global Tax How Much Does It Cost to Expand Your Team Abroad? August 14, 2023 Without the right knowledge and preparation, global expansion as part of your organization’s growth strategy can be expensive. Countries have vastly different operating legislation, ones that can harbor hidden costs that stops your growth strategy in its tracks. Here’s what you should know. Moving into a new country to develop business opportunities is an exciting prospect, especially in our global economy. It is therefore prudent to calculate as many potential costs as possible to make sure your endeavors succeed. Let us look briefly at the following: employment, corporate, administrative, and cultural costs. Employment costs Employment costs can include such items as work/resident visas, legal fees, compensation, pensions, taxes (income and social), health insurance, housing, and education. Some questions to consider: Will the employees stay on payroll in the home country, shift to a local payroll, or be a hybrid of the two? Is a Cost-of-Living adjustment necessary? Does the host country mandate employer pension contributions, and if so, at what rate? Will new employees require language training? Corporate costs Corporate costs to consider are: Rent, Insurance, Taxes (income, value-added, transfer pricing, excise, etc.), Legal, and Logistical Many countries offer corporate tax incentives to attract businesses to relocate or expand. Some countries provide more effective infrastructures to help mitigate logistical costs. Others make it easy for companies to setup and register. Knowing what is available in a new market and what questions to ask can result in significant cost savings. Administrative costs Administrative costs can be both financial and time consuming. A few examples include: Obtaining visas, Licenses, Signage, andBank accounts Knowing how to efficiently move through various bureaucratic agencies can save time and money. Cultural costs When considering costs, one can easily overlook the areas which do not necessarily have a monetary value associated with them. For our purposes, we are calling them cultural costs. Let us consider, for example, how an employee from the home location communicates and interacts in the new country. Additionally, Are there certain customs or protocols to follow? Can a potential deal fall apart because one is perceived as either too assertive or passive? Is it appropriate to give gifts or are would these be considered bribes? Many companies expanding globally make a concerted effort to partner closely with individuals in the host countries’ to help effectively navigate through such cultural costs. We hope this insight gave you a better look at the potential costs of global expansion in the hope that it provides a steppingstone into your new endeavors. Questions? We’re happy to help.
