Understanding legal and regulatory compliance in international expansion

To ensure a smooth expansion, businesses must understand local compliance rules, choose the right legal structure, and align with tax regulations.

Choosing the right business structure

How a company is structured in a new market affects everything from taxation and liability to operational flexibility and ownership rights. Businesses typically choose between establishing a subsidiary, branch office, or local partnership, each with its own legal and financial implications.

Common business structures in global markets

• Subsidiary – A legally independent entity owned by the parent company, offering liability protection but requiring compliance with local corporate laws.
• Branch office – An extension of the parent company, often easier to set up but with fewer legal protections.
• Joint venture – A partnership with a local company to leverage market expertise while sharing risks and profits.

Country-specific examples

• Finland: A limited company (Osakeyhtiö or Oy) is a common choice for foreign businesses. At least one board member must be an EEA resident, or a permit must be obtained from Finnish authorities.
• Germany: A GmbH (Gesellschaft mit beschränkter Haftung) requires a €25,000 minimum capital investment and must follow strict governance rules.

Understanding taxation and compliance

Tax obligations vary significantly by country, affecting corporate profits, VAT/GST requirements, and cross-border transactions. Businesses must ensure compliance with local tax laws to avoid financial penalties and cash flow disruptions.

Key tax considerations

• Corporate tax rates – The percentage of tax paid on profits differs by jurisdiction.
• VAT/GST registration – Some countries require businesses to register once they reach a revenue threshold.
• Double taxation agreements (DTAs) – These treaties help businesses avoid being taxed twice on the same income when operating in multiple countries.

Country-specific examples

• Denmark: Corporate tax is 22%, but companies can benefit from R&D tax incentives.
• The Netherlands: Offers a 30% ruling tax advantage for highly skilled expatriates, reducing their taxable income.

Industry-specific regulations and licensing

Certain industries face stricter compliance requirements, requiring permits, licenses, or sector-specific regulations to legally operate.

Industries with strict compliance needs

• Financial services – Banking, investment, and fintech firms require licensing and regulatory approvals.
• Healthcare and pharmaceuticals – Strict medical and data protection laws apply.
• Manufacturing and import/export – Compliance with environmental and safety regulations is essential.
• Technology and data privacy – Companies handling customer data must comply with laws like the EU GDPR.

Country-specific examples

• France: Strict labor protections make compliance with employment laws essential before hiring staff.
• UK: Businesses must follow minimum wage laws, pension contributions, and worker rights protections.

How Greenstep can help

Expanding into a new country requires expert legal and tax support to navigate compliance challenges. Greenstep, in partnership with MSI Global Alliance, provides businesses with:

• Legal and tax compliance guidance tailored to each country.
• Entity setup and structuring support to ensure smooth market entry.
• Risk assessments and regulatory insights to prevent costly missteps.

International expansion requires proactive legal and regulatory planning. Choosing the right business structure, understanding taxation, and ensuring compliance with industry regulations are critical steps in avoiding unnecessary risks.

With Greenstep’s expert advisory and global network, businesses can confidently expand into new markets while ensuring full compliance with local laws.