Navigating the tax landscape of international expansion, from corporate structuring to global mobility considerations for a mobile workforce.
Expanding internationally presents both opportunity and complexity for construction businesses. Even large firms face financial constraints due to recent industry-wide pressures.
Mace, a privately owned UK firm, offers a compelling case study. By preserving flexibility over dividends to reinvest profits, it has remained stable in uncertain times.
Its blended consultancy-construction model has driven efficiency, though it complicates financial reporting for risk and margin. To attract investment, Mace separated its balance sheets to highlight the strength of its consultancy arm - a move that proved commercially savvy ahead of its upcoming transaction with Goldman Sachs.
Structuring for expansion: subsidiary vs branch
When entering new international markets, businesses must decide whether to establish a subsidiary or a branch. Subsidiaries offer ringfenced risk and clearer commercial and tax treatment, while branches allow loss-sharing though can bring other legal complexities. The choice impacts effective tax rates (ETR), treaty benefits, and the level of in country compliance required. It is important in the first instance to consider the commercial requirements of a structure and to assess the likely tax impact so that it may be factored in to pricing.
Where relief from double taxation relies on the operation of a treaty, it is vital to factor in the timing and additional compliance required in making a claim and any subsequent cash flow implications this may have, if there are delays in reclaiming tax.
There is the added risk that cross-border operations can unwittingly create permanent establishments. It is therefore vital that senior management within a business understands the tax risks of activities such as signing contracts in country or attending board meetings remotely.
People: the overlooked risk factor
The tax implications of labour mobility are often underestimated. Yet the potential pitfalls can, in some instances, outweigh the corporate income tax implications of international operations. For example, employment taxes in countries like Belgium and Denmark can reach effective rates of 40–50%, making global mobility tax planning essential
In a tight labour market, businesses face a balancing act, where they must make international mobility attractive to workers whilst also protecting margins. Clear policies on overseas benefits and clear communication with the workforce to educate workers about how they will be taxed whilst on assignment can go a long way to achieving both ends.
To avoid unpleasant surprises bid teams pitching for work should be encouraged to seek tax input whenever people are moving across borders. Often relatively simple and cheap steps can mitigate the risk of negative interactions for employees with tax and border agencies and protect margins from large tax liabilities and compliance costs.
Top Tips for Global Expansion
Track and review: Regular cross-functional reviews ensure alignment and cost control.
- Plan the structure early Subsidiary vs branch decisions affect tax, compliance, and commercial outcomes.
- Don’t ignore people Employment contracts, social security, and local tax rules can make or break profitability.
- Think long-term Quick decisions may serve commercial goals but can undermine strategic positioning.
- Invest in advice A quick tax consultation costing say £500 could save £500,000+ in tax exposure.
- Track and review Regular cross-functional reviews ensure alignment and cost control.
Global expansion isn’t just about market access, it’s about strategic foresight, financial discipline, and operational clarity. With the right planning, construction businesses can thrive across borders.
