Raising funds globally can trigger tax obligations in different countries, and the complexity increases if your investors are from multiple regions.
Important factors include:
- Double taxation. Some countries have treaties that prevent investors and businesses from being taxed twice, but not all do.
You need to understand how taxes will apply to both your company and your investors in their respective jurisdictions.
- Corporate structure. You might need to create a separate legal entity in another country to simplify tax matters or to meet regulatory requirements.
Many startups create a parent company in a business-friendly jurisdiction (such as Delaware in the U.S.) to streamline global fundraising efforts.
Work with tax experts who specialize in cross-border investments and small business administration to help you structure your fundraising in a tax-efficient manner.
Another risk you should consider is fluctuating exchange rates.
Depending on where your investors are located, you could face challenges when converting funds into your home currency or dealing with currency volatility.
Currency fluctuations can impact the value of your raised capital and make it either more or less valuable over time.
This is particularly important if your business is based in one country but generates revenue or operates in others.
Some startups choose to hedge currency risk by using financial instruments or working with investment banks that specialize in cross-border transactions to lock in favorable exchange rates.
Ensure you have a strategy to manage foreign exchange risk, especially if you’re raising large amounts in a currency different from your home market.