The Impact of International Statutory Requirements: 3 Areas to Consider
Whether it is your company’s first endeavor into international expansion, or it is the tenth time you have setup overseas operations, the task of determining what is required of your business in a new country can be overwhelming and time consuming. Just figuring out deadlines and researching where exactly to send documents can make the process of complying with international statutory requirements a major headache.
Though often a commonly cited concern, keeping your international operations compliant in country isn’t just about filing tax returns on time—your statutory obligations begin right when you get on the ground in another country, and can affect various pieces of your business. Here are some key areas to consider how international statutory requirements may impact your company overseas:
Entity setup. From the day you send your first employee to an overseas location to begin establishing your global footprint, your company may be subject to various international statutory requirements around entity setup. Depending on what activities your employee is conducting overseas, permanent establishment may be created, resulting in the potential need to setup an entity. The obligations that come along with entity setup can be extensive; international statutory requirements range from corporate tax registration to specific office lease considerations. Consider the domino effect that may result before you even send a single employee overseas and get the appropriate support in place.
Financial reporting. Often the area most frequently associated with compliance issues, international statutory filing requirements by country can be vastly different. Your business needs to ensure that corporate income tax returns, year-end payroll returns, statutory local accounts, etc., are filed on time and with the right authorities. Otherwise, your international operations will be at significant risk for major fines and penalties from in-country governments. Maintaining an up-to-date compliance calendar gives you visibility as to what is required throughout the year. Also, it is important to closely monitor technical updates and react to any changes in key requirements.
Employee benefits. When considering the employee-employer relationship, international statutory requirements are much more stringent than in the United States. For example, the concept of “at-will” employment does not exist elsewhere in the world, with terminations requiring very specific reasons and documentation. Additionally, many countries have statutory benefits unheard of in the U.S.: mandatory amounts of paid time off, maximum allowed work hours per week, etc. Become familiar with what is necessary of you as an employer in a given country to avoid being out of compliance with such requirements.