Insights

Introduction: Why International Tax Matters

Expanding across borders offers exciting opportunities, from new markets, global customers, and higher growth potential. But it also brings complex international tax challenges. Each country has its own rules, thresholds, and reporting systems, and when these overlap, things can get tricky pretty quickly.

From VAT and corporate tax to customs duties and digital services, international transactions demand careful planning and compliance. Understanding how different tax regimes interact is essential to avoid costly mistakes.

At CRM Accountants, we help UK businesses manage their cross-border tax obligations with clarity and confidence. Our specialist advice ensures your global expansion is structured efficiently, compliant with local laws, and built for sustainable growth.

Understanding the International Tax Landscape

When a business begins trading internationally, the tax landscape becomes far more complex. Each country has its own rules, rates, and definitions; therefore, understanding this global tax environment is crucial to staying compliant and profitable.

Businesses operating across borders typically encounter five main types of tax:

• VAT / GST / Sales Tax: taxes on goods and services, usually charged to the end consumer.
  
• Corporate Income Tax: levied on profits earned in each jurisdiction.
  
• Withholding Tax: deducted at source on cross-border payments such as dividends, royalties, or interest.
  
• Customs Duties and Import Taxes: applied when goods move between countries.
  
• Digital Services Tax (DST): imposed on revenues from online or technology-based activities.

These taxes often overlap. A single international transaction can trigger multiple layers of tax, depending on where the buyer, seller, and goods or services are located. Understanding how they interact is key to effective international tax compliance and efficient cross-border business planning.

At a Glance: Key International Taxes

Type of Tax	What It Covers	Who Pays It	When It Applies	Key Risk Points
VAT / GST / Sales Tax	Goods and services sold domestically or across borders	End customer (collected by the business)	When selling or importing goods/services	Incorrect place-of-supply rules, missing export evidence
Corporate Income Tax	Profits earned by a business in a given country	The company	When a business has a taxable presence abroad	Creating a permanent establishment without realising it
Withholding Tax	Cross-border payments (e.g. interest, royalties, dividends)	The payer (deducted at source)	When paying overseas entities	Failing to claim relief under tax treaties
Customs Duties & Import Taxes	Goods moving between countries	Importer or exporter	When goods cross borders	Misdeclared values, tariff errors, post-Brexit changes
Digital Services Tax (DST)	Revenues from digital platforms, advertising, or streaming	The digital service provider	When earning revenue from users in a DST country	Overlapping VAT/DST rules, underestimating local thresholds

International VAT and Indirect Taxes: Getting the Details Right

When it comes to international tax, VAT (or its equivalents, GST and sales tax) is one of the most intricate areas to manage. Every transaction starts with a crucial question:
“Who is supplying what to whom?”

To determine how VAT applies, consider three key factors:

• Supplier location: Where is the business established or registered for VAT?
  
• Nature of supply: Is it goods or services, and do any special rules apply?
  
• Customer location and type: Is the customer a business (B2B) or consumer (B2C)?
  

Goods

• EU customers – supplies from Great Britain (GB): Sales of goods from GB to the EU are exports for UK VAT purposes and can be zero-rated when you hold valid proof of export (UK VAT Notice 703). (GOV.UK)
  
• EU customers – supplies from Northern Ireland (NI): Movements of goods between NI and the EU remain intra-EU. NI businesses use EC Sales Lists (ESL) where conditions are met and may have Intrastat obligations; 2025 Intrastat thresholds are £500,000 (arrivals) and £250,000 (dispatches). (GOV.UK)
  
• B2C goods to the EU – IOSS/OSS (post-2021 rules): The old per-country distance-selling thresholds (e.g., €35k/€100k) no longer apply. For consignments ≤ €150 imported into the EU, non-EU sellers can opt into the Import One-Stop Shop (IOSS) to charge destination-country VAT at checkout; above €150, import VAT and customs apply at the border and local registrations may still be needed depending on fulfilment (e.g., stock in the EU). (Taxation and Customs Union)
  
• Non-EU customers: Goods exported outside the EU are exports and typically zero-rated with proof of export. (GOV.UK)
  

Services

• B2B – EU customers: Under the general rule, the place of supply is where the customer belongs; such sales are usually outside the scope of UK VAT and accounted for by the customer under the reverse charge (VAT Notice 741A). (GOV.UK)
  
• B2C – EU customers (general rule and key exception): Generally, VAT is due where the supplier belongs. However, for electronically supplied (digital) services, the place of supply is where the consumer is located; UK suppliers can use the non-Union OSS to account for EU VAT on these B2C digital sales. (GOV.UK)
  
• Outside the EU: Services supplied to customers outside the EU are often outside the scope of UK VAT, but specific rules apply to certain sectors (e.g., land-related services, events, restaurant/catering, transport, telecoms, digital). Check VAT Notice 741A for exceptions. (GOV.UK)
  

Common pitfalls of international tax include: 

• Missing export evidence
• Assuming old EU distance-selling thresholds still apply 
• Mis-timing OSS/IOSS use
• Misreporting the place of supply.

