Tech company international expansion

The Challenge

A Spanish technology company had developed a logistics management SaaS platform that was growing rapidly in the Spanish market. With revenues exceeding 8 million euros and a client base demanding local presence, expansion into France, Germany, and the UK was the natural next step. However, the tax complexity of operating in four jurisdictions simultaneously posed a significant risk.

Key concerns included the potential inadvertent creation of permanent establishments, varying VAT obligations in each country, the transfer pricing policy between the Spanish parent and local operations, and the taxation of employees temporarily deployed during the launch phase. Without a coherent international structure, the company risked triggering unexpected tax liabilities in each country, duplicating compliance costs, and exposing itself to transfer pricing challenges that could significantly erode margins.

Our Approach

We designed a multi-jurisdictional tax strategy in three tightly sequenced phases, each building on the outputs of the previous one.

Phase one: presence structure analysis. Before recommending any corporate vehicle, we conducted a permanent establishment risk assessment for each market. This involved mapping the proposed commercial activities, the role of local staff, and the location of decision-making authority. For France and Germany, the planned level of activity — including local sales teams, contract signing authority, and maintenance of client sites — met the threshold for creating a taxable presence. Establishing full subsidiaries in both markets was both legally necessary and commercially advantageous, providing a credible local entity for contracting and banking purposes. For the UK, the initial go-to-market model could be executed through a commissionaire arrangement, in which the Spanish parent retained ownership of customer contracts while the UK entity acted as a disclosed agent. This structure avoided permanent establishment in the first twelve months, giving the company time to assess the UK market before committing to full subsidiary costs.

Phase two: transfer pricing policy design. With three entity types in play — a Spanish parent, two fully consolidated subsidiaries, and a UK commissionaire — we conducted a detailed functional analysis of each entity, mapping the functions performed, assets used, and risks borne. The Spanish entity retained ownership of the software platform, the core technology intellectual property, and the group-wide sales strategy, acting as the principal in the group’s value chain. French and German subsidiaries performed routine distribution and customer implementation functions, bearing limited risk. The UK commissionaire earned a commission on contracts facilitated. We documented the transfer pricing policy in a master file and two local files compliant with OECD BEPS Action 13 standards, with benchmarking studies supporting all intercompany margins. This documentation provided a defensible framework under any audit scenario in any of the four jurisdictions.

Phase three: VAT and compliance configuration. Each jurisdiction’s VAT framework presented different obligations. We registered the French and German subsidiaries for VAT and configured the intercompany invoicing flows — software licence fees, implementation support services, and sales commissions — so that each charge matched the transfer pricing policy and was correctly documented for VAT recovery purposes. For the UK, we assessed the post-Brexit VAT position and ensured the commissionaire arrangement correctly accounted for digital services. We implemented a unified invoicing system across all four entities, with standard templates and automated tax code assignment, reducing manual compliance workload and the risk of errors.

Results

The tax structure was implemented in four months, enabling the company to begin commercial operations in all three markets within the planned timeline. The 28% tax savings compared to the unplanned scenario translated into over 340,000 euros annually. These savings arose from three sources: the efficient allocation of intellectual property income to the Spanish principal entity, the avoidance of double taxation through proper dividend flow design, and the elimination of unplanned withholding tax exposure on intercompany payments.

International revenue reached 12 million euros in the first full year of European operations, representing 60% growth on the prior year’s Spain-only base. The transfer pricing documentation withstood a routine query from the French tax administration in the second year of operation without requiring any adjustment, demonstrating the robustness of the framework put in place at inception.