taken, not only in relation to tax, but on the wider business implications.
This note deals only in broad outline with the UK tax issues which should be considered for companies. In addition, the tax regime in the overseas country is very important, and the ways in which the two systems interact should be explored before decisions are taken.
For more information on setting up overseas, see the Introduction to setting up overseas and the Setting up overseas – branch or subsidiary guidance notes, and other notes in the 'International tax and transfer pricing' topic in the Corporate Tax module (subscription sensitive).
A UK resident company which is merely selling goods or services to customers overseas is not normally taxable in the foreign jurisdiction. To be taxable the company must generally have a permanent establishment. Different rules may apply for VAT, see below.
If the UK business has premises overseas which is used only to store or display goods, or to hold them pending delivery or processing, this does not normally constitute a permanent establishment.
These definitions and requirements are drawn from articles 5 and 7 of the OECD model tax treaty, which forms the basis for most double tax treaties.
A UK resident company which establishes either a branch or a subsidiary company in the foreign jurisdiction will normally have a permanent establishment in the country where it is established.
The OECD Model tax treaty gives primary taxing rights to the country where the permanent establishment is based. The text of current double tax treaties can be found on the HMRC website .
Many overseas operations begin by setting up a branch.
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