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How to decide whether a new market needs a company, VAT registration or establishment assessment

Before creating another company in the ERP, establish who will conduct the business and what that business will do in the new country. A local customer, tax number, employee, warehouse and incorporated subsidiary represent different facts. Putting them all under a country flag hides decisions that affect invoices, accounting and filings.

Produce four separate conclusions: the company or branch-registration position, VAT-registration position, corporate-tax permanent-establishment position and VAT fixed-establishment position. Then translate those conclusions into software configuration. This guide explains that assessment process through UK examples. It does not provide a global incorporation rule or decide a particular business's tax position.

Use the business-footprint worksheet to retain facts, conclusions, evidence and review triggers. The controls and software patterns below are recommended project practices. A local legal or tax reviewer decides the applicable treatment.

Start with the transaction and the people behind it

Write a short factual description before asking whether an entity is required. Identify the legal person signing customer contracts, owning stock, employing workers, bearing commercial risk and receiving customer payments. Record where those activities occur and when they start.

Include arrangements that have not yet produced revenue. An employee may start before the first sale. Stock may enter a fulfilment warehouse before an order exists. A representative may begin negotiating while the formal contracting authority still sits abroad.

Ask the business owner to confirm the following facts in writing:

• Who may negotiate, approve or conclude contracts, and what happens in practice.
• Which premises, desks, equipment and systems the business may use.
• Who performs the work and whose instructions they follow.
• Where goods are held, who owns them and who imports them.
• Which customers are businesses or consumers and what is actually supplied.
• Whether an agent, employer of record, group company or logistics provider participates.
• Which facts are planned, which already exist and which remain uncertain.

Treat the contract and actual conduct as separate evidence. A document calling someone an independent contractor does not describe the full operating arrangement. Preserve contradictory facts for review instead of choosing the description that makes configuration easiest.

Assess company and branch registration

Distinguish forming a local company from registering an overseas company's local establishment. Record the legal person behind each registration. A foreign company's registry reference must not automatically become another independent seller in the ERP.

For the UK, Companies House explains when an overseas company must register a place of business. It also says a company without a UK base does not need that Companies House registration, although Corporation Tax registration can still be relevant. Where registration is required, its guide specifies a one-month filing period after opening for business. Companies House, register as an overseas company.

Ask the legal reviewer which route applies and what continuing filing and disclosure duties follow. Keep the company-register evidence separate from the tax review. Companies House publishes a dedicated guide covering overseas establishments and their continuing accounts and disclosure requirements. Companies House, overseas companies registered in the UK.

The project output is a named legal owner and a registration decision with an effective date. An application acknowledgment is evidence of an application, not evidence that every requested registration is active.

Assess VAT registration from the supplies

List the proposed goods and services separately. For each transaction, establish the place of supply, customer status, physical movement, party responsible for tax and any relevant exception. Only then apply the appropriate registration test.

The standard domestic turnover threshold is not a safe starting assumption for a foreign business. HMRC's VAT Notice 700/1 describes non-established taxable persons, registration without the ordinary threshold and situations that can change that result, including qualifying reverse-charge and marketplace arrangements. Review the relevant branch of that guidance rather than borrowing a resident-business threshold. HMRC, VAT Notice 700/1, sections 9 and 12.

For services, determine whether a special place-of-supply rule applies before using the general B2B rule. Record evidence supporting the customer's business status and the establishment involved. HMRC's services notice explains both the general rule and exceptions, and distinguishes overseas-supplier registration from cases where the customer accounts for tax through the reverse charge. HMRC, VAT Notice 741A, sections 2, 5 and 6.

The ERP output may be a foreign registration belonging to the existing company, a different invoice-tax treatment, another reporting population or several of these. It is not necessarily another incorporated entity. Verify that the proposed product and localization can represent the approved arrangement before relying on that design.

Assess corporate-tax permanent establishment separately

Give the direct-tax reviewer the same factual record, including the agent's practical authority and the activities conducted at each location. Ask for the domestic-law assessment and the applicable treaty assessment, with the relevant provisions identified.

