High Street Partners' Blog

German Business Culture: Five Tips for Success

HSP — Thu, 24 May 2012 18:42:24 +0000

Just set foot in Germany? While the differences from your home country may be visually apparent, it is the cultural differences when working with Germans that are subtler. A friendly “entschuldigung” (excuse me) along with a little small talk may get the conversation started, but there are some additional insights that are essential to your success while working in country:

Be formal. Even after many years of acquaintance or working together, Germans address each other as Mister X and Miss Y, Herr Kaiser and Frau Mayer. Moving to a more casual, first-name basis will most likely not happen with older Germans.
Listen till the end of the sentence. Germans are used to efficient exchanges of information and every word counts. They often place important information just at the end of a long phrase. And don’t be surprised if your German counterpart, while speaking English, puts lots of information into a long, winding sentence.
Be prepared for frankness. Sometimes, Germans come across as arrogant, when in fact they are just particularly pragmatic and direct in order to avoid ambiguity. Your counterpart might respond to a “how are you?” salutation with a sincere, detailed answer to how his or her day has been so far.
Keep to meeting agendas. If you don’t start a meeting with the agenda in mind, your German counterpart will be more than irritated. Your German partner will likely have thoroughly prepared for a meeting and brought the right specialists to answer to detailed questions related to the points on the agenda. Prepare to focus on the issues at hand while avoiding small talk in meetings. Once a decision has been reached – and that might take some time as you go methodically through all the eventualities and implications – execution of that decision can be swift and efficient.
Err on the side of formal dress. While casual dress is becoming acceptable in some tech and creative sectors, formal dress is still the norm. However, it is often expressed differently in Germany than in other countries, and does not necessarily translate to a blue or gray business suit and tie. In Germany, it could just be a suit jacket or a blazer, shirt, tie and pants.

If you have questions or are unsure, ask your German counterpart about the particular culture in his or her company. Your questions will be welcome and show that you are trying to adapt to culture of your partner’s business.

What experiences have you had with German culture?

Dirk Hinze is an international PR and cross-cultural consultant enabling companies to maximize the power of communications to meet their business goals. Dirk Hinze is the Director of Universal Consensus’ Germany Practice.

Follow him on Twitter @dirkhinze.

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Being a Nonresident Employer in Germany: Four Considerations

HSP — Fri, 18 May 2012 12:21:23 +0000

Considering exploring the German market but not interested in making a huge commitment? In lieu of a formal presence, such as an entity or partnership, you may want to investigate setting up a payroll only, and operating as a nonresident employer (NRE).

NREs are a good option for companies looking to explore the opportunity in a country, through research and marketing activities, without the headaches of the entity setup or partner negotiation process. However, it’s not as simple as hiring an employee in Germany and sending him or her paychecks. There are several considerations to keep in mind when establishing a payroll only in Germany:

NREs cannot withhold income tax. German tax authorities do not allow NREs to withhold income taxes from the paychecks of employees working in country. The rationale behind this is that the authorities do not have any jurisdiction outside of the country. Therefore, the onus of making income tax payments falls on the employee. This means advance payments of tax must be made, usually quarterly, and filed directly by the employee to the authorities. This places compliance obligations on the employee and may affect employee cash flow and other financial commitments.
Social security deductions are still applicable. Although income tax withholding by NREs is not allowed, social security is still an obligation, regardless of where the parent company is based. Both the NRE and employee are required to remit social security contributions regularly to the government through a payroll registered in Germany. A registered payroll in Germany is therefore a requirement, but still cannot be used for income taxes.
Employer’s liability insurance is required. Companies that employ staff in Germany, whether on-the-ground or overseas, are required to have liability coverage to protect employees in the event of at-work injury. However, the insurance that a parent company overseas has will not satisfy this requirement. Whether an entity or NRE, all organizations that employ in country must obtain liability insurance from a company that is based in Germany.
NREs still have corporate tax exposure. The NRE arrangement does not shelter the employer from risks of corporate tax exposure in Germany. Specific activities of the company and the employees will determine what type of tax risk exists. An office in Germany will also create a risk that may even extend to a home office.

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Germany Q&A

HSP — Mon, 14 May 2012 15:43:13 +0000

Last week's webinar Doing Business in Germany: Avoiding Common Pitfalls encouraged a lot of discussion. There were several interesting questions from attendees for HSP's Germany experts; here are some of the highlights, and answers:

Does hiring an employee as a NRE create a permanent establishment in Germany?

