FORETHOUGHT - Whyte Hirschboeck Dudek SC

EXPANDING YOUR BUSINESS
ABROAD—A FEW BASICS
Written by
Daniel B. Geraghty
As technology has made the world
a smaller place, the reasons and
opportunities for doing business abroad
have become commonplace. Whether
the expansion is a marketing strategy, a
manufacturing strategy, a supply strategy,
or tied to another reason, businesses
going abroad must be mindful of
adjustments to the “norm” and to barriers
or obstacles that they may face. A little
“forethought” before making the move will
go a long way toward avoiding problems.
Following are a few basic legal and tax
considerations for doing business abroad.
Legal Barriers and Other
Governmental Regulations
This obvious question needs to be
considered early on in the process. For
example, portable generators that are
made and sold in the United States may
need to be fine-tuned for export to the
United Kingdom. In addition, the model
for selling in the United States—for
example, through independent sales
representatives—may not legally work in
the United Kingdom or be a commonly
accepted business practice.
impose the tax as a back tax at the time
of the sale unless the taxing authorities
“approve” of the sale. On its face, an offer
of no tax for 10 years sounds like a very
attractive reason to expand in Nicaragua.
The reality, which may not be readily
apparent, may be completely different.
Duties and Other Similar
Transaction Taxes
Many times, a duty will be charged on
importing goods to a country. In addition,
other transactional taxes will be imposed
at various points in commerce. It is
essential to understand their potential
application. For example, while not yet
prevalent in the United States, nearly
all countries impose what is known
as a value added tax (VAT). This is a
tax imposed upon a sale of property
throughout the commercial process with
a series of credits that ultimately shift the
burden of tax to the end user. Rates of
20% are not uncommon. If a business
sells to another business it is critical to
understand that a credit is available and
how to obtain the credit.
Cultural Differences
While some countries are markedly
different than the United States, others
are more in line with the ways of doing
business here. Doing business in
Germany, for example, is a relatively
structured and known process. To expand
in Brazil or certain other Latin American
countries, however, is considerably
different and the process can be uncertain
at the start. For example, businesses
expanding in the hospitality industry in
Nicaragua are exempt from income tax
for 10 years. However, if the business is
sold before the 10 years, Nicaragua may
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