Food Processing & Agriculture manow
Three International Tax
Traps to Avoid
by Roy Deaver, Partner, International Services Group
With a wavering US economy, many food
processors are exploring the international
marketplace as the next frontier. After all, with
95 percent of potential customers outside our
borders, there’s a large market for your products.
But before you plow ahead, there are several
important tax pitfalls to watch out for.
Foreign Sales Tax
Unlike the US system, in which everyone along
the supply chain is exempt from sales taxes until
the end consumer, many foreign systems assess
tax on all parties along the way. Typically in these
types of systems, taxes paid can be claimed as a
credit against taxes charged to customers.
However, while these types of taxes shouldn’t
result in a net cost to a company, they can
become a trap for the unwary if not appropriately
identified and managed. This is especially true
when selling to individual consumers.
In many cases there isn’t a de minimis or certain
volume of sales that’s exempt—all sales are
subject to tax. Additionally, “nexus” may not be
needed in a country for these taxes to apply.
Before entering into transactions in a foreign
country, you should understand the mechanics
of the sales-type tax in that country and whether
you’ll be required to register for, charge, collect,
and remit such taxes.