Going Global October 14 - FINAL.pptx [Read-Only]
Transcript of Going Global October 14 - FINAL.pptx [Read-Only]
October 14, 2015
*This presentation is offered for informational purposes only, and the content should not be construed as legal advice on any matter
GOING GLOBAL:Key Considerations for Successful International Expansion
A COMMON SCENARIO
You want to hire 2 developers in the U.K. and a sales person in China.
Here are some of the questions you should ask: Which entity will sell the products (software or services) to the
customer? Do we need an entity in each country? If so, what are our options and
how quickly can we get operational? How do we run payroll? Can we pay them from the U.S.? What are the local benefits and tax requirements? Are we issuing stock options? What sort of employment contracts do we need? What are the other
employment requirements and pitfalls? How do we effectively protect our intellectual property?
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SUBSIDIARY, BRANCH, OR “JUST PAYROLL?”
Step 1: Determine the appropriate entity structure Determine appropriate level of corporate “registration” in
country Subsidiary or branch? What are your plans for the future? Representative office – limited in scope to marketing and non-sales
activities In practice, representative offices often do more than permitted scope
Just payroll registration (possible in UK, not possible in China)
“Activities” in-country can trigger a corporate tax Permanent Establishment (“PE”) Difference between revenue generating activities vs. purely marketing,
non-revenue generating activities PE is a grey area and is open to interpretation by different fiscal
authorities in different countries Understanding “triggers” allows for proactive management and
compliance
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BRANCH VERSUS SUBSIDIARY
Branch Office A branch office is an extension of another company A branch office is not a separate legal entity - no legal liability
protection Branch office of U.S. parent company could expose Parent’s profits to
tax in branch country and also to legal liability Consider forming a separate Delaware LLC to house foreign employees and
contractors
Subsidiary A subsidiary is a separate legal entity Provides a layer of protection between the parent company and the
activities of the entity Generally a better vehicle to manage tax and legal liability risks
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Agency Workers
• permissible?
• limitations on time or type?
• equal pay obligations?
• equity compensation?
Employees
• local corporate presence required?
• payroll registrations?
• benefits?
• fixed term?
• equity compensation?
PEOEmployees
• are joint employees and need to comply with all applicable employment laws
• permissible?
• equity compensation?
EMPLOYMENT / HR PLANNING:ENGAGEMENT OPTIONS
Independent Contractors
• what quacks like a duck is a duck
• withholding obligations (VAT, GST)?
• registration obligations
• sales agent rules?
• equity compensation?
Step 2: Get employment and global equity right
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MOBILE EMPLOYEES AND EXPATRIATE ASSIGNMENTS – HOW DOES IT WORK?
Alternative #1: Direct contract with host country employer (‘localization’)
Home Country, Inc.
Host Country, Inc.
Transferemploymentrelationshipthroughtermination &hire
Alternative #2: Secondment
Keep existing employment with home country employer and second or loan to host country employer
Home Country, Inc.
Host Country, Inc.
Seconded
Service Fee
Alternative #3: Transfer followed by Secondment
Transfer employment relationship through termination & hire and then second or loan to host country employer
Home Country, Inc.
Host Country, Inc.
SecondedService Fee
Global Employment Company (“GEC”)
Home Country, Inc. (dormant)
Host Country, Inc.
Maintain dormant employment relationship with home country employer; enter into active employment relationship with host country employer
Alternative #4: Transfer with dormant home country employment relationship or dual employment
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EMPLOYMENT / HR PLANNING: OTHER CONSIDERATIONS
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Payroll• Local hires• Expat employees
Benefits• Mandatory (law, CBA)• Optional
Onboarding Requirements • Workers’ compensation
equivalent• Pre-hire medical tests• Background tests
Employment Agreements• Required?• Language?• PIIA• Specific terms?
