Expanding internationally after COVID-19? Five factors to help smooth the way
Article 4 minute read

Expanding internationally after COVID-19? Five factors to help smooth the way

02 June 2020

As the world starts to reopen, it is possible for your business to expand globally if you are aware of the complexities.

Businesses of all sizes face challenges as they expand across borders, and the task is even greater as the world emerges from the coronavirus pandemic. Recovering from the impact of COVID-19 requires companies to take a broader view of their global operations, while also adapting to the specific jurisdictional requirements of every country in which they wish to operate.

To ensure operations remain fit for purpose as they grow, companies must not neglect or underrate local – and critical – compliance complexity. Not allowing enough time to address this issue is surprisingly common, according to TMF Group’s Global Head of Accounting & Tax, Emine Constantin. 

“Understanding the extent of variation in local regulation is so important,” she says. “Many companies believe their standard global processes can form the basis of operations in a given country. However, those that do soon find that these local variances are likely to lead to radical changes in implementation.”

TMF Group research shows that getting compliance wrong, can result in operational delays, fines, suspensions and even long-term bans.

Here’s how to get ahead of the game:

1. Plan, plan and keep planning

While coronavirus may have sent your business plans into a spin, now is the time to get them back on track and look to the future. 

While many companies have put expansion plans on hold in the short-term, knowing how and when to revive them will be a finely balanced judgement call. Understanding the interplay between the supranational and local regulatory landscape is fundamental. Any plan must be devoid of assumptions that lead to compliance surprises.

You need to understand fully what local authorities require in each jurisdiction – and in real time – so you can get up and running and see your business model paying back in line with expectations.

Tax teams, for instance, need specialist help to assess the different direct and indirect levies that need to be paid, and the most efficient way to report them. This gives rise to questions about whether it is cost-effective to resource this in-house.

“Understanding how international tax trends are translated into local legislation is one of the most important elements,” says Constantin. “These often change at speed and without notice.”

2. Get the sequence right

Careful sequencing is a must. Timing and scheduling will differ between business sectors, with some more tightly regulated and monitored than others.

Simply incorporating a company doesn’t mean you can start trading the next day. Depending on the jurisdiction, you may need to secure various registrations, licences and authorisation before business can begin.

“Ideally, companies should take around six months to plan the steps,” says Constantin. “Then they can really understand the tax compliance requirements of each jurisdiction, which taxes will be enforced and when and how they will be calculated.”

3. Prep your paperwork

While the COVID-19 pandemic prompted some governments to postpone filing deadlines or offer incentives for filing online, paperwork is something that ultimately can’t be ignored.

“We crystallise for our clients the main tax areas they need to think about under the current circumstances,” Constantin explains. “On top of their regular filings, many are wondering whether they should reflect items related to COVID in their year-end disclosure notes.”

In some countries, for example Indonesia and Romania, there’s been a wholesale change in the filing process as the pandemic forced the authorities to digitise rapidly. 

“All tax authorities had to find a way of communicating digitally,” Constantin explains. “Often the regulations haven’t changed but going digital makes the communication easier.”

Even those countries that were already in the process of digitising filing have accelerated those efforts, while other jurisdictions that relied heavily on paper and in-person filing, have been driven to a more radical rethink.

4. Call in outside help

The pandemic has also intensified the need for help with local compliance requirements. With the COVID responses in each country having implications for filing and compliance, deciding if you should hire an internal expert or look for external help is central to success. Even so, setting up in-house specialists in every country is highly unlikely to be cost-effective or even feasible.

“You must be able to understand the local compliance requirements fully. Then you need to be able to identify the gaps and bridge them,” says Constantin. “The ideal combination, especially where a company operates across multiple jurisdictions, involves deep local knowledge set in a broad international context.” 

Almost every country has enacted new legalisation to help businesses with the effects of the pandemic. Understanding the new programs and laws is imperative to keeping your company compliant in all jurisdictions. 

5. Local expertise is key

Constantin stresses the vital role of local experts, who must be native speakers, in expediting processes and resolving queries, issues and misunderstandings quickly. Local knowledge of regulations and changes can be vital for your business’ expansion into new areas. 

“You need people who are rooted in the business environment, who speak the same language as your client’s customers and local authorities. They must also fully understand the context of what you’re trying to achieve and why,” says Constantin. 

“The international business environment is very dynamic,” she adds. “Things change, often very frequently.  It’s challenging if you don’t have the right people to draw on and the right processes in place.”

Businesses will be able to grow and expand as the world begins to recover from the effects of COVID-19. Our local experts operate in 80+ countries and know how to keep your global business compliant. Contact us to learn what TMF Group can do to help.

Want to know more about our services and how we can help your business? Contact us.

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