Setting up a foreign subsidiary is a milestone. Managing its ongoing accounting and tax compliance is where the real work, and the real risk — begins.
The compliance burden for companies with international subsidiaries intensified significantly in 2026. The OECD's Pillar Two global minimum tax entered its first major enforcement cycle for multinational groups with revenues exceeding €750 million. Transfer pricing scrutiny reached record levels as tax authorities across Australia, India, the UK, and France accelerated the use of AI-powered audit tools. And the administrative demands of running a local subsidiary — statutory accounts, corporate tax returns, payroll obligations, VAT or GST filings, remain entirely local, entirely jurisdiction-specific, and entirely the responsibility of the subsidiary's directors.
For the growing companies that Expandys works with French and European businesses with subsidiaries in Australia, India, the United Kingdom, and beyond the challenge is rarely a lack of awareness that these obligations exist. It is a lack of the local expertise, structured processes, and integrated oversight to manage them consistently and without costly mistakes.
This guide provides a practical framework for doing exactly that.
The intuition many parent companies bring to foreign subsidiary compliance is that it mirrors their home-country experience, that if you can manage French liasse fiscale or UK corporation tax, managing an Australian or Indian subsidiary is a comparable task carried out by a local accountant.
That intuition underestimates the complexity in three important ways.
Every jurisdiction has its own accounting standards, tax calendar, and filing infrastructure. Australian subsidiaries file under AASB (Australian Accounting Standards Board) standards, lodge tax returns with the Australian Taxation Office (ATO), and manage GST quarterly BAS lodgements. Indian subsidiaries operate under Indian GAAP (or Ind AS for larger entities), file monthly GST returns with the GSTN, deposit TDS (Tax Deducted at Source) by the 7th of each month, and file annual income tax returns with the Income Tax Department. UK subsidiaries file statutory accounts with Companies House and corporation tax returns with HMRC. None of these calendars, formats, or agencies align with each other, or with the parent company's home-country obligations.
Intercompany transactions create a second layer of compliance risk. Whenever your subsidiary buys from, sells to, charges fees to, or borrows from the parent company or other group entities, transfer pricing rules apply. These rules — based on the arm's length principle — require that all intercompany transactions are priced as if they had taken place between unrelated parties. Tax authorities in Australia, India, the UK, and France all scrutinise intercompany pricing closely. Getting it wrong does not just create a tax adjustment — it creates penalties and, in some jurisdictions, can trigger a full audit of the subsidiary's broader affairs.
Late or incorrect filings compound quickly. A missed GST return in Australia triggers ATO general interest charges at approximately 10.96% per annum, compounding daily. A late company accounts filing with Companies House in the UK incurs automatic penalties starting at GBP 150 and escalating to GBP 1,500 for filings more than six months overdue. In India, late TDS deposits attract interest at 1.5% per month. These are not exceptional outcomes, they are the routine consequence of compliance management that lacks the local infrastructure to track and meet each jurisdiction's specific deadlines.
Regardless of jurisdiction, every foreign subsidiary carries six categories of ongoing compliance obligation. The specifics vary by country, but the structure is universal.
Every incorporated subsidiary must prepare annual financial statements in accordance with the accounting standards of the country where it is registered. These are typically filed with the relevant companies registry and, in many jurisdictions, are publicly available.
Australia: ASIC-registered companies must maintain financial records and, above certain size thresholds, prepare and lodge audited financial statements. Small proprietary companies (annual revenue below AUD 50 million) are generally exempt from mandatory audit but must still maintain adequate records and file solvency declarations with their ASIC annual review.
India: All Indian companies must prepare accounts under Companies Act 2013 requirements and file annual returns and financial statements with the Registrar of Companies (RoC). Statutory audit is mandatory for all companies regardless of size, and must be conducted by a Chartered Accountant registered with the Institute of Chartered Accountants of India (ICAI).
United Kingdom: UK private limited companies must file annual accounts with Companies House within nine months of their financial year end. Small companies (annual turnover below GBP 10.2 million, balance sheet below GBP 5.1 million) can file abbreviated accounts. Micro companies (turnover below GBP 632,000) can file micro-entity accounts with further simplification. Accounts more than one day late trigger automatic penalties.
