Establishing an International Presence

Having a international presence is becoming an increasing priority for many owner-managed and fast growing entrepreneurial businesses.

Improved technology and communications and the reduction of trade barriers have all helped to smooth the trend towards global markets. However, for anyone thinking of establishing an international presence for the first time, careful planning is essential. In the desire to pursue a new lucrative market, business owners frequently overlook the commitment involved in trading abroad be this financial, management time, IT or administration. Worse still, the implication on the core business is often not considered until after the event - can you meet the orders, finance the cash flow, support the product or protect your Intellectual Property?

Establishing a physical presence overseas may offer greater potential rewards than exporting goods from Malta. For one thing, you won't need to share the profits with a local agent. On the other hand, the risks are likely to be greater too.

You will need to decide whether your overseas operation should be a branch of the Maltese company or a locally incorporated subsidiary. Where sizeable losses are expected in early years, a branch should enable you to claim tax relief more quickly. However, the cost of subsequent conversion to a subsidiary can often outweigh early tax relief.

Consider the potential impact of local legislation and regulations on profitability. In some parts of Europe, for example, national insurance, pensions and other costs can add more than 50 per cent to the salary bill. Other areas for consideration will include VAT and transfer pricing.

Grant Thornton is a member of Grant Thornton International, a network of firms with worldwide representattion, so wherever you decide to expand we can assist you both here in Malta and in your new location.