HMRC's international manual describes fixed-place and agency routes to a UK permanent establishment and explains the importance of treaty interaction. It also discusses preparatory or auxiliary activities in relation to the business as a whole. A warehouse label or job title alone is insufficient evidence for the project's conclusion. HMRC, INTM264050.

Keep the conclusion distinct from the company-register and VAT decisions. HMRC has a Corporation Tax registration process for specified non-UK companies not required to register with Companies House, including those trading through a dependent-agent permanent establishment. HMRC, Corporation Tax for non-UK incorporated companies.

Translate an approved PE assessment into requirements for attributable transactions, costs, assets, records and reporting ownership. The tax reviewer determines any profit-attribution method. An ERP dimension can help collect data; its existence does not establish or eliminate a PE.

Assess VAT fixed establishment for the relevant supply

Ask a separate question: which establishment makes or receives the particular service? Record the human and technical resources involved, their availability and the role they perform. Do not substitute the answer from corporate-tax PE analysis.

For an EU services analysis, Article 11 of Implementing Regulation 282/2011 describes the relevant permanence and resource criteria and says a VAT identification number is not sufficient on its own to establish a fixed establishment. Apply the current consolidated rules and relevant case law to the actual transaction. This EU reference is separate from the UK example. EU VAT Implementing Regulation, Article 11.

In the UK, HMRC's services guidance discusses the establishment most closely concerned with a supply. Its examples also show that a VAT registration without supporting resources does not itself create a fixed establishment. HMRC, VAT Notice 741A, sections 3 and 4.

Retain the supply-specific reasoning. A group company exists as a separate legal person, but that fact alone does not answer every question about resources used by another group business. Outsourced services need a factual review too.

Work through five changes to one business

Consider a fictional Swedish company, Northstar Instruments AB. It already maintains Swedish books. The following examples illustrate assessment and software-design decisions; they are not legal determinations for a real business.

Remote services to a UK business

Northstar contracts from Sweden to provide a service to a UK business. It has no UK workers, premises or stock. The tax reviewer confirms that this particular service follows the general B2B place-of-supply rule, that the customer is acting as a business and that the customer accounts for UK VAT through the applicable reverse charge.

Keep that conclusion with the contract and customer evidence. Configure the approved sales treatment in Northstar's existing company. Do not create a UK subsidiary just to give the customer a UK address. Record the other three assessments independently; a VAT conclusion does not close them automatically.

A worker starts from a UK home office

Northstar hires a UK-based worker to support customers. Record the equipment, use of the home office, duties, permanence, supervision and authority. Reopen the corporate-tax and VAT-establishment assessments against those facts.

Create a separate employment workstream for payroll, social security, employment and immigration questions as applicable. Do not wait for a PE conclusion to ask who operates payroll. For ERP planning, identify the employer and cost owner; leave the legal classification to the appropriate reviewers.

A representative begins concluding contracts

The representative's role changes from introductions to regularly agreeing customer contracts. Ask for a fresh agency and treaty review. The system needs the start date of the changed role and a way to identify affected contracts.

Do not retain the earlier conclusion under a generic "no office" label. Record a review task, preserve the old facts and determine whether prior transactions need examination. The relevant change is what the person now does, not whether the organization chart changed.

Northstar places its own stock in a UK warehouse

Northstar retains title to goods held by a third-party warehouse. The local tax owner confirms the required import and VAT setup before the illustrated domestic sales begin. That assumed VAT conclusion is specific to this example. The other establishment assessments remain separate.

The proposed data design has one stock owner, Northstar, a UK warehouse and the tax registrations belonging to Northstar. It does not create a second seller or a fictitious intercompany sale merely because stock moved. If the ERP needs another operational company container, preserve the common legal owner and design a controlled reporting merge.

For a simple control example, Northstar stores 100 units and sells 10 to a customer. The warehouse records a reduction of 10 and 90 remaining. The owning company's records must show that same movement once. If an internal transfer also appears as customer revenue, investigate the entity and movement mapping before approving the design.