Key practice: Align the subsidiary's financial year end with the parent company's where possible. Misaligned year ends create additional complexity in group consolidation, intercompany reconciliation, and transfer pricing documentation.
Every subsidiary is subject to corporate income tax on its profits in the country where it is registered. The applicable rate, computation method, and filing timeline all vary by jurisdiction.
|
Jurisdiction |
Standard Corporate Tax Rate |
Key Notes |
|---|---|---|
|
Australia |
25% (Base Rate Entity) / 30% |
25% applies where turnover < AUD 50M and income is primarily active |
|
India |
22% (existing companies, Section 115BAA) / 15% (new manufacturing companies) |
Surcharge and health/education cess add approximately 5.5% effective uplift |
|
United Kingdom |
25% |
Main rate since April 2023; small profits rate of 19% applies below GBP 50,000 taxable profit |
|
France (parent reference) |
25% |
Standard rate; progressive rate for SMEs with revenue below €10 million |
Filing deadlines are a common compliance failure point. Australian tax returns are typically due by 31 October following the 30 June financial year end, or by 15 May if lodged through a registered tax agent. UK corporation tax returns are due twelve months after the end of the accounting period. Indian income tax returns for companies are due by 31 October each year (or 30 November if transfer pricing applies).
Withholding tax on dividends requires particular attention. When the subsidiary distributes profits to the parent company, withholding tax is typically deducted at source. The rate depends on whether a double taxation agreement (DTA) exists between the two countries, and on the applicable treaty rate for dividends. Australia withholds 30% on dividends to non-residents, reduced to 5% or 15% under most DTAs including the France–Australia DTA. India withholds 20% on dividends, reduced under treaty provisions. The UK does not currently impose withholding tax on dividends paid to parent companies.
Most jurisdictions require subsidiaries engaged in commercial activity above a revenue threshold to register for and collect indirect tax — GST in Australia and India, VAT in the UK and France.
Australia GST: 10% on most supplies. Registration is required when annual GST turnover exceeds AUD 75,000. Returns (Business Activity Statements — BAS) are lodged monthly or quarterly depending on turnover. The ATO charges general interest charges on unpaid GST at approximately 10.96% per annum, compounding daily.
India GST: A dual structure with Central GST (CGST), State GST (SGST), and Integrated GST (IGST) for interstate transactions. Rates range from 0% to 28% depending on the category of goods or services. Monthly GSTR-1 and GSTR-3B returns are required for most businesses. India's GST compliance system — the GSTN portal — is technically demanding, and late filings attract interest at 18% per annum on unpaid tax plus a late fee of INR 50 per day.
UK VAT: 20% standard rate. Registration required when turnover exceeds GBP 90,000 (as of April 2024). VAT returns are typically submitted quarterly via HMRC's Making Tax Digital (MTD) platform. Late payment penalties apply from day one of an overdue return.
Key practice: Appoint a local VAT/GST agent from day one of operations. The filing calendars, return formats, and online portals are jurisdiction-specific and change regularly. A missed registration or late return in the first year of operations creates a compliance gap that is both costly to remediate and visible to tax authorities on the subsidiary's compliance record.
Subsidiaries with local employees carry a range of payroll-related tax and social security obligations that differ substantially between jurisdictions.
Australia:
India:
United Kingdom:
Key practice: Payroll compliance is the highest-frequency obligation for any subsidiary with staff. Missed or incorrect payroll tax filings generate immediate penalties and interest, and — critically — affect individual employees' personal tax records, which creates both legal risk and HR friction.
Transfer pricing is the single largest tax risk for most companies with foreign subsidiaries. It applies whenever the subsidiary transacts with any other entity in the corporate group — the parent company, a sister subsidiary, a shared services entity, or an IP holding company — regardless of the size or frequency of those transactions.