It depends on the specifics on the situation and what the employee on the ground is actually doing in country. A good of thumb is that if you are not renting office space and the employee is not concluding contracts, PE will not be created. However, it really is dependent on the specific circumstances surrounding the employee- be sure to consult with your legal counsel.

We often see in U.S. investment schemes into Europe the use of so-called "hybrid financing instruments" such as PECs or CPECs. Can these instruments of financing/funding apply to German partnerships, or would you need to opt for a corporation (ex. GmbH)? Are hybrid financing instruments in general eligible and acknowledged under German tax/corporate law?

The instruments you refer to are in practice only seen in connection with corporations. Any use with partnerships would trigger questions to be asked by the German tax authorities. Hybrid financing structures that usually allow for a double dip from a tax point of view have become very rare due to countermeasures in the German national tax law, but may in some cases still be possible if planned wisely.

Tax-wise, are German partnerships transparent vehicles? If withholding tax doesn't apply to distributions to the shareholders, can they still be possibly subject to income tax on the amount received?

German partnerships are always treated as transparent vehicles, there is no exception to this rule. Distributions from the partnership to the partners are not taxed under German national tax law, the partners are only taxed based on their pro rata profit share in the partnership with respect to the income of the partnership.

For terminations, can you pay in lieu of notice?

Yes, as long as the particulars are laid out in writing in the initial employment agreement. You must pay out the notice period as a minimum.

Any particular issues with respect to immigration, such as bringing U.S. citizens to Germany for both short and long periods?

All employees without EU nationality assigned to work in Germany will need a work permit issued by the German authorities. This only permits them to work in Germany and, depending on whom the sponsor is, the rights to work may be limited to specific locations in Germany. In theory, one day of work directly related to revenue will require a work permit. A visitor visa cannot be used if the employee is intending to work in Germany. Visitor visas should only be used for transitory meetings (conferences, events, meetings, etc.).

Is there a publication that would describe employee expense reimbursement policies from a tax perspective?

This information should be available on the German tax department website. However, at best, this will be general advice on the tax position of expense reimbursement. Each employer may have a different policy relating to reimbursement of expenses and these would need to be reviewed by an expert to see whether they are tax efficient and/or tax compliant.

Is it required to keep time cards in order to determine if overtime is due?

Collective agreements or similar agreements may require this, but it is not required under law. However where there is no opt out from overtime, it is recommended to do keep track of time to confirm the overtime payments are required. Lack of evidence can lead to disputes

Are there employee-related taxes (other than social security) that a GmbH needs to pay that are not required for NRE companies?

With the exception of withholding of employee income taxes, there should be no other employee-related tax obligations for a GmbH over those of a nonresident employer.

With no entity established in country, what are the options for filing payroll taxes for a local, remotely working employee in Germany? What potential liability consequences are there if the employee is to take in charge of filing the tax on behalf of the company?

The employer is still responsible for paying social security taxes. This cannot be assigned to the employee even where no entity is established in Germany. With respect to employee income taxes, the only option where there is no entity established in Germany is for employees to settle these taxes themselves. There may be options on regularity of these payments (quarterly, semi-annually or annually) but this will depend of the local tax office at which the employee is registered.

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Germany

Selling Apps, MP3s and eBooks in the EU? You're on the Hook for VAT

HSP — Fri, 04 May 2012 14:52:44 +0000

Is your business delivering electronic content to consumers worldwide? Have you registered for value-added tax (VAT) where your customers are located? When it comes to electronic content, VAT can be complicated, and your business may need to be registered in each country of supply.

The global electronic content market is booming. Products that were traditionally sold in tangible formats—music, books, movies—are readily available as instantaneous downloads, straight to a consumer’s device of choice. And companies invested in these types of goods are working quickly to make the digital switch, to meet the demands of the market.

How is it that these companies, familiar with VAT being a consumer responsibility, may suddenly find themselves presented with numerous fines and penalties for noncompliance?

