🔖 Contents on this page:

Intro

Expanding your start-up across borders can be an exciting opportunity for growth and new markets. However, it also comes with a set of unique challenges and complexities that require careful consideration.

This overview is intended to provide start-ups with key insights into essential legal and tax issues to keep in mind when setting up business operations and subsidiaries abroad.

Getting Started: Regulatory and Compliance

• Local Regulations: Each country has its own set of rules and regulations governing businesses. Understanding these regulations is crucial to ensure compliance.
• Entity Selection: Choose the right legal structure for your subsidiary in accordance with local laws and understand the tax implications of these structures.
• Registration: Be aware of the registration requirements in the target country and ensure timely compliance.

📋 Setting Up a Clean Structure: Intercompany Agreements

Structuring the legal relationship between your start-up and its foreign subsidiaries is a crucial step when setting up operations abroad. Under most circumstances, intercompany service agreements between the entities are the means of choice here. From a legal and tax perspective it is important that these intercompany agreements are drafted at-arm's-length, i.e. reflecting similar terms found in comparable third-party agreements. For a more detailed overview on Contracts in general we recommend our Essential Business Contracts sub-page.

Here are some integral parts to consider when drafting a comprehensive intercompany agreements:

• A definition of the services rendered between the companies - e.g. administrative or strategic support by the headquarter for the benefit of the foreign subsidiary.
• A proper pricing for the services, compliant in particular with transfer pricing regulations (see below).
• Regulations on each party’s responsibilities - e.g. reporting obligations.

Another important aspect in an intercompany (service) agreement refers to intellectual property. We recommend to safeguard intellectual property rights through clear agreements to prevent disputes over patents, copyrights, and trademarks. A clear allocation of IP rights between the different companies and jurisdictions is increasingly important in a cross-border structure especially in exit scenarios - a forward-looking legal drafting can usually prevent later discussions that may arise, particularly, in case of asset or licensing deals revolving around the IP.

For a more detailed overview on IP we recommend our Intellectual Property sub-page.

🏦 Avoiding a Fiscal Headache: Taxation and Transfer Pricing