Cost-sharing between group companies — where does doing it myself start to cost money?
Some of it, yes — and we will say so on the call if that is the honest answer. The parts that are worth paying for are the ones where a missed election, a missed deadline or an unverified threshold costs more than the fee: a defensible allocation needs an actual benefit to each participant, a key that reflects that benefit, and evidence that shareholder costs were excluded.
What if I have already filed and got it wrong?
That is a common starting point. We re-derive the position, identify whether an amendment or a disclosure route is the right vehicle, and tell you which one preserves the relief that is still available. The order matters more than the speed.
How long will it take?
It depends on the documents rather than on us. Once the pack is complete most filings turn around inside a fortnight; anything that needs a certificate from a tax authority runs on that authority's timetable, which we tell you at the start rather than at the end.
Can I charge my foreign subsidiary a share of head office costs?
You can, but the charge has to be built rather than declared. A defensible allocation needs three things: a real benefit to the company being charged, an allocation key that reflects that benefit, and evidence that costs incurred for the shareholders were kept out of the pool. Miss any of them and the charge is exposed at both ends — the deduction is denied in the country paying it, while the receipt remains taxable in the country receiving it. That is the worst of both outcomes, and it is the usual one when the arrangement was never documented.
How should shared costs be allocated between group companies?
Start from what each participant actually receives, not from what is convenient to divide. The key should be something that moves with the benefit — usage, headcount, transaction volume, whatever genuinely tracks the service in question — and it should be capable of being tested against records that already exist for other purposes. A key chosen because the data was to hand, and then applied to costs that have nothing to do with it, fails on its first serious question. Different cost pools frequently need different keys, and one key applied across everything is a common weakness.
Why was our intercompany management fee disallowed?
Usually for one of three reasons. The paying company could not show it received an identifiable benefit; the basis of the charge could not be explained; or the pool included costs incurred for the parent as an owner rather than for the subsidiary as a customer. Note the asymmetry that follows a denial: the country that refused the deduction does not thereby persuade the other country to stop taxing the receipt, so the same amount is taxed once and relieved nowhere. Disallowance is therefore more expensive than it first appears.
Are shareholder costs chargeable to the subsidiaries?
No, and separating them is one of the three things a defensible allocation has to demonstrate. Costs a parent incurs because it is an owner — reporting to its own shareholders, servicing its own financing, managing its holding of the subsidiary — are incurred for its own benefit, whatever value the group may derive indirectly. Costs incurred to provide a service the subsidiary would otherwise have bought or performed itself are a different matter. The distinction has to be drawn when the pool is assembled, because reconstructing it years later from a ledger that never made the split is slow work.
We post one management charge at the year end — is that enough?
A single year-end entry is the pattern auditors open with, because on its face it shows a figure chosen and then justified rather than costs incurred and then allocated. The charge itself may be perfectly reasonable; the difficulty is that nothing in the record demonstrates it. If the underlying costs are real and the allocation key is sound, the same result can be supported by recording the basis at the time and charging through the year as the costs arise. If the figure was reached by working backwards from a target, that is a different problem.
What evidence supports a cost allocation if we are audited?
An agreement made before the costs were incurred rather than after the query, setting out what is provided to whom. The composition of the cost pool, with shareholder costs identified and excluded. The allocation key, with the reason it reflects the benefit and the source data behind it. Something that shows the service was actually delivered — correspondence, deliverables, the work itself. And a note of who reviewed the arrangement and when. Assembled as you go, this takes very little time; reconstructed under audit, it takes months and is weaker for having been built afterwards.
Branch or subsidiary — which should we use to expand?
A branch keeps one taxpayer: results consolidate at home, losses are usable sooner, and the exposure is that the branch is a permanent establishment whose profit the host country taxes, sometimes with a branch tax on repatriation. A subsidiary is a separate taxpayer with limited liability and local rates, at the cost of withholding on dividends home and transfer pricing on everything between them. The deciding facts are usually expected losses, liability and exit plans. See branch against subsidiary.
Which business structure has double taxation?
The corporation — specifically a US C corporation, where profit is taxed to the company and the dividend again to the shareholder. Sole proprietorships, partnerships and LLCs treated as flow-throughs are taxed once, in the owners' hands. Across borders that tidy answer breaks: an entity treated as a flow-through in one country can be opaque in the other, which produces a mismatch neither system planned for. See LLC against corporation for Canadians.
