About Corporate Services
How can Sovereign Help?
In today’s global marketplace, business success increasingly requires active trading participation in foreign markets. Emerging companies typically operate in rapidly evolving industries where expertise, speed and efficiency are rewarded.
Modes of entry may vary – Internet, exporting, licensing, commercial agents, distributors, strategic alliances, joint ventures, overseas manufacturing or sales subsidiaries – but international expansion will inevitably involve unfamiliar legislation, regulations and processes, as well as creating international legal and tax considerations.
Whether you are doing business in Europe, Asia, Africa, the Middle East, the Americas or elsewhere, Sovereign will set up the best trading structure for your business. We will assist you to select the most effective and efficient legal entity, and we will then form and register that entity in line with local laws and regulations.
Companies wishing to expand their trading activities into new territories may consider establishing a Representative Office (RO) or Branch instead of incorporating a new company. An RO provides a limited presence in a foreign market with the ability only to engage in promotional activities, while a Branch will also permit core activities and sales to be undertaken. However neither is a distinct legal entity, so the parent company remains liable for any legal obligations.
If incorporating a new company is preferable, a Subsidiary or a Joint Venture (JV) may be appropriate. A Subsidiary is an entirely separate legal entity created specifically for business overseas. This is generally more tax efficient and offers legal protection between the overseas company and its parent company.
A JV is also a separate legal entity that requires a joint investment with a local company. It is not however a permanent structure and could be dissolved if the original agreements between the parties involved cease to have effect.
Multinational entities may decide to establish a holding company as an efficient way of managing a group of subsidiaries in a particular region. This allows the financing, licensing and management activities to be centralised, preferably in a politically and legally stable environment. It may also offer tax advantages in relation to capital gains and withholding taxes on dividends.
Choosing a suitable location for a holding company will involve detailed consideration of business, logistical and operational requirements. The tax system will also be relevant in respect of:
- The effective tax rate for income and gains
- The ‘economic substance’ requirements
- The withholding tax rates for dividend, interest and royalty payments
- The size and quality of the tax treaty network.