WHY INTERNATIONAL BUSINESS EXPANSION IS IMPORTANT FOR YOU?

INTRODUCTION

As businesses grow and expand, it is always an exciting opportunity for business owners to diversify their markets and move into previously unexplored territory. Expansion into international markets is one of the most ambitious growth opportunities for any business. Such global expansion can be a fantastic opportunity for a company to benefit in a variety of ways.

When expanding a business abroad, a company owner can look forward to the following advantages:

• Entry to New Markets

The first step is to enter a foreign country's new market. It is worth noting that a company's growth opportunities in its home country can sometimes be exhausted. In that case, turning to global expansion is a wise decision for growing your business and gaining access to new customers, thereby increasing sales. Coming out of their shell, the country can allow entrepreneurs to enter markets in Europe, Asia, and the Americas that have not previously been used by their goods and services, allowing them to expand their businesses in ways that would be impossible within national borders. Businesses within a given country grow and expand to cover every conceivable area within its borders. The international business expansion allows such a company to acquire new markets outside the presence of the country.

• Larger Customer Pool

Another advantage of expanding a business abroad is that you will have a larger pool of customers interested in your product. One of the most significant benefits of international expansion is an increase in the number of potential clients, which leads to increased business growth. Entering international markets allows businesses to grow faster by reaching a new customer base. On the other hand, by expanding internationally, a company not only sells current products or services to a new customer base, but also invests in and introduces new products to a foreign market.

• Competitive Advantage against other Rivals

International expansion also provides businesses with a significant competitive advantage over their competitors. It is worth noting that the market in one's home country can become saturated at times, and expanding abroad allows a company to gain access to a market where competitors do not exist. Unreached markets are usually a first-come, first-serve opportunity for businesses in tough competition, with the first company to establish a presence within a specific country market benefiting from additional advantages, such as ease of dominance in the market. Moving into a less developed niche in another country before your competitors does can give you the opportunity to become a trusted brand in that country. As a result, you can use this to enter neighbouring countries' markets. By the time your competitors gain popularity, you will already have become a recognized supplier of goods or services, which will give you a competitive edge.

• Increase in Profit Potential

At the same time, keeping business in the domestic market limits its profit potential. International expansion provides an opportunity for a company to diversify its investment and acquire new assets, as well as implement new operational strategies. Due to unforeseen circumstances, the domestic market may slow and a business may suffer losses. As a result, business expansion provides the benefit of a global market, which can help cushion the company during slower economic times.

• Cost Saving

The possibility of economic changes and a slowing of the national market leads to yet another benefit: cost savings. A company can lower its operational costs and save money by establishing itself in a new country. When expanding a business abroad, the option of relocating some manufacturing operations to other markets with lower labour costs and more readily available talent can be considered advantageous.

• Access to Local Talents

It is worth noting that the expansion comes with the opportunity to work with locally available resources, including talent and natural resources. Hiring international talent can provide a variety of benefits, such as advanced language skills and diverse educational backgrounds. While it may take longer on average to establish a business overseas, the effort to reduce costs and improve results over time can be well worth it. Reducing production and personnel costs through outsourcing or overseas expansion can provide the funds needed to enter new markets, develop new products, or scale the business.

• Government Incentives and Tax Advantages

Government incentives and lower taxes are two of the most significant advantages of business expansion. In many countries, there are a variety of government incentives to encourage start-ups. This can be expressed in the form of investment opportunities to make the incorporation of a business more appealing.

There are also a number of tax breaks available to business owners. It can also be useful to compare the levels of corporation tax in various countries. Some of the most appealing aspects of establishing a business abroad are the tax advantages. As governments followed the example of offshore jurisdictions, which managed to earn significant amounts of money for the economy by providing such incentives, such tax breaks began to spread in most countries around the world. This usually entails not only tax breaks, but also financial policies such as low lending rates, low social contributions, and other measures to encourage private enterprise.

The most important factor to consider when considering a tax advantage in business expansion is the tax legislation of the country in which an entrepreneur intends to develop the company. As a result, before the company begins operating under the new rules and laws, the tax policy of the chosen jurisdiction should be investigated. Knowing the exact corporate tax rate and tax credit provided by the government can assist in making a decision on the jurisdiction.

Double tax treaties are another tool that can be used to select a country for the registration of an international company. The primary goal of such agreements is to comply with and harmonise tax law between contracting countries, to eliminate differences, to ensure equal rights for taxpayers, and to prevent tax evasion. Tax treaties are an important component of many countries' international taxation rules. There are currently over 3,000 bilateral treaties on income taxation in force, and the number is growing. The vast majority of these treaties are based on the United Nations Model Convention on the Avoidance of Double Taxation between Developed and Developing Countries and the Organization for Economic Cooperation and Development Model Convention on Income and Capital Taxation.

It should be understood that such agreements apply to a limited number of people (contracting parties' residents) and to clearly defined types of taxes. Companies that operate in the offshore sector or benefit from preferential tax regimes are typically exempt from double taxation treaties. Thus, only companies registered in offshore jurisdictions (such as Cyprus, the United Kingdom, or the Netherlands) can benefit from the treaty on the abolition of double taxation, and only in relation to so-called "direct" taxes such as profits, capital gains, and property. The agreements do not govern the taxation of "indirect" taxes like VAT.

To take advantage of the treaty to eliminate double taxation, a foreign company must obtain a certificate from the tax authority in the country where it is registered confirming that it is a tax resident of that country.

The more agreements signed between countries, the more business owners are drawn to them. These agreements reduce the company's and its owners' tax burden. Furthermore, double taxation treaties work on a reciprocal basis, offering tax breaks or discounts. As a result, the investor can choose to establish a company in the country with the best tax conditions for conducting business.

Providing Service to International Clients of the Company:

One of the reasons businesses expand globally is to provide a dependable service to their international clients. Companies with a global presence typically have a stronger brand name, more prominent brand recognition, and a much broader reputation. A positive global reputation will bring in new customers.

Other Points to be Considered when Expanding Abroad:

When expanding business abroad, a company must take comprehensive measures to open and support a business abroad, interact with foreign government agencies, collect the necessary documents, select an economical tax regime, and choose the appropriate jurisdiction based on the specifics of the business (for example, low tax burden, suitable infrastructure).

At the same time, the company must open an account in a foreign bank so that when paying for the services of foreign counterparties, they do not have to rely on international transfers on a regular basis.

Conclusion

To summarise, it is important to remember that each country has its own unique characteristics; therefore, it is critical to study not only the economic and political aspects of the issue, but also the mentality of citizens and the country's culture. Despite the fact that many countries are working to improve the conditions for doing business on their territory in order to attract new active entrepreneurs, it is important to remember that the success of a business is dependent on the leadership's literacy and the entrepreneurs' actions.

Written By: Ankush