Overseas Tax Audits are High on the Agenda

With increased globalisation, and information sharing agreements in place between countries, Governments are aggressively attacking companies using tax audits and assessments. They focus upon direct taxes, such as personal taxes of globally mobile employees or corporation taxes on intercompany transactions. Attention is also paid to indirect taxes, ensuring companies have correct processes dealing with customs duties, VAT invoices, payments and returns.

Companies often receive significant demands for tax from overseas authorities, with little time to review and appeal, and often must pay the tax before appealing.

We have experienced tax audits tackling various group structures, intercompany transactions and arrangements, and if not planned properly from the outset, can result in a UK company becoming liable to tax in a foreign country, which could have been avoided.

For example, if a UK company assigns employees to work for an overseas subsidiary and don’t have correct visa or Secondment Agreements in place, this can trigger permanent establishment issues within the overseas jurisdiction, depending on numbers of days spent in country and whether there exists any double tax agreement between the UK and the overseas country. It can also trigger payroll withholding obligations in the overseas country, which could lead to double taxation of the employees’ salaries.

Proactive planning is vital to minimise unexpected disputes, liabilities and risks in future. However, if defending a large tax audit or investigation, it is vital to ensure properly experienced tax people are involved in advance. Companies should also ensure a clearly communicated and understood strategy is in place to deal with tax audits and investigations to minimise any financial or reputational damage for the company.

We would recommend companies receiving tax assessment or audit letters take immediate action, and, if operating overseas, regular reviews or health checks of overseas tax compliance obligations are undertaken.

AAB has vast experience managing overseas tax assessments, audits and investigations, and assisting and facilitating local advisors to ensure these are dealt with in a timely and efficient manner with a successful defence and outcome for the client.

AAB also run training courses designed to help and prepare businesses who are setting up overseas or who are already operating overseas but require a refresher on the tax issues to be considered.

If you require further information regarding the AAB training on overseas tax issues or are interested in attending our Doing Business in Norway course, please contact Helen Brown at or your usual AAB contact.