How to advise clients navigating cross-border transactions
Accountancy Today advises accountants on the things they must be aware of when conducting any kind of cross-border transactions

In today’s globalised economy, cross-border transactions are becoming increasingly common. Whether your clients are expanding their businesses internationally, engaging in foreign investments, or dealing with overseas suppliers and customers, understanding the intricacies of cross-border transactions is crucial.
Understanding cross-border transactions
To begin with we must first outline what a cross border transaction is. These transactions involve the transfer of goods, services, capital, or information across international borders. This can include:
- Import and export of goods and services
- Foreign direct investments (FDIs)
- Mergers and acquisitions (M&As) involving foreign entities
- Cross-border financing and loans
- International licensing and franchising agreements
Key considerations for advising on cross-border transactions
Regulatory compliance
The first and most important thing to consider when advising on a cross-border deal is how to navigate the regulatory landscape of multiple jurisdictions. This means that you must comply with local laws and regulations in each country involved in the deal. Each country has its own set of business laws, including company formation, employment laws, and industry-specific regulations. These regulations may also include anti-money laundering laws designed to prevent financial crimes so it is imperative you are across this to keep your client out of trouble.
Alongside this, you must also be across any international trade agreements that may exist between the two nations involved. This is particularly pertinent since Brexit as the UK lost tariff free trade agreements with the EU. An example of a trade agreement would be the UK-EU Trade and Cooperation Agreement post-Brexit, which affects tariffs, quotas, and customs procedures.
Ensuring that cross-border agreements are legally sound is also crucial. To do this you should clearly define which country’s laws will govern the contract and where disputes will be resolved. This will help avoid any potential problems. You also must ensure that your client’s IP rights are adequately protected in all relevant jurisdictions to avoid any potential issues down the line. Finally, as there will be multiple parties involved in any transaction you should include arbitration or mediation clauses in any deal to handle potential disputes efficiently.
Lastly, you must be aware of any sanctions and embargoes which may affect business operations in certain countries. For example, much of Europe has sanctions against Russian and Belorussian business as a result of the invasion of Ukraine, therefore affecting the business you can do with companies from or affiliated to those countries.
Taxation
The next most important thing to consider when advising on a cross-border deal are the tax implications of it. Working across multiple jurisdictions means tax laws are different and therefore you must be able to advise your client on how to pay the correct amount of tax in the correct place.
One thing to consider are double taxation treaties (DTTs). The UK has DTTs with many countries to avoid double taxation of income. In your role as adviser it is up to you to find out which countries the UK has treaties with and the specifics on them so your client ends up compliant with all tax laws.
It is also important to be across VAT and customs duties. Each jurisdiction will have its own application of tax on imported and exported goods. You must also ensure that inter-company transactions are conducted at arm’s length to comply with transfer pricing regulations and avoid tax penalties.
Lastly, and perhaps most importantly, you must assess whether a client’s activities in a foreign country create a Permanent Establishment (PE), triggering tax obligations in that jurisdiction. In the UK a PE is defined as a fixed place of business in the UK through which the business of the enterprise is wholly or partly carried on, or an agent acting on behalf of the enterprise that has authority to do business on behalf of the enterprise.
Foreign exchange risk
A big potential issue around cross-border transactions are currency fluctuations that can significantly impact the profitability of cross-border transactions. Currency fluctuations can be caused by a number of factors many of which are out of the control of your client and therefore you must advise them on ways they can best insulate themselves from these fluctuations.
To do this you should advise them on hedging strategies and use financial instruments like forward contracts, options, and swaps to mitigate foreign exchange risk. You should also track currency movements and advise your clients on the optimal times to execute transactions to get the most value for whatever currency they trade in.
Cultural and operational differences
The last and perhaps most important thing to consider as part of any cross-border deal is understanding and acknowledging that there will be cultural and operational differences across the table. Therefore you must advise your client on the best way to conduct themselves to get a deal done with ease.
You must first educate clients on the cultural nuances of doing business in different countries. Countries like Japan will have very different ways of working and very different traditions and it is important that your clients are able to respect that when agreeing any deal.
Secondly, you must then discover how each country works operationally and how your client can adapt to that, to develop an efficient supply chain strategy to help navigate any potential hold-ups in the success of a deal.