Surprise: Digital “goods” are actually considered services

Typically, when a U.S.-based company sells goods to private EU citizens, the business will not have to register for VAT, if the customer acts as the importer of record. However, electronic content is a unique type of product, known as an electronically supplied service (ESS). Any type of downloadable content—MP3s, games, videos, mobile applications, eBooks— can be considered ESS. Specific VAT applies to supplies of such services within the EU, the default position being that the supplies take place in the country where the customer resides.

For example, if a business in the U.S. sells a CD to a consumer in the U.K., no VAT registration is required by the U.S. company, as the customer is the importer of record when the goods are shipped. However, if the company sells a digital version of the same album to the same consumer, the business is liable for VAT and must register in the U.K. This is because MP3s are considered ESS, so VAT needs to be collected where the service is supplied, the U.K. in this instance.

If you’re making the switch, be conscientious

The number of companies in the ESS space will likely grow in the next few years as the market expands. The digital music market is projected to hit $20 billion, eBook sales are expected to triple by 2016 and mobile app store revenue may exceed $58 billion. There will likely be many companies realigning products to meet the market demand, like CD companies selling MP3s or magazine publishers moving to digital editions.

These are the companies that often find themselves in VAT compliance hot water, when making the switch from tangible goods to ESS. Tax authorities are actively pursuing providers of such products, as the ESS market grows, to determine whether or not they are complying with VAT regulations. Sizeable penalties are being levied for failing to comply, and at-fault companies may even need to repay historic VAT fees and late payment interest.

The good news: For non-EU based suppliers of ESS with the need to register for VAT across Europe, there is a special simplification scheme which enables multiple EU country VAT accounting to be administered through a central portal and a single country registration.

For EU-based suppliers of ESS who currently account for VAT on supplies locally, a change in approach will roll out in 2015. A current proposal will make registering for VAT in the EU a “one stop shop,” as opposed to registering piecemeal in each of the individual member states. The Mini One Stop Shop (MOSS) proposal is set to go into effect January 2015, first for e-commerce, broadcasting and telecom services.

Being proactive can help avoid headaches

Retroactively fitting your business for VAT registration can be complicated and expensive. The best way to avoid issues with ESS is to be proactive when restructuring your business to provide digital materials. You can get started today by signing up for a free VAT health check, where HSP experts will assess your current situation, address potential pitfalls and make recommendations for next steps. With proper planning and the right systematic changes, supplying ESS won’t become a VAT nightmare.

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April International Operations Update Available

HSP — Tue, 01 May 2012 13:45:54 +0000

The April edition of International Operations Update is now available. You’ll find an overview of China’s proposal to overhaul its existing entry and exit laws, a look at several new tax incentives in Brazil, a review of Belgium’s new older worker protections and a helpful how-to guide for reclaiming VAT in Europe.

If you have operations in India, you’ll find several updates of particular interest, as we’ve included information on the new annual statement filing requirement for all liaison offices, news regarding managerial staff secondments and possible service PE triggers, as well as detail on changes to India’s Service Tax regime. As always, we invite you to review this information with care, and contact us with any questions or requests for service.

Value-Added Tax (VAT) & Your Supply Chain: Q&A

HSP — Fri, 27 Apr 2012 13:52:10 +0000

Yesterday's webinar VAT & Your Supply Chain: Getting it Right in a Global Economy encouraged a lot of discussion. There were several interesting questions from attendees for HSP's VAT expert Nick Hart; here are some of the highlights, and answers:

We shipped a piece of demo equipment to the U.K., but are not registered for U.K. VAT. We were charged a 20 percent import VAT on products we do not intend to sell, and that may ultimately be shipped back to the U.S. How do we get a refund for the amounts paid?

If you are importing something into a country that you intend to export, import VAT relief is often available, particularly if the export is planned within two years of the original importation. A freight agent can set it up properly, so that either you (1) don’t pay VAT up front or (2) you pay VAT but can get it refunded, in accordance with how the temporary import VAT relief is structured in that country.

If you have already incurred the import VAT in the EU, you may have the potential opportunity to recover it through a refund under the 13th Directive depending on the country and what documentation you hold to support the recovery position.

We are a U.S. company that buys booth space at several large European trade shows each year and sends U.S.-based employees to attend those trade shows. Under this condition, is there any opportunity to reclaim VAT paid as part of paying for the various trade show expenses?

Yes. This is one of the most common types of costs that can be reclaimed from the EU under the 13th Directive. The opportunity to lodge a claim does depend on the EU country however, as some do not offer the facility.

