As a new player in your export market, you are entering a game with a new set of tax and administrative rules. Knowing these rules and planning accordingly will ensure you enter with your best hand and less at stake.
New market, new rules
Making a smooth entry by adhering to international tax laws poses not only extra financial burden, but also has administrative and time implications. In addition, harsh penalties may be faced if international tax laws are not abided, so it’s very important to carefully adhere to tax laws.
With Market Finder, you can save time on research and be sure that your tax information is relevant and reliable, leaving more leeway to focus on business with operations running smoothly in the background.
Time is money
Figuring out and paying taxes is a process that can eat into your time and resources, channeling them away from exploring the new business opportunities of your export market.
When assessing the time requirements of tax compliance in your export market, consider more than just the initial planning, calculation and payment. Ongoing compliance with changing rules, the correction of any errors, response to tax audits, and the application and receipt of refunds are further factors that may tie up your time.
The differing levels of sophistication in global tax systems means differing levels of efficiency. Less economically developed countries may not have robust electronic systems in place, and time to comply1 and number of payments2 made may increase, with more audits required as a result.
On average it takes a medium-sized domestic company 251 hours to comply with its taxes, it makes 25 payments, and has an average Total Tax Rate of 40.6%.3
The global picture
The global snapshot below gives an insight into the key tax considerations of a medium-sized domestic company looking to export.
Still a difficult region for paying taxes, it has the highest average number of payments, and the second highest total tax rate and time to comply.4
- The total tax rate continued to increase (due to implementing minimum tax rates and increasing social security contributions)
- The time to comply decreased thanks to improvements in accounting software and electronic systems for paying and filing tax returns
- The region fared better on post-filing: correcting a corporate income tax return would be likely to trigger a tax audit in 51% of African economies, but the completion time for those audits is less than the global average
Asia Pacific performed better than the global average on all counts except for post-filing. Time to comply and the number of payments continue to fall, but the total tax rate has increased slightly.
- The time to comply and the number of payments fell due to electronic systems being introduced or improved
- The total tax rate increased slightly as labor taxes and business rates increased in the region
- For post-filing, the processes take longer than the global average for all measures apart from the time to obtain a VAT refund
- The region has the longest average time of any region to comply with a corporate income tax audit and in 45% of economies a corporate income tax audit is expected
Central America & the Caribbean
The total tax rate and number of payments continued to fall, with changes to profit taxes and improved use of electronic systems.
- There has been a slight increase in the time to comply resulting from the introduction of VAT in The Bahamas.
- The region did not fare well on the post-filing measures, taking longer than the global average
- The region takes the longest time to comply with, and to obtain, a VAT refund
Central Asia & Eastern Europe
Central Asia & Eastern Europe continues to perform well for the total tax rate, time to comply and for number of payments – all of which are below the global averages and have fallen this year.
- The region has recorded the largest decrease this year of any region in the number of payments, due to the continued introduction and improvement of electronic systems, and the abolition of taxes
- It fared better than most regions in post-filing with better than average global results for three components: time to obtain a VAT refund, time to comply with, and time to complete a corporate income tax audit
EU & EFTA
Almost two thirds of the economies in the region made changes which affected their total tax rates.
- However, the total tax rate changes were mostly by small amounts, across the range of profit, labor and other taxes
- EU & EFTA is the only region where the number of payments has increased following the introduction of a tax that cannot be paid and filed online
- In terms of post-filing, few economies will audit the corporate income tax return for errors
- VAT refunds are available across the whole region
This continued to be the easiest region in which to pay taxes, with the lowest total tax rate and time to comply. The region performed worse than the global average in post-filing matters.
This region, with its three economies, still has the lowest number of payments and the time to comply also remained below the global average.
- Despite a small increase due to changes in property and labor taxes, the region’s total tax rate remained below the global average
- The region scores well on post-filing because there is to be an audit as a result of a corporate income tax correction in the United States
The total tax rate and time to comply have fallen but still remain the highest of any region.
- The total tax rate has fallen as the threshold rates for a turnover tax changed
- The time to comply fell as the introduction and improvement of electronic systems across the region took effect
- Electronic systems improvement also kept the number of payments below the global average
- South America has the least efficient post-filing processes of all regions, predominantly because VAT refunds are not available in any economy and the corporate income tax processes take longer than the global average
Learn more: For more free hands-on support from Export Development Canada, check out this list of resources.
The time to comply captures the time required to prepare, file and pay each main tax type (corporate income taxes, labor taxes and mandatory contributions, and consumption taxes). ↩
The number of payments measures the frequency with which the company has to file and pay different types of taxes and contributions, adjusted for the manner in which those filings and payments are made. ↩
The World Bank Group’s Paying Taxes 2017 study ↩