The arm's length principle requires that all intercompany transactions be priced as if they had taken place between independent parties dealing at arm's length. This applies to:
The documentation requirement is contemporaneous. You cannot reconstruct transfer pricing documentation retrospectively after a tax authority raises questions. Australia's ATO, India's Income Tax Department, the UK's HMRC, and France's Direction Générale des Finances Publiques (DGFiP) all require that transfer pricing documentation be prepared at the time the transactions take place or at the time the tax return is filed.
Penalties for non-compliance are substantial. In Australia, transfer pricing adjustments can attract penalties of 25% to 50% of the tax shortfall, reduced to 10% where reasonably arguable documentation exists. In India, transfer pricing adjustments are subject to penalties ranging from 100% to 300% of the tax undercharged. In the UK, HMRC can apply penalties of up to 200% of unpaid tax for transfer pricing non-compliance.
The most common intercompany arrangements that attract audit attention in 2026:
Key practice: Establish a transfer pricing policy and prepare annual transfer pricing documentation at the same time as you prepare the subsidiary's tax return. For higher-risk transactions (IP licences, management fees above USD 100,000/year), a full benchmarking study prepared by a specialist transfer pricing advisor provides the best protection.
Beyond tax, every subsidiary carries annual corporate governance obligations that must be maintained to preserve its legal good standing.
Australia: Annual company review with ASIC, including payment of annual review fee (AUD 338 for a proprietary company) and lodgement of any changes to directors, shareholders, or registered office address. Late lodgement of statutory notices incurs a penalty of AUD 330 per 28-day period.
India: Annual General Meeting (AGM) must be held within six months of the financial year end. Annual return (Form MGT-7) and financial statements (Form AOC-4) must be filed with the RoC within 60 days of the AGM. Additional event-based filings are required for changes to directors, share capital, or registered office.
United Kingdom: Confirmation Statement (replacing the annual return) must be filed with Companies House at least once every 12 months. Any changes to the company's PSC (Person with Significant Control) register must be updated and filed within 14 days of the change.
France (parent obligations): Where the French parent is a société anonyme (SA) or société par actions simplifiée (SAS) with subsidiaries abroad, it must include information about foreign subsidiaries in its annual financial statements under French GAAP (Plan Comptable Général) and, for groups exceeding applicable thresholds, consolidate subsidiary accounts under IFRS.
Two significant developments in 2026 add a new layer of complexity for companies with foreign subsidiaries.
The OECD's Pillar Two framework introduces a 15% global minimum effective tax rate for multinational groups with annual consolidated revenues of at least €750 million. <For smaller Expandys clients, Pillar Two is not yet directly applicable — but it is a watch-and-wait issue for companies approaching the threshold, planning M&A activity, or working within groups that are already in scope.>
For groups that are in scope, 2026 is the first major year of compliance. The OECD published a "Side-by-Side" (SbS) package on 5 January 2026 that provides safe harbour protection for US-headquartered groups — effectively shielding them from the Income Inclusion Rule (IIR) and Undertaxed Profits Rule (UTPR) on the basis that the US tax system meets Pillar Two objectives. The United States is currently the only jurisdiction with a qualified SbS regime.
For European-headquartered companies — including French companies — Pillar Two obligations remain fully operative. The first GloBE Information Returns for calendar-year taxpayers were due by 30 June 2026 in implementing jurisdictions. Companies should assess whether their effective tax rate in each operating jurisdiction meets the 15% minimum and, where it does not, ensure they have a strategy to address the resulting top-up tax liability.
Tax authorities in Australia, India, the UK, and France are deploying increasingly sophisticated AI-powered analytics to identify transfer pricing risk at the time of return processing — not just at the point of audit. The ATO's Risk Differentiation Framework, HMRC's Connect system, and India's CASS (Computer Assisted Scrutiny Selection) system all scan intercompany transaction data to flag anomalies in real time.
This does not change the law — the arm's length principle has been in force for decades. But it changes the practical risk profile for companies that have historically managed transfer pricing informally. A management fee arrangement that was never questioned in five years of quiet compliance may now be flagged automatically in 2026. The window for a comfortable informal resolution is narrowing.
Effective compliance management for a foreign subsidiary is not a single annual event — it is a continuous operational discipline. The following framework provides a structure that Expandys recommends to clients managing subsidiaries in multiple jurisdictions.
