What are the legal implications of using international order fulfiment?

Question

We are a UK company that supplies computer spare parts and are considering keeping parts in strategic locations in various markets through order fulfilment centres in order to improve delivery times when needed urgently. What are the legal implications of this, eg HMRC etc.

Answer

There are a significant number of implications that you should consider. You mention legal but also refer to HMRC, so I’ll focus on legal and tax. The exact implications will vary depending on the countries involved, but here are some for you to review:

– VAT: in the strategic locations you may need to register locally for VAT and file VAT returns
– legal: you may need to create a legal entity (eg a branch or subsidiary) depending on the level of business activity you are going to be conducting there. Activities that increase this risk include e.g. if you are going to be staffing these with your own full-time employees, making any sales direct from these locations
– tax: again depending on the exact nature of your business activities, you may be liable to pay corporate tax in the strategic locations. If you are deemed to create a “permanent establishment’, that will be the case.

Although this sounds scary, it is perfectly do-able and the costs need not be that high. It is easy to outsource all these tasks at reasonable prices in most countries to great local accountants who have fantastic English skills. I also recommend you use the services of a one-stop international expert who can advise on what you need and co-ordinate all this for you.

Best regards
John

Answer

There are a significant number of implications that you should consider. You mention legal but also refer to HMRC, so I’ll focus on legal and tax. The exact implications will vary depending on the countries involved, but here are some for you to review:

– VAT: in the strategic locations you may need to register locally for VAT and file VAT returns
– legal: you may need to create a legal entity (eg a branch or subsidiary) depending on the level of business activity you are going to be conducting there. Activities that increase this risk include e.g. if you are going to be staffing these with your own full-time employees, making any sales direct from these locations
– tax: again depending on the exact nature of your business activities, you may be liable to pay corporate tax in the strategic locations. If you are deemed to create a “permanent establishment’, that will be the case.

Although this sounds scary, it is perfectly do-able and the costs need not be that high. It is easy to outsource all these tasks at reasonable prices in most countries to great local accountants who have fantastic English skills. I also recommend you use the services of a one-stop international expert who can advise on what you need and co-ordinate all this for you.

Best regards
John

Answer

There are a significant number of implications that you should consider. You mention legal but also refer to HMRC, so I’ll focus on legal and tax. The exact implications will vary depending on the countries involved, but here are some for you to review:

– VAT: in the strategic locations you may need to register locally for VAT and file VAT returns
– legal: you may need to create a legal entity (eg a branch or subsidiary) depending on the level of business activity you are going to be conducting there. Activities that increase this risk include e.g. if you are going to be staffing these with your own full-time employees, making any sales direct from these locations
– tax: again depending on the exact nature of your business activities, you may be liable to pay corporate tax in the strategic locations. If you are deemed to create a “permanent establishment’, that will be the case.

Although this sounds scary, it is perfectly do-able and the costs need not be that high. It is easy to outsource all these tasks at reasonable prices in most countries to great local accountants who have fantastic English skills. I also recommend you use the services of a one-stop international expert who can advise on what you need and co-ordinate all this for you.

Best regards
John

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