Is your international structure optimal?

Louise Cupples, Tax Partner, Professional Services

Operating internationally is not new to professional service firms. When a new business opportunity present itself outside the jurisdiction in which a firm operates then the firm must decide how it plans to utilise that opportunity and service a new client. An established spectrum of solutions has developed over time ranging from the formal opening of a new office to the more casual fly in fly of staff, and partners (for those operating through partnership structures).

Recently, however, change has come as displaced workers and remote working have resulted in more staff working overseas. When this change in practice is added to the struggle to retain talent then it is no surprise businesses are starting to review existing international working policies. Designing more flexible arrangements which allow both hybrid and permanent remote working outside of the home jurisdiction as well as providing more international secondment opportunities is likely to become the norm for international professional service firms.

In this article we reflect on how international structures of professional service firms have evolved and consider how they may need to adapt to best fit the future strategic objectives of the business.

Optimal structures

Changes in international working policy are causing firms also to look more closely at their corporate international structure. Many structures have evolved over time and some businesses looking at their structures today might wonder how they have arrived at them based on where they started!

Complexity, however, really is no surprise given the many competing factors which are at play when a firm decides to operate internationally. Regulatory requirements, transactions, tax rate/ legislative changes, governance, cultural issues, funding requirements and concerns over local disclosure requirements all come into play and must be balanced with the usual starting desire to minimise undue complexity.

The relative balance of those factors change over time and a business can find that offices which were sensibly structured when they first opened are now best housed differently. The impact of Brexit on regulated businesses is a recent example of an external factor which led to change. Affected businesses had to reconsider how to structure operations in Europe and brought into question whether branches/ subsidiaries of UK headquartered entities could or should be restructured and whether there was a place for alternative, non-UK incorporated entities in the evolving structure. Changes to the profit contributions of different locations to the global profit pool change over time and might mean that a firm’s structure is now struggling to enable tax efficient repatriation of profits and losses. Increased levels of international business travel may result in firms considering for the first time if there is a need to incorporate specific entities into the structure to manage the relevant tax implications such as an international employment company.

Finally, the current economic and geo-political uncertainties mean a more agile structure might be beneficial which allows for more frequent opening and closing of offices and permanent establishments.

All in all, a review of structure is probably long overdue.

How BDO can assist

BDO’s international network operates in 167 countries and is able to provide coordinated, international solutions with a sector specific angle.We can help you with all aspects of developing or reviewing your international structure and incorporating changes to your policies around partners and staff operating internationally. 

Our international professional services expertise includes advice on:

  • International structures;
  • Permanent establishment creation and mitigation;
  • Advice in relation to specific office openings/closures;
  • Tax treaty interpretation and withholding tax;
  • International compliance, governance and reporting requirements including advice in relation to OECD developments.
  • Local filing and reporting requirements;
  • Partner and staff policies on remote working, global mobility, secondments and business travel;
  • International transfer pricing;
  • Global VAT; and
  • International accounting, audit and M&A

Please look out for our forthcoming topical international updates where we will be focusing on relevant international matters affecting professional service firms. Please also register for our Professional Services Tax Webinar Series which feature international topical updates along with the latest wider tax developments relevant for professional services firms

For help and advice, please contact Louise Cupples, your usual BDO adviser or leave your details below:


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