Appoint a local accountant or accounting firm before you lodge your first invoice. The compliance calendar starts from the moment the subsidiary is incorporated. Many companies appoint local accountants late — after the first GST or VAT quarter has already passed — and spend the first six months catching up on missed obligations.
Set up the accounting infrastructure in the local currency and to local standards. Cloud-based accounting platforms (Xero, MYOB for Australia; Tally, Zoho Books for India; Xero or Sage for the UK) with local compliance modules significantly reduce the risk of missed deadlines.
Draft your intercompany agreements before the first transaction takes place. A written service agreement, licence agreement, or loan agreement, with pricing benchmarked against comparable third-party arrangements, is the foundation of a defensible transfer pricing position. It is far easier to draft these agreements before the first transaction than to reconstruct them years later under audit pressure.
Register for all applicable taxes on day one. GST/VAT registration, payroll tax registration, PAYG withholding registration, and — in India — GST, TAN, PAN, PF, and ESI registration should all be completed before the subsidiary invoices its first customer or pays its first employee.
Map every filing deadline across all jurisdictions into a single compliance calendar, owned by a named individual or team. For a subsidiary operating in Australia, this calendar should include:
For India, the equivalent calendar is significantly denser — monthly GST returns, monthly TDS deposits, quarterly TDS returns, and a range of annual filings with the RoC, IT Department, and EPFO/ESIC.
Build review checkpoints at the group level. The subsidiary's local accountant manages the day-to-day filing calendar, but the parent company's finance team should receive a monthly compliance status report covering: all returns lodged, all taxes paid, any outstanding correspondence from tax authorities, and any changes to local law that may affect the subsidiary.
Once per year, conduct a group-level tax review covering:
Most pairs of countries have bilateral double taxation agreements that prevent the same income from being taxed twice. France has an extensive treaty network, including agreements with Australia (signed 2006), India (updated protocol 2009), and the United Kingdom (1968, as updated).
Key treaty provisions relevant to subsidiaries:
Important: tax treaty benefits are not applied automatically. The subsidiary must actively claim treaty protection, typically through a declaration of residence certificate and specific withholding rate applications filed with the relevant tax authority. In some countries — including India — the process of claiming treaty benefits requires advance applications to the tax authority or specific disclosures in the tax return.
The operational reality for most growing companies with foreign subsidiaries is that they cannot maintain in-house expertise across every jurisdiction they operate in. Local compliance requirements change frequently — the ATO introduces new payroll reporting obligations (Payday Super, July 2026), HMRC updates Making Tax Digital requirements, India's GST Council issues new circulars on a monthly basis — and tracking all of these changes across multiple jurisdictions is a full-time specialist function.
Most of Expandys's clients take a hybrid approach: a qualified local accountant in each jurisdiction manages day-to-day compliance, payroll, and filing obligations, while an international partner — Expandys — provides the group-level oversight, intercompany coordination, transfer pricing guidance, and connection between the subsidiary's local operations and the parent company's reporting requirements.
This is precisely what Expandys's accounting and tax services for foreign subsidiaries are designed to deliver:
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What accounting standards apply to a foreign subsidiary? The accounting standards that apply to a foreign subsidiary are those of the country where it is incorporated — not the parent company's home country. An Australian subsidiary files accounts under Australian Accounting Standards (AASB). An Indian subsidiary files under Companies Act 2013 requirements (Indian GAAP, or Ind AS for qualifying larger companies). A UK subsidiary files under FRS 102 (the UK Financial Reporting Standard applicable in the UK and Republic of Ireland). These local accounts are then typically converted or reconciled into the parent company's reporting format (IFRS or French GAAP) for group consolidation purposes.
Does a foreign subsidiary need to be audited? The audit requirement depends on the jurisdiction and the size of the subsidiary. In India, statutory audit is mandatory for all companies regardless of size. In Australia, statutory audit is required for large proprietary companies (above specific revenue, assets, or employee thresholds) but not for small proprietary companies. In the UK, small companies below the size thresholds for annual turnover, balance sheet, and employee numbers are generally exempt from mandatory audit. Note that even where local law does not require an audit, the parent company's group auditors may require audited subsidiary accounts for group consolidation purposes.
