Legal Aspects of Exporting for Small Businesses

by Danielle Bloom

2 min read

As your small business grows, you may start looking at conquering markets outside of Canada. The United States is a natural ground for expansion, but, depending on your particular business, you may also be looking at other markets. No matter where you plan to export goods, there are basic laws in all countries that you’ll need to take into consideration. Here is an overview of the most common ones.

Business Registration

In almost every country there is an obligation to register your business if you want to access the local market. The rules vary greatly from place to place, but in most cases as soon as you have a physical presence somewhere, there’re required to register and pay fees. You” usually need to hire a local agent for make the process go smoothly.

Product Labeling

Labeling your products is another area where almost all jurisdictions have enacted regulations. This is especially true if you’re in the food and drink industry, or if you sell products that can be considered “dangerous.” Local environmental laws, language laws, and consumer protection laws may all contain provisions that you need to be aware of before you spend considerable amounts preparing and packaging your products. The best solution in this case is probably to consult local marketing and legal professionals before entering a new market.

Income Taxes, Sales Taxes, and Import Duties

Taxes are inevitable aspect of doing business internationally. As you enter new territories, you’ll need to consider three different types of taxes: income taxes, sales taxes, and import duties. You may need to pay income taxes if you have a sufficient presence in a jurisdiction. Canada’s tax treaties often soften the blow by protecting you from theses taxes until you have a permanent establishment in a country, but that is not always the case. In the United States, for example, the vast majority of states have income taxes that are based on a concept called “nexus” which involves only a minimal connection with the state, like a storage facility. Sales taxes are also important and vary greatly from country to country. In Europe, the tendency is to have VAT-style taxes, comparable to the GST/HST system in Canada. In the United States, the system is entirely different and is state-based. It’s crucially important to know ahead of time what taxes you’ll need to register for, collect and remit as part of your international expansion. Finally, before selling anything abroad, make sure you know what import duties or tariffs might apply to your product, since it’ll have a direct impact on your retail price to customers and your competitiveness in the marketplace. Many bilateral and multilateral treaties, such as the North American Free Trade Agreement, have reduced or eliminated tariffs, but many still remain. Make sure you clearly understand what applies to your particular case. Exporting can be an exciting new phase for a growing business. To avoid disappointment, make sure to find out about local laws well ahead of time, so you can adapt your business plan accordingly.

References & Resources

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