Do you know what’s waiting for you…outside of the box?
Here is a short, fun quiz you can take to determine if you’re ready to go global. This quiz tests generally established processes for setting up a business outside of the U.S. These questions may not apply in all cases. We just pulled a few from recent experiences.
As a general rule, organizations going global should establish employment terms and conditions in an employee handbook
when the population reaches:
The correct answer is all of the above. If you do not establish the organizational terms and conditions of employment, you will not have identified the specific requirements in the employee/employer relationship. In many countries the terms and conditions of employment will change based on the size of the employee population. For example you must work with an employee “union” or “works council” once you have over five people in Germany and their impact on work rules becomes stronger the larger the company becomes. Documenting the employer/employee relationship early allows the company to set forth key provisions such as causes of termination, code of conduct, benefit coverage, vacations, holiday schedules, etc.
What must a U.S. company do first to legally receive payroll, employee contact information and benefit data from their subsidiary in the European Union?
The correct answer is B. They must comply with the European Data Privacy regulations and laws. This must occur even before sending information to a third party processor such as ADP or any other payroll firm.
- Modify their payroll system in the U.S.
- Comply with EU data privacy laws
- Choose a subsidiary name
- Hold a meeting with their new employees regarding benefits
Global Financial Planning
You’ve decided to expand overseas and follow your customers into a new region. What is the very first question you must
answer before opening your new location?
The correct answer is C
- What should you call your new subsidiary?
- In what country or state should you locate?
- How will you treat the profits of the overseas location?
- Who will run the operation?
. The first question that must be answered is, how will you treat the profits of your overseas firm? Will you keep your profits in country or repatriate/allocate those profits back to your home country? This determines the best way to establish business entities. Once you determine the company's business goals then you can consider which country or state in which you should locate to optimize the tax on corporate income. You will also find many countries and states willing to offer your firm a significant economic incentive to set up business in a region or economic development zone. Incentives exist for specific industries particularly green energy, bio-medical and technology. So it pays to select your location to maximize your profit potential before you incorporate.
Global Legal Procedures
What is an “Apostille” and when is it commonly used in global start up activities?
The correct answer is B
- An apostille is a way to get around tax laws in a foreign country
- An apostille is legalizing a document for international use
- It helps you get your profits back to your home country
- It’s a document written by a person from biblical times
. An “apostille” refers to the legalization of a document for international use under the terms of the 1961 Hague Convention Abolishing the Requirement of Legalization for Foreign Public Documents. Documents which have been notarized by a notary public, and certain other documents, and then certified with a conformant Apostille are accepted for legal use in all the nations that have signed the Hague Convention. In startup activities the incorporation documentation of the home country will generally have to be apostilled before applying for things like company bank accounts, company registrations, etc. This confirms to the foreign officials that your home company is a legally registered organization. You will be required to have your company documents apostilled prior to foreign incorporation. This notarization is also required when appointing Powers of Attorney to sign documents at the local affiliate.
What is a “Totalization Agreement” and why is it used in an expatriate assignment?
The United States has entered into agreements, called Totalization Agreements, with several nations for the purpose of avoiding double taxation of income with respect to social security taxes. These agreements must be taken into account when determining whether any alien is subject to the United States Social Security/Medicare tax, or whether any U.S. citizen or resident alien is subject to the social security taxes of a foreign country. A company that applies for coverage under these agreements does not have to pay the 8-30% foreign social taxes on the expatriate’s income. This must be done prior to the expatriate taking up residence in the foreign location. Not doing this means your firm and the expatriate will be required to pay 8-30% extra in foreign social taxes, PLUS this amount will generally be treated as income for the expat in which case you will have to increase the amount of any tax gross up you are providing this individual. This can be a significant cost to an expatriate assignment if it is overlooked.
- An agreement that you sign with your employee that covers all of their income and benefits and the expatriate terms.
- An agreement between the US and other countries regarding double taxation.
- An agreement between the US and other countries regarding moving profits back and forth.
- The entire agreement an employer has with their employee council in the Netherlands.
One of the great aspects of establishing an enterprise in China is the availability of workers. Whether you need factory labor
or degreed technicians China has an abundance of candidates and you are free to hire whoever is best suited for the job.
True or False
False. Depending on the region you are in and how strictly the laws are enforced, hiring a person from outside the local “hu ko” (Administrative District) can result in any response from additional costs, fines or the “unregistered” worker losing access to public schools for their children and medical attention for their family.
If by taking this quiz you have found that going global is a lot more complicated than you thought, give us a call and we’ll be happy to help you go global, the right way!