Can you describe the 8th/13th Directives?

They are references to EU VAT legislation and they allow member states to implement a VAT refund system for nonresident companies who incur VAT in those member states.The 8th Directive allows EU-based, VAT-registered companies to lodge VAT refund claims for VAT incurred in other EU member states.The 13th Directive allows non EU-based businesses to lodge VAT refund claims for VAT incurred in some of the 27 EU member states. Not all EU countries allow this and it depends on whether there are reciprocal arrangements in place with that country.

Can you please provide insight on how the concept of a self-assessment of taxes works? I know that this is available in Colombia and Venezuela.

The self-assessment of VAT, more commonly referred to as reverse charge, is generally applicable where services are being provided to a business customer, from a supplier based outside of the country where the customer is established. It is a simplification procedure really designed to prevent the need for the supplier to register for VAT in the country where the supplies are being made, by making the customer, or recipient of the services, responsible for accounting for any VAT due through a reverse VAT charge. For a fully taxable company, any VAT accounted for under the reverse charge is going to be recoverable at the same time, subject to local rules.

We are paying VAT in costs of a subsidiary that is a cost-plus entity when the entity invoices the parent it does with VAT, is this recoverable?

If the subsidiary is charging VAT on its intercompany supplies to its overseas parent company, then there might be the opportunity to recover this VAT depending on which country the subsidiary is operating in, and in the country where the parent is based. One other point that may need to be considered is whether the local subsidiary is correct to charge this VAT in the first place. It also might be an indicator that the parent company is making local supplies and it may also have an obligation to register and account for VAT locally.

If a parent company is in the U.S. with a subsidiary in the U.K., where the U.K. company is using supplies of service from U.S. parent, should VAT be charged between companies?

The VAT treatment to be applied will depend on the nature of the services being supplied. It might be that the reverse charge, or VAT self-assessment will apply, in which case the supplying entity does not have to charge VAT. This really does depend on what type of services are being supplied, as VAT rules differ from one type of service to another.

If a U.S. company that has been selling electronically supplied services (ESS) to Europe forms an EU entity and a subsidiary of that EU entity registers for VAT, could the EU entity or subsidiary be subject to penalties and fees for back VAT taxes that were not paid by its U.S. parent company in the time prior to VAT registration?

It is unlikely that a local entity would suffer penalties and interest charges in relation to its parent company failing to declare VAT at the correct time. This is because the subsidiary and the parent are different entities and the local subsidiary is only responsible for its own VAT accounting. However in some cases, if fraud is suspected by the tax authorities, then they may widen their net by considering the VAT compliance history of all group companies who are making supplies in that particular country.

Our company sells software B2B through a wholly owned subsidiary in Germany. The subsidiary owns the IP for a software product we will be selling worldwide here in the U.S. There is a reseller agreement in place between the parent and the subsidiary. What are the VAT implications?

Under these circumstances, you would expect there to be a supply of software services from the German subsidiary to the U.S. parent which, on the face of it, is outside the scope of German VAT. The onward supply of software services by the U.S. parent would generally take place where the recipient of those supplies is established. If the recipient is a VAT-registered business in its own country, then the general position is that the recipient would self-assess any VAT due under the local reverse charge provisions, if they are available in that country. If they are not, then the U.S. supplier may need to register for local VAT in that country where the supplies are made.

If you are providing free samples to a customer (medical device) for trial, does VAT need to be paid on these devices? If so, would it be at the suppliers cost or at list price?

There are some ‘deemed’ supply rules that relate to the provision of samples that may need to be considered depending on in which country they are being provided. Also, if the devices are imported into the customer’s country of establishment, then import VAT will be incurred which can either be incurred by the supplier or customer.

The value of an import for VAT purposes is generally taken to be the sales value although some other factors need to be taken into consideration. For example, in the U.K. there are six different ways of valuing an import, depending on the specific circumstances. The value for deemed supply purposes, if applicable, tends to be cost price if VAT needs to be brought to account, in accordance with local rules.

Can you clarify who owes VAT when a manufacturer in the EU imports component parts from non-EU countries, then ships finished goods within or outside of the EU?

This is a potentially complex question, but in summary, the manufacturer will incur import VAT when the component parts are shipped to the EU (assuming that it is importer of record).

