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Structure an expansion offshore

We will design the offshore structure before you commit, because unwinding one afterwards is far more expensive.

When you take a business offshore, Australia’s tax rules do not stay behind. A set of provisions exists specifically to tax income earned through foreign entities you control. The controlled foreign company rules, transfer pricing and thin capitalisation each apply on their own terms. How they interact depends on the structure you choose. Those choices are made once, at the start, and they are expensive to reverse. We design the structure before the first entity is incorporated.

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Priced before it is built

You choose between structures with the Australian tax cost of each one in front of you.

No attribution you did not expect

Controlled foreign company rules can tax offshore profits here before any dividend is ever paid.

Both jurisdictions agreeing

We work with your destination country advisers, so the structure is efficient at both ends.

What is outbound tax structuring, and when does it need to happen?

Outbound structuring is the design of how an Australian business holds and operates its foreign activities. It settles whether you operate through a branch or a subsidiary, and which country the entity sits in. It also settles how the entity is funded and how value moves between the parts of the group. Each of those decisions has consequences in Australia and in the destination country. Because the rules attach to the structure rather than the intention behind it, the design has to come first.

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Branch or subsidiary, which is better?

It depends on the numbers and on what the operation will do. A branch is part of the Australian entity, so its losses and profits are generally brought to account here directly. A subsidiary is a separate company, which changes when profits are taxed in Australia and how they come home. Both are priced before you choose.

What are the controlled foreign company rules?

They allow certain income of a foreign company you control to be attributed to you and taxed in Australia. That can happen whether or not a dividend has been paid. The rules depend on where the company is resident and on the type of income it earns. Active business income is often treated differently from passive income.

Do we need transfer pricing documentation from day one?

If there are dealings between the Australian entity and the foreign one, yes. Prices between related parties have to reflect what independent parties would agree. Documentation prepared at the time is what supports the position. Preparing it after a review has started carries much less weight.

Can we change the structure later if it does not work?

You can, but rarely cheaply. Changing the shape of a group usually means disposing of interests, and a disposal is a taxable event. That is the reason to price the options before anything is incorporated rather than afterwards.

Design the structure before the first entity exists

Tell us where you are going and what the business will do there. We will set out the structuring options and what each one costs in tax.

A structure chosen for convenience is expensive to unwind

You are expanding into another country and the commercial case is clear. The structure has usually been suggested by someone in the destination country, chosen for reasons that make sense locally. What has not been tested is what that structure does to your Australian position. Attribution under the controlled foreign company rules, transfer pricing obligations and funding limits all follow from a decision that felt administrative.

We will establish what the offshore operation will actually do, and where.
We will set out the realistic structuring options, including branch and subsidiary.
We will model attribution under the controlled foreign company rules for each option.
We will advise on transfer pricing documentation for your related party dealings.
We will check the funding against the thin capitalisation limits before you commit.

The expansion is decided and the structure is about to be

You have customers, a partner or an opportunity in another country, and the case for going there is made. Someone has proposed incorporating a local company, opening a branch, or using a holding entity in a third jurisdiction. The advice you have is about the destination country and not about what happens back here. You are about to make a decision that is very hard to reverse, on incomplete information.

What's included in your outbound structuring advice

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Substance analysis of the proposed offshore operation.
A priced comparison of branch, subsidiary and holding company structures.
Controlled foreign company attribution modelling.
Transfer pricing advice and documentation requirements.
Thin capitalisation and funding structure review.
Coordination with your advisers in the destination country.

Why the structure is the only cheap decision

Almost everything about an offshore expansion can be adjusted later. The structure is the exception.

Once entities are incorporated, shares are issued and operations begin, changing the shape of the group means disposing of interests. That is itself a taxable event, and a restructure done two years in can cost more than the expansion earned in that time. Meanwhile the original design keeps producing consequences. Profits in a controlled foreign company can be attributed back and taxed in Australia before any dividend is paid. Related party dealings priced without documentation invite transfer pricing adjustment and penalties. Funding the foreign operation with debt beyond the thin capitalisation limits denies part of the interest deduction.

None of these is a trap for the careless. They are the ordinary operation of rules that assume a structure was chosen deliberately.

From a structure someone suggested to one you chose on the numbers

We start from what the business will actually do offshore, because the rules apply to substance rather than to labels. Where the people are, where the decisions get made and where the value is created all bear on the answer.

Then we set out the realistic options and price each of them. A branch and a subsidiary produce different outcomes on losses, on repatriation and on the treatment of profits before they come home. We model attribution under the controlled foreign company rules, the transfer pricing documentation each option requires, and the funding limits that apply. You choose with the numbers in front of you, and we work with your advisers in the destination country so both halves agree.

How we design an offshore structure

Price the options before the first entity is incorporated.

Establish the substance

We work out what the offshore operation will really do, and where the decisions will be made.

Price the options

We compare branch, subsidiary and holding structures on attribution, repatriation and the treatment of losses.

Build it properly

We document the transfer pricing position, and check the funding against the thin capitalisation limits.

The structure priced before it is built

Expanding overseas is usually the most ambitious thing a business has done. The tax work can feel like it is slowing down the part that matters. The reason to do it first is narrow. It is the only decision here that cannot be revisited cheaply.

One of our lawyers is a Chartered Tax Advisor with The Tax Institute and has held that credential for 25 years. We are also recognised in Doyle’s Guide for tax law. We advise Australian businesses on outbound structures, including controlled foreign company attribution, transfer pricing and thin capitalisation. We work alongside advisers in the destination country, because a structure that is efficient at only one end is not efficient.

Our great lawyer guarantee

Six principles we hold to, whatever you bring us and however long it takes.

Take the time

We listen carefully to understand what you want to achieve, then step you through the advice and the documents.

Share our knowledge

We pass on as much as we can, so you can make your own informed decisions.

Stick to our knitting

We only do what we are good at, so you never pay for our learning.

Work as one team

Someone is always available to answer your question or point you the right way.

Fair pricing

A fixed or capped quote for advice and documents, so you do not carry the price risk.

It is your show

We are in it for a front row seat to witness your success, not for our egos.

Choose the structure on the numbers

Tell us where you are expanding and what the operation will do there. We will price the realistic structuring options and tell you what each costs in Australian tax.

Speak to a lawyer 1300 654 590