A UK subsidiary becomes the reseller

Northstar later incorporates a UK subsidiary and transfers the commercial role under approved contracts. Establish the exact date and ownership changes. Create the subsidiary's legal-entity record and separately assess its registrations, accounting and filings.

Now a genuine transaction between Northstar and the subsidiary may need intercompany treatment. Keep it distinct from the earlier movement of Northstar's own stock. Reassess the parent's continuing activities as well. Adding a subsidiary does not erase the parent's existing obligations or historical records.

Translate the conclusions into controlled configuration

Give the application owner one approved record per conclusion. Include the legal owner, jurisdiction, subject, effective period, source, decision maker and facts on which the conclusion depends.

Map that record to the ERP objects that implement it:

• Legal companies identify the seller, buyer, employer or asset owner.
• Registration records identify a tax or corporate registration and its owner.
• Warehouses identify stock locations without changing ownership by accident.
• Branch or establishment dimensions identify the required reporting population.
• Tax rules select treatment from transaction facts and approved applicability.
• Reporting assignments identify who prepares, submits and retains each output.

These are design roles, not promises that every ERP has objects with those names. Require the supplier to demonstrate the approved business model. If the product cannot support it directly, document the controlled alternative and its reconciliation before committing to a workaround.

Stop configuration when facts and registrations disagree

Suppose Northstar's ERP partner creates a UK company because the business supplies a UK VAT number. The legal record still names the Swedish company as seller and stock owner. An operator then posts a transfer between the two software companies as an external sale.

Pause that mapping. The finance owner checks ownership and posted balances; the tax owner confirms registration ownership and treatment; the application owner reproduces the transaction. Correct affected records through approved accounting procedures and retain the original evidence. Do not merge histories or delete postings to make the software look tidy.

Keep unresolved decisions out of automatic processing. A useful assessment status is "pending facts," "under review," "approved" or "superseded." A blank box must not silently mean "no registration required."

Complete the assessment before the first affected transaction

• ☐ The business owner has confirmed contracts, workers, resources, stock and dates.
• ☐ Company/branch, VAT registration, corporate-tax PE and VAT fixed establishment have separate conclusions or explicit open reviews.
• ☐ The relevant domestic law, treaty and supply-specific VAT rules are identified.
• ☐ Each registration is linked to the correct legal owner and active period.
• ☐ ERP design preserves ownership, reporting populations and historical changes.
• ☐ A normal transaction and a changed-footprint scenario have been demonstrated.
• ☐ Payroll, customs, product permissions and other adjacent workstreams have named owners where relevant.
• ☐ First-transaction gates, evidence retention and review triggers are assigned.

Reopen the record when contracting authority, workers, premises, warehouse arrangements, ownership or the supplying establishment changes. Review after a relevant legal or treaty change too. A conclusion remains useful only while its underlying facts remain true.

Related guides and verification

Continue with mapping tax and reporting obligations, verifying an ERP localization and preparing localization master data. Use the glossary for terminology.

Sources checked 17 October 2026. The HMRC and Companies House pages were available as substantive official text. The EU Article 11 wording was available through an indexed official text; the direct ELI page presented an access challenge. Apply the current consolidated legislation and relevant judicial interpretation for an actual EU decision. The five scenarios and the software controls are illustrative examples.

Worksheet: Business-footprint assessment worksheet

Copy this worksheet for each case. It records decisions and evidence; it does not determine the tax or legal treatment.

Related on this site

• Country pages: key facts with sources
• E-invoicing matrix: country × ERP support
• All guides

Vendor documentation is cited only as an example of the level of evidence to ask for; it is not a recommendation or a ranking. This guide is general information, not tax or legal advice. Checked 2026-10-17.

Related: Glossary – abbreviations and terms used in these guides (SAF-T, Peppol, CTC, EN 16931, IFRS and more).

Page last updated: 2026-10-17 · Markdown version