When it supplies its finished goods, the VAT treatment depends on where the goods will be sent in order to fulfill a supply. If they are supplied in the same country as the manufacturing and the goods do not leave that country, then local VAT will need to be charged by the supplier.

If the goods are to be shipped outside of that EU country to elsewhere in the EU, or exported to outside of the EU, then the supplies are deemed to take in the country where the goods are located when they are assigned to the supply. However, there are intra-EU and export reliefs available and the supplies maybe subject to 0 percent VAT if specific conditions are met.

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Value Added Tax (VAT)

Pondering Expansion to China? 3 Entity Options to Consider

HSP — Wed, 18 Apr 2012 13:59:56 +0000

If expansion to China is on your mind, good news: The Chinese economy is expected to become the world’s largest by 2020. The not-so-good news is that, even if you’re interested in simply exploring the Chinese market prior to making a long-term commitment, you may need to set up a legal presence.

The country is seeking more foreign investment dollars, but strict rules for nonlocal companies make getting into China a complex and time-consuming process. The country is ranked 91^st on the World Bank’s Ease of Doing Business report, and is in 151^st place for ease of actually starting up a business.

The bottom line: A legal entity may be required for your operations in country and Chinese law does not make it particularly easy for foreign investors to get started. What does this mean for companies trying to break into the Chinese market? Plan ahead, allow ample time and consider one of the following options for China entity setup:

Representative Office
A representative office allows a company to establish a minimal presence in China, acting as a “liaison” office in country to assess market opportunities. ROs are an easy way for foreign investors to get started in China because they do not have a minimum investment requirement and have lower maintenance concerns compared to other entity types.

However, ROs are very limited in what they are allowed to do, and may only be suitable for certain business scenarios. Non-income generating, non-transactional business activities (market research, building relationships with suppliers, etc.) are allowed, but engaging in sales, signing contracts and issuing invoices are generally not permitted.

Wholly Foreign Owned Enterprise (WFOE)
As the name suggests, a wholly foreign owned enterprise (WFOE) is 100 percent owned by foreign shareholders. This structure permits a foreign organization to do business directly in China while retaining control over the business. It is often utilized by foreign entities that have long-term business objectives in China, and can allow businesses to enter into contracts, hire local employees, conduct research and development, market products and services, issue invoices and receive payments in the local Chinese currency.

While allowing foreign investors more freedom to do business in China, the WFOE isn’t without strict regulations. A minimum investment requirement exists, dependent on the nature of business and the specific locality of operation. Additionally, the government requires that a WFOE articulate a defined business scope from the start and stay within it, unless approval is sought from the local authorities.

Joint Venture
A joint venture is a partnership between a foreign business and local Chinese company, whereby the parties agree to collaboratively setup a new entity, sharing expenses, assets and revenues. Foreign investors can benefit by working with a partner who is a known quantity in country, has the right government contacts, etc. With unique local knowledge that would take a huge time investment for a foreign company to develop independently, local partners already have the right infrastructure in place. This can help dramatically reduce overall startup costs in China.

This type of setup is not without risk. By working with a partner, a foreign investor is ceding a certain amount of control to a partner. Additionally, if every detail is not thoroughly considered, differing culture and business practices can creep up and cause issues between partnering companies.

China presents some great market opportunities for companies looking to grow overseas, but managing the intricacies of the country’s business regulations can become an expansion headache. Understand the rules that apply to your company so that you can stay one step ahead and avoid major issues for noncompliance.

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Why Everyone Wants to Work in France (But No One Wants to Hire There)

HSP — Fri, 06 Apr 2012 13:51:59 +0000

Five weeks mandatory vacation, free health care and one of the shortest work weeks worldwide? All it takes is a quick look at some of the highlights of French employment law to get a U.S.-based employee to proclaim, “It’s good to work in France!”

France’s reputation for complex employment law is well earned. Even more so than its counterparts in the rest of the European Union, the nation is committed to protecting the rights of employees. It’s the reason why France can be attractive to employees… and overwhelming for businesses looking to hire in country.