Corporate Tax and Permanent Establishments

Even limited overseas activity can create corporate tax obligations abroad. The key question is whether your operations amount to a Permanent Establishment (PE) – typically a fixed place of business such as an office, warehouse, or an agent who regularly concludes contracts. 

Once a PE exists, local tax authorities can tax the profits attributable to that presence under local law and applicable Double Taxation Agreements (DTAs).

DTAs set out how profits should be allocated between jurisdictions and how to claim relief to prevent double taxation. Businesses must also follow transfer pricing rules, ensuring transactions between connected companies are at market value and supported by documentation.

Even temporary overseas arrangements can trigger a taxable presence, so review your structure carefully before expanding.

Withholding Taxes on Cross-Border Payments

When money moves across borders, withholding tax can quietly reduce what your business or its partners receive. This tax is deducted at source on certain cross-border payments, typically dividends, interest, or royalties. 

Rates vary by country (often 5%–30%), but the UK’s DTAs frequently provide relief or exemptions to prevent double taxation; relief usually requires residency certificates, specific claim forms, and careful record-keeping.

Understanding and managing withholding tax correctly helps maintain healthy cash flow and avoids penalties.

Customs Duties and Trade Compliance

When goods cross borders, customs duties and import taxes often apply alongside VAT. These charges depend on product type, origin, and declared value.

To trade smoothly and remain compliant, manage the essentials:

• EORI number: Required for importing or exporting goods from the UK.
• Tariff classification: Determines the duty rate for each product.
• Rules of origin: Affect eligibility for reduced tariffs under trade agreements.
• Customs declarations: Must accurately reflect the nature, value, and destination of goods.
• Incoterms: Define responsibility for transport, insurance, and duties.
  

Since Brexit, UK businesses face specific NI-EU reporting where relevant (see ESL/Intrastat above). Getting these details right prevents delays, unexpected costs, and compliance risks. (GOV.UK)

Tax Tip: Keep clear records of customs entries and supporting documentation; they’re essential for audits and VAT recovery.

Digital and E-Commerce Tax Rules

With more business online, digital and e-commerce taxation is now a global priority. For EU sales:

• From 1 July 2021, the EU’s VAT e-commerce package introduced the One-Stop Shop (OSS) and Import One-Stop Shop (IOSS) to simplify B2C VAT, removed old distance-selling thresholds, and ended the low-value import VAT exemption, replacing it with IOSS for consignments ≤ €150. (VAT e-Commerce – One Stop Shop)
  
• Marketplaces as “deemed suppliers”: In specific B2C scenarios (e.g., certain cross-border sales and imports ≤ €150), online marketplaces are treated as the deemed supplier and are liable to collect and remit VAT; sellers remain responsible for transactions outside those scenarios and for other obligations (e.g., stock held in the EU, local registrations). (VAT e-Commerce – One Stop Shop)

E-commerce sellers using platforms like Amazon or eBay should confirm where the deemed-supplier rules apply and where they themselves must still register or report.

Staying Compliant and Planning Strategically

Managing international tax compliance is about more than deadlines, it’s about building a structure that supports efficient, sustainable growth. As your business expands, a clear tax strategy prevents problems before they arise.

Key steps to stay compliant include:

• Mapping your global tax footprint: Identify where your customers, suppliers, and taxable activities are based.
  
• Registering early: Meet VAT or corporate tax obligations before crossing local thresholds.
  
• Automating records: Use accounting systems that handle multi-currency VAT, invoicing, and real-time reporting.
  
• Maintaining documentation: Keep contracts and export evidence ready for audits or relief claims.
  
• Review regularly: Rules change, schedule periodic reviews with your accountant to ensure your structure remains compliant.

Proactive planning doesn’t just reduce risk; it can unlock savings, improve cash flow, and streamline cross-border operations.

Our international tax specialists design clear, compliant, and scalable strategies, helping your business focus on global growth, not red tape.

Conclusion

Expanding internationally creates opportunity but also complexity. Managing tax compliance, reporting, and planning effectively ensures your business grows with confidence, not risk.

At CRM Accountants, we guide businesses of all sizes through the challenges of VAT, corporate, and international tax. From registrations to reporting and cross-border structuring, our experts keep your operations compliant and future-ready.

Get in touch today to simplify your global tax strategy and keep your business growing across borders.