The global recession due to the current pandemic (COVID-19) has forced business owners to think and act quickly in regards to their investments. The impact of the pandemic is very much varied from country to country and industries affected are also diverged.
The current situation has forced business owners to explore other industries and evaluate new business opportunities from different jurisdictions. Migrating companies to other countries or jurisdictions is not exclusively done in times of pandemic. Other factors such as politics, economy, law and taxation may factor in deciding to migrate companies to other jurisdictions.
Every business owners would want to have a smooth and seamless transition from one jurisdiction to another, the less excruciating processes, the better. However, there are a couple of challenges one must consider in migrating a company. The following enumerated reasons are the ones we observed as the most common challenges in migrating a company:
1. Licensing
When an investor is done assessing the viability of business in a target country, he needs to consider the licensing of a company in that jurisdiction. The corporate laws are different in every jurisdiction. Some countries allow foreign investors to fully own a company while others have set up limits and only allow a certain degree of ownership on the business. The cost, processing time and ease of setting up a company also needs to be considered as some countries are notorious on extravagant fees and slow processing of the company set up.
2. Taxation
It is important for investors to know the basic tax laws of the target jurisdiction. This is also a challenge in the accounting side as some jurisdictions have complicated tax laws and regulations while others simply don’t have taxes at all. The tax rates differ in every jurisdiction, some could go as high as 40% on the net income while others can go low as 5%. Some countries implement Sales Tax and Value Added Taxes with rates as high as 25%.
3. Operating Costs
Going to a more developed country, it is expected that the operating costs would also be higher. Business owners will need to factor the average wages of hiring professionals, the cost of rent on offices or warehouses, the internet infrastructures, and the logistics in setting up a company. Developing countries such as the Philippines, India, Vietnam and many others in Asia are popular for setting up an outsourcing business as the cost of manpower is very cheap as compared to other countries.
4. Accounting and Reportorial/Statutory Requirements
Reportorial and Statutory requirements are one of the challenges that need to be considered in migrating a company. While accounting and bookkeeping are universal and is practiced the same in every jurisdiction, the reporting and statutory requirements vary from every jurisdiction. Other jurisdictions require quarterly, semi-annual or annual report and a specific report format to be submitted to the authorities while others simply don’t require it at all.
While these challenges are very broad and common, it is still very important to hire an expert to guide you when you decide to migrate a company. Migrating a company is something that cannot be done without the assistance of an expert. Our company, CRESCO Accounting Limited, has an affiliate, Hensley&Cook which provides corporate and advisory services which can help you in setting up a company in multiple jurisdictions. While, we at CRESCO Accounting, can help you on in overcoming all the accounting challenges in setting up a company in a different jurisdiction. Our team is composed of multiple accounting professionals specializing in different fields and jurisdictions which can make you at ease while you concentrate on the other aspects of the business.