Some of basic benefits provided to French employees are unheard of in the United States. Examples include:

A standard 35-hour work week means that workers who put in more time may be entitled to overtime pay above and beyond their salaries. Through alternative working time arrangements and Réduction de Temps de Travail (RTT), many employees are entitled to additional days off per year (usually around 10 days) to compensate at a flat rate any excess time worked.
Minimum required vacation time of five weeks does not include the standard 10+ RTT days, as well as the average 11 annual public holidays.
While generous statutory benefits include health coverage, unemployment allowances, retirement/pension funds, etc., employees are often offered supplementary benefits. Some typical types of add-on benefits can include: company car, supplemental private health coverage and meal vouchers.
A system of collective bargaining agreements (CBAs) further indicates the scope and detail of the employment relationship and often offers additional benefits to employees.
An array of specialized labor courts make the process of filing suit against a current or former employer an easier process than what might be experienced in the U.S. The timeline for settlement is also often drastically reduced, turning what is often a long, drawn out process in the States into something streamlined and effective, but typically very costly for the employer.

Even so, France still remains a key destination for European expansion. With one of the top economies in Europe, market opportunity in a variety of industries and recent reforms providing incentives for foreign businesses, France can fast become a must-have destination for growing companies. Understanding the nuances of what is required on the ground in this country, particularly around hiring, is essential to successfully growing your business here.

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France Employment Law Q&A

admin — Tue, 03 Apr 2012 20:31:37 +0000

Last week’s webinar Employment Law in France: Avoiding Common Pitfalls encouraged a lot of discussion. There were several interesting questions from attendees for HSP's advisory services expert Dafydd Williams; here are some of the highlights, and answers:

What is the best location for a U.S.-based small-to-medium sized company to set up a European office from an employment and tax standpoint?

It is difficult to state that one country is better than another from the perspective of ease of employment and tax effectiveness. A company has to include many other factors in making this decision, including commercial markets, logistics, available skills, overall business environment, bureaucracy and other influences which may be important to a particular company.

With respect to employment issues (ease of hiring, termination, etc.), we typically see Germany and the U.K. as the less onerous countries. The tax perspective is trickier to address. Ireland has grabbed the headlines in the last decade or so as having one of the lowest tax rates in Europe. However, to fully address tax costs, you do need to look at all costs and not just the headline corporate rate of tax, as this rate alone may be less relevant if the operation in Europe is making little or no profit.

You said that all employment related documents should be made available in the French language. Does this include non-contractual items, such as travel and expense policies?

While there has been no case law focused on the implications of not translating travel and expense policies into French in the same way as the example we provided on bonuses, the latter case could be seen as precedent in respect of a court decision if a travel and expense policy was challenged on the basis that it was not translated into French. We would therefore suggest that such policies are translated.

Similarly we talked about adapting policies as well as translating. Expense and travel costs are treated differently with respect to tax and employment law in every country. France is no different. What is considered a compliant and reasonable policy in the U.S. may not be compliant in France. For example, tax-free reimbursement of fuel for business mileage in France is based on a combination of engine size and total distance traveled in a year. There is no single rate published by the government to provide for tax-free reimbursement as there is in other countries.

How is sick leave handled?

Employee entitlement may be increased by a prevailing collective bargaining agreement (CBA). However as a minimum, employees are entitled to continuation of pay 90 percent of gross salary during the first 30 days of illness and 66 percent of gross salary thereafter. Payments are reimbursed either through the state social security or through a mandatory disability insurance policy required under the CBAs.

Is it required to get employee agreement if there is a significant change in job responsibilities if there is not a change of compensation or benefits?

In most countries an employer should secure the employee’s written agreement to a change in any term of employment irrespective of whether there is a change in compensation or benefits, if only as a matter of good HR management and to avoid later disputes and misundertandings.

In France, a change in position and the responsibilities that go with the position would be considered a change of employment terms. If this is done without employee written consent, the employee will likely use this in a future claim against the employer as an example of unreasonable treatment and behavior. Consultation with the employee is key and in most situations a clear consultation process with plenty of information as to why the position requires modification typically ends with a positive response.

Are all employees eligible for overtime in excess of 35 hours (ex. country manager)?

This will depend on the working time arrangement under French law and a prevailing CBA, documented in the employment agreement .

The most senior positions in an organization, for example the country manager or managing director, may be outside of working time restrictions and work unlimited hours without overtime. In all cases a detailed review of the position, its responsibilities and the candidate would be required to assess this. Getting it wrong could result in significant claims for backdated overtime pay and other unpaid employee entitlements in the event of a later termination.