Policies• Required work rules
and internal regulations
• “Global” policies (e.g., code of conduct)
• Local policies (e.g., disciplinary & grievance procedure)
Exit Strategy• No at-will employment
internationally• Probationary periods
and performance management
• Redundancies and performance terminations
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GLOBAL EQUITY COMPENSATIONPROGRAMS
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INTERNATIONAL TAX PLANNING:KEY CONSIDERATIONS
Step 3: Consider your international tax structure Early expansion stage – basic items Keep it simple and manageable as complexity produces marginal benefits and
reduces future flexibility Define intercompany relationship based primarily on business rationale Intercompany agreement – defines the relationship between affiliates Transfer pricing – pricing of goods, service and IP between affiliates based on the
intercompany agreement But, keep an eye out on potential for more sophisticated international
structuring opportunity and timing (as it could be sooner than you think) E.g., building an R&D team in Ireland; or acquisition of a Dutch target with product
and sales infrastructure; or raising Series C or going IPO at high valuation Valuable to company but also to potential acquirer
High growth stage – comprehensive international structuring Understand the value of planning by modeling out the timing and potential
benefits whether future as stand alone entity or acquisition target Note that value of intangibles increases over time, thus balancing of timing
and operational readiness becomes key
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TAX PLANNING SUMMARY
Overall message: Allocate, Protect, and Facilitate Allocate Allocate income to lower-tax jurisdiction(s) where feasible
Protect Plan for both US and foreign “long arm” statutes
US long arm statutes
Foreign long arm statutes Withholding Tax Permanent Establishment
Facilitate Reduce tax and legal friction on cash movement or redeployment
(including repatriation)
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OVERALL CONSIDERATIONS
Proper, practical planning for international expansion is critical Develop a checklist and bring in advisors early
Scope out timing & costs
Involve key players within your organization
Need to think long-term Impact to share value upon an exit event -- M&A, IPO
Potential tax reserves, once valuation allowances are released
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TREASURY IS A KEY FUNCTION FOR GLOBAL COMPANIES
Treasury’s top
challenges
1. Cash repatriation2. FX volatility3. Visibility into global
operations, cash, and financial risk exposures
Deloitte, “2015 Global Corporate Treasury Survey,” January 2015
Almost 3 months
Time spent annually on manual tasks by
organizations that rely on spreadsheets for
forecasting
50% more time than those with an
automated process
Kyriba & Association of Corporate Treasurers, “The Changing Role of the
Modern Treasurer,” 2015
Over 90%Companies that use
a central treasury organization to support their global operations.
2015 Treasury Strategies / RevalBenchmarking Study
EVERY COUNTRY IS UNIQUE
SEPA, covering the entire EURO zone, is one of the world’s largest cross-border networks for low-value payments
Germany uses its own electronic payments network, called ELV
Japan can transfer funds in real time with its Zengin system
Only Brazil uses the Boleto, a paperpayment method
The U.S. reports with BAI files ...
... while Europeprefers SWIFT
Paper checks are nearly non-existentin Sweden
CORE COMPONENTS TO A CENTRALIZEDTREASURY STRATEGY
Organization
Legal structure Tax structureOrganizational structure Policies and procedures
Operations Payments and collections Liquidity Risk management
Technology
ERP and treasury integration Standards and protocols Straight-through processes Systematic controls
CREATE A TAILORED GLOBAL TREASURY SOLUTION
Reviewyour global footprint
Identify locations
Align tax structure
Defineyour payment needs
Review volume, timing, and destinations
Which currencies
Improveyour work flow
Automate, consolidate, and expedite transactions
Implement industry-standard tools
Optimizeyour control
Establish accurate cash positioning
Optimize idle cash
Establishyour accounts
Assessin-country needs
Review funds flow
Designate controls, signers
Integrateyour systems
Transact globally from one platform
Connect directly to ERP
BENCHMARKS TO MEASURE SUCCESS
Centralized control, agnostic of location
Geographical standardization among processes
Decreased transaction costs
Scalability to support continued growth
Transparency for local tax needs
Consolidated banking relationship management
PRESENTERS
Michael BratsafolisSenior Paralegal
Twilio, Inc.
Since January 2015, Michael has managed the corporate logistics of Twilio’s international expansion in Europe, South America and Asia. Michael has spent the past ten years working as a paralegal in both in-house and traditional law firm settings. Michael received a BA from Coastal Carolina University, and is currently pursuing an MS in Applied Economics at Johns Hopkins University.
Ben OlivasPartner, International Tax
Ben Olivas concentrates his practice in international tax and operational structuring, global transfer pricing strategy and documentation, cross-border mergers, acquisitions, dispositions and joint ventures, post-acquisition integration and tax controversy. Ben has worked extensively with US companies doing business in various parts of the world, as well as foreign companies expanding their US operations.
Tyler ChapmanVP Finance /Corporate Controller
Lumos Labs “Lumosity”
Tyler Chapman oversees the Lumosity’s accounting, tax and treasury functions and is also heavily involved in corporate FP&A. He joined the company in 2014 and brings more than 10 years of corporate and public accounting experience to Lumosity. Tyler is a CPA and holds an M.S. in Taxation from Golden Gate University and both an M.S. in Accounting and a B.S. in Accounting from the University of Montana.
Albert HwuVice President International Treasury
Wells Fargo
Albert works with corporate/finance leaders to develop global cash management solutions for companies expanding internationally. He primarily focuses on middle market companies in the Bay Area including the technology and life sciences sectors.
Elise LeungDirector of Legal, Corporate &
SecutitiesAppDynamics, Inc.
As Director of Legal, Corporate & Securities, Elise represents AppDynamics, Inc. in all legal matters, including corporate governance, strategic transactions, commercial agreements, IP, litigation, compliance, employment law and equity administration.
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