Globalisation is not a new phenomenon, but a continuation of development that began in the 19th century. It is also not limited to large international companies. Many small and medium-sized enterprises (SMEs), thanks to modern communication and information technology, are currently planning to expand abroad. But before we start global activity, we should look at a few issues.
Legal considerations
What is allowed in your local jurisdiction may constitute a restriction in another country. The existing regulations may also differ significantly from those to which you are used at home. It is therefore important to understand the local legal framework applicable to your industry.
For example, China has special administrative measures for access to investment (often referred to as a national list) and special administrative measures for access to foreign investment in the pilot free trade area (often referred to as the FTZ list).
In the case of actions on the list of negative companies, it may be necessary to consider using the services of local partners.
Trusted national partner
Expanding new territories can be both exciting and demanding. Although globalisation has increased awareness of different cultures around the world, different language, religion or printing can create obstacles. Establishing trusted partnerships with local companies can help you make more profits with less effort.
Travel restrictions due to pandemic Covid-19 made it even more important. A good example is the Chinese private securities market. Until recently, foreign shares in fund companies were limited to 49%.
Although market liberalisation completely removed this limit in April 2020, The majority of foreign investors (including well-known international investors) use local partners to support growth and market penetration.
In the case of small and medium-sized enterprises that are new to the Chinese market, it is worth considering using the services of a trusted national partner to form a local entity rather than a wholly foreign owned company.
This may reduce compliance costs applicable to foreign companies when repatriation profits abroad under a profit sharing agreement.
Local compliance requirements
In pursuing economic success in global expansion, we need to take account of local compliance requirements and associated costs. In China, these issues include:
- registration in the State Administration of Industry and Trade (SAIC)
- annual reporting to SAIC
- registration and reporting to the customs office
- registration and registration to the state and local tax office
- registration in the Social Security Office
- opening a bank account
- foreign currency control.
Chinese authorities often invent, implement and amend regulations and principles. Moreover, implementation of the guidelines often requires local recognition and evaluation, resulting in regional differences. Therefore, it is difficult to see the upcoming changes to the rules, understand those rules that are passed mainly in Chinese, and make sure your company has implemented them.
Support for local service providers may be helpful. It is important to work with someone who:
- is professional
- has employees who understand local language and can communicate in English or in your chosen language
- understands and manages cultural differences, while ensuring compliance
He understands your business and your strategy.
A constantly changing globalised business environment highlighted the advantages of using medium-sized accounting services with international connections.
SMEs developing around the world may not want to pay high professional fees charged by large accounting firms; however, everyone needs advice from a person with both local and international experience that can establish a link between their home country and their destination abroad.
With the help of a network member company, you will have everything you need In one site: resources with many skills and an international team of professionals. This way you will succeed in a globalised business market.
About the author
Erica Xiong Hong Kong, China
Erica has over 10-years of experience in providing tax advisory services in Hong Kong and regional and ensuring compliance for international organisations from different industries.