Where can industry specific CBAs be found? Are there English translations of these?

The French government portal provides access to CBAs, but there are no English translations. We do not recommend machine translation given the legal interpretations of these agreements. Similarly we do not recommend having a legal translation made. This is costly and will need constant updating as amendments to the CBA regularly occur.

We encourage our clients to speak with a French labor lawyer or with us whenever they have a question relating to employment law in France. This is the only other way to ensure accurate advice in respect of employee entitlements in France.

What if you want to terminate due to a reduction in force (cease operations in France)?

Retrenchment or redundancy is only considered a reasonable cause for termination in France if the alternative is the complete failure of the company on a global basis. Failure of the business in France is not considered a sufficiently important reason to eliminate a position in France. Terminations for this reason are typically settled between the employer and employee.

Will a French court rewrite ("blue-pencil") a non-compete, or if they find it unreasonable will the whole non-compete be rendered unenforceable?

French courts will not rewrite a non-compete clause. If any of the conditions of the non-compete (geographic, business and time restrictions, level of compensation) are considered unreasonable, the courts will simply render the agreement unenforceable.

Can a company limit the amount of vacation carry over days from one year to the next year?

Minimum entitlement of vacation cannot be rolled over from year to year. An employer must essentially make every effort to allow employees to take the minimum entitlement (national legislation mandates 25 days, or five weeks, in France, but this can be increased through different CBAs). However, days over and above the required minimum may be able to be rolled over. For example, if an employee has 30 vacation days, 25 statutorily required and five provided as an additional benefit, the employee could potentially roll over those five extra days into the next year if they are not used at the end of the year. Conversely, additional RTT days cannot be carried over.

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Getting Cash Out of China: 7 Repatriation Best Practices

HSP — Fri, 23 Mar 2012 13:00:17 +0000

China can be a notoriously difficult place for foreign companies to do business. With strict rules for entities and complex tax regulations, just getting on the ground can be a pain in itself. But while sales may roll in to your Chinese entity, there’s an added complication foreign companies face: How do I move that cash back home?

It’s not as simple as you might think. Take the example of one High Street Partners client, a U.S.-based web services company with significant operations in China. With growing foreign profits, they wanted to repatriate those funds back into the U.S. regularly, to support further business growth. They made plans for twice monthly repatriation tied to management service fees and royalties.

Unfortunately, this client underestimated what was necessary to take on repatriation. Their timeline was too aggressive, creating significant costs for preparing documentation in such short amount of time. This was exacerbated by inadequate allocation of resources, resulting in major delays throughout the process. Furthermore, the entire process ground to a halt when the royalty rate payable was deemed to be “too high” by the local tax authority.

How can your company avoid complications like those experienced by this client? Consider these seven best practices for making your repatriation of cash from China go smoothly:

Plan ahead. Know that, with document preparation and approval times, repatriation can take months. Have all the right resources and knowledge in place; be aware of the nature/types of remittances and, ideally, stick to those that are clearly defined in tax directives.
Understand impact of tax treaties. Consider the effects of treaties that exist between China and your company’s home country. Consultation from an experienced tax professional is essential to structuring the most effective and efficient agreements.
Ensure documentation is in order. Don’t get caught in a situation where you have to scramble at the last minute to find the right paperwork. In most instances, original documents need to be produced at the bank and to the authorities.
Register agreement with authorities. This will begin the process of obtaining your approvals and tax clearance, permitting you to move forward with repatriation. Generally, outward remittances cannot happen without showing proof that the underlying agreement has been approved, and that the appropriate taxes have been paid.
Be realistic about timing. Approvals and processes could take a week to months, depending on the type and nature of repatriation. And, if an audit is needed as part of the conditions of repatriation, it is even lengthier. Allocate additional time to complete any audits and obtain tax clearance, prior to the intended timing of repatriation.
Follow the order of events to avoid delays. In China (and elsewhere), repatriation usually follow a very strict process and activities need to follow a specific order. Know which type of approval to obtain first based on remittance type (e.g., state tax bureau approval usually has to be obtained before the local tax bureau would approve).
Work with a partner who knows the process. Choose a provider who understands the local environment, procedures, and who can help put together the required documentation. The local provider will require access to the respective authorities to help seek clarification, so reputation and credibility of the provider is important.