What is transfer pricing and does it apply to small subsidiaries? Transfer pricing rules apply to all transactions between related entities — regardless of the size of the subsidiary. If your French parent company charges a management fee to its Australian or Indian subsidiary, or licenses its brand or technology to the subsidiary, or lends the subsidiary money, transfer pricing rules apply. The arm's length principle requires those transactions to be priced as if they took place between unrelated parties. Documentation requirements are proportionate to the value and risk of the transactions, but the legal obligation to apply arm's length pricing applies from the first intercompany transaction.
What is a double taxation treaty and how does it help? A double taxation treaty (DTA) is a bilateral agreement between two countries that prevents the same income from being taxed in both countries. For a French parent company with an Australian subsidiary, the France–Australia DTA reduces the Australian withholding tax on dividend payments from 30% to 5% or 15% (depending on the ownership percentage), and defines how business profits, interest, and royalties are taxed between the two countries. DTAs do not apply automatically — the company must actively claim treaty benefits by filing the appropriate declarations and certificates with the relevant tax authority.
What taxes does a foreign subsidiary pay in Australia? An Australian subsidiary pays: corporate income tax (25% for Base Rate Entities with turnover below AUD 50 million, or 30% for larger companies); GST at 10% on taxable supplies above AUD 75,000 annual turnover; PAYG withholding on employee salaries; payroll tax at the applicable state rate and above the relevant state threshold; and the mandatory superannuation guarantee contribution of 11.5% of ordinary time earnings per employee. It must also file an annual company review with ASIC.
What are the main tax obligations for a foreign subsidiary in India? An Indian subsidiary's main tax obligations include: corporate income tax at an effective rate of approximately 25.17% (22% base rate plus surcharge and cess) for existing companies under the Section 115BAA regime; monthly GST returns (GSTR-1 and GSTR-3B) and GST payment; monthly TDS deduction and deposit by the 7th of the following month, with quarterly TDS returns; Provident Fund contributions at 12% of basic salary deposited monthly; Employee State Insurance contributions for eligible employees; and annual filing of income tax return by 31 October (or 30 November where transfer pricing applies).
How do we manage compliance across multiple countries? The most effective structure for managing compliance across multiple jurisdictions is a combination of local qualified accountants in each country, responsible for day-to-day filings and regulatory correspondence, overseen by a central international accounting partner who maintains the group compliance calendar, coordinates intercompany positions, ensures transfer pricing documentation is current, and bridges local accounts into group reporting. This structure provides both the local expertise that jurisdiction-specific compliance requires and the group-level visibility that the parent company needs to manage its consolidated tax position effectively.
What happens if we miss a filing deadline in a foreign country? The consequences depend on the jurisdiction and the type of obligation. In Australia, missing a BAS (GST) lodgement triggers ATO general interest charges at approximately 10.96% per annum on unpaid tax, compounding daily. Missing payroll tax or superannuation deadlines incurs additional penalty rates. In India, late TDS deposits attract interest at 1.5% per month, and late GST filings incur interest at 18% per annum plus late fees. In the UK, late corporation tax, VAT, or Companies House filings all carry specific penalty regimes. Beyond the financial penalties, repeated late filings create a negative compliance profile with the relevant tax authority that increases the risk of audit selection.
Managing accounting and tax compliance for a foreign subsidiary in 2026 is operationally complex, jurisdiction-specific, and consequential. The obligations are not optional, the deadlines are fixed, and the penalties for non-compliance compound quickly.
The companies that manage it well share two characteristics: they appoint qualified local professionals before their first transaction takes place, and they maintain group-level oversight to ensure the local picture feeds into an integrated international compliance strategy.
Expandys supports European companies with the full lifecycle of foreign subsidiary compliance — from entity setup and first registrations through to annual statutory accounts, corporate tax returns, transfer pricing documentation, and group-level coordination — in Australia, India, the United Kingdom, and across our 50-country network.