Nonprofits Shouldn’t Venture Abroad without a Map
October 14, 2021

Budgetary shortfalls may have your nonprofit looking for new sources of support. If those sources are international, be careful. Activities such as soliciting donations, recruiting members and selling products in foreign countries can raise tax and legal issues.

Is There a Need?

Before your nonprofit adopts a global strategy, make sure that the need for your services or products is robust enough in target countries to justify the costs of doing business there. For example, what will your competition be like? Ample research is essential before making a decision.

This includes gathering information about the country’s relevant laws and regulations. If you plan to sell products or services there, investigate sales and tax issues thoroughly. If the country engages in free trade, it may be easy to do business there. But if the country isn’t a party to a free trade agreement with the United States, high tariffs might prove an insurmountable obstacle.

Consult with legal and financial advisors as you chart your business plan. Foreign activities also may require analysis to ensure that your American contributors retain their tax deductions and that you don’t jeopardize your organization’s own tax-exempt status.

Have You Considered Cultural Differences?

Your understanding of the target country’s population will be key to your success. Setting up a cultural advisory committee in the United States that includes expatriates is one way to develop insights into your new market. If English isn’t the primary spoken language in the target country, bring a translator along on exploratory visits.

Offering membership to individuals in other countries can be your initial step toward becoming a global organization. Some organizations hold seminars and conferences for these potential new members and even open local offices to establish roots.

If you appoint a member from the target country to your nonprofit’s board, be willing to accept different approaches to issues. Board meetings probably will continue to be held at your U.S. headquarters. But videoconferences and collaborative software can help board members participate fully in meetings regardless of physical location.

Finally, don’t discount the potential impact of currency exchange rates. If the U.S. dollar is weak, it could work to your advantage in selling products and services abroad. On the other hand, a strong dollar will likely go further when leasing foreign property or compensating international staff.

What about Travel Restrictions?

If your expansion plans include foreign countries, you may have to proceed slowly. Pandemic restrictions still affect international travel and make many formerly simple transactions difficult. Contact us to discuss the tax and financial implications of potential opportunities.

© 2021

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