THE NEW WORLD; HOW TO DO BUSINESS EFFECTIVELY

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THE NEW WORLD; HOW TO DO BUSINESS EFFECTIVELY

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Title: THE NEW WORLD; HOW TO DO BUSINESS EFFECTIVELY


1
THE NEW WORLD HOW TO DO BUSINESS EFFECTIVELY
  • Hotel Baur au Lac
  • Zurich
  • 18.09.07

2
Programme
  • 14.30 Registration Coffee
  • 15.00 Up-date from Intrust Group its
    partners David Sykes, Director Intrust
    Group of Companies
  • 15.15 China Investment Structures Jack Flader
    GCSL Limited
  • 15.45 Indo Swiss EU A growing
    partnership Vijay Goel Singhania Co,
    Solicitors Indian Advocates
  • 16.15 Coffee Break
  • 16.30 Russia Pitfalls to avoid when
    doing business with Russia Alexander Alexeev
  • GSL Law Consulting
  • 17.00 Comparative Analysis Cristiano Medori,
    The Benedict Partnership, LLP
  • 17.20 Closing Remarks David Sykes,
    Director Intrust Group of Companies
  • 17.30 Cocktail

3
Latest news developments from the Intrust Group
and its partners
  • Benedict Intrust (Ireland) Limited
  • inWEALTH TRUST sarl
  • Cyp Intrust Limited
  • Insail Services - Aircraft Services
  • Benedict Partnership LLP - VAT Consultancy
  • Western Mideast
  • Global PTE Limited
  • GCSL

4
China Investment Structures
OVERVIEW
China Investment Structures A Practical Discussion
Jack W. Flader, Jr.CEO Group Managing
DirectorThe GCSL Group of Companies
Jack W. Flader, Jr.CEO Group Managing
DirectorThe GCSL Group of Companies
5
China Investment Structures
OVERVIEW
  • Introduction to Jack
  • Introduction to GCSL
  • Current Events
  • Representative Office
  • Wholly Foreign Owned Enterprise
  • Joint Venture
  • Danone vs Wahaha
  • Conclusion

6
China Investment Structures
INTRODUCTION - JACK
  • Lived and worked in Asia since 1985 in the fields
    of law, financial and fiduciary services.
  • Qualified attorney and counselor at law of The
    State Bar of California and the Northern District
    of California of the USA District Court.
  • Independent director and consultant to several
    companies listed in Hong Kong and the USA with a
    focus on Asia and Greater China.
  • Member of the Hong Kong General Chamber of
    Commerce, Hong Kong Securities Institute,
    American Bar Association, International Bar
    Association, International Tax Planning
    Association, Center for International Legal
    Studies and President of the Asia Offshore
    Association.

7
China Investment Structures
INTRODUCTION - GCSL
  • Global Consultants and Services Limited (GCSL)
    was established in Hong Kong in 2006 by a group
    of like-minded fiduciary services professionals
    who possess a wealth of experience in servicing
    the simplest to the most complex needs of our
    global clientele.
  • GCSL has offices in Hong Kong, Anguilla, Belize,
    Cook Islands, Nevis, Samoa, Shanghai, Singapore.
  • Services include Company, Trust, Foundation,
    Captive Insurance and Mutual Fund formation and
    establishment Company Secretarial Fiduciary
    Administration Consultancy Services.
  • GCSL is partners with the Intrust Group since
    January 2007

8
China Investment Structures
China Investment Structures
CURRENT EVENTS
  • Shanghai stock market minimal impact of
    sub-prime mortgage crisis.
  • USA China trade disputes, RMB/USD rate (RMB5.5
    USD1 by 2010?).
  • China colonization of Africa
  • China has contributed USD364 million to the
    Africa Development Bank.
  • Prime Minister declared 2007 is the year for
    China and Africa Partnership.
  • National Development Bank created USD5 billion
    fund to support China enterprises to invest in
    Africa.
  • China plans to setup 5 economic cooperative zones
    in Africa.
  • China influence in Asia, ex Japan and Australia.

9
China Investment Structures
China Investment Structures
CURRENT EVENTS
  • 5th Session of the National Peoples Congress
    (passed on June 29, 2007)
  • The law states that the property of the state,
    the collective, the individual and other obliges
    is protect by law, and no units or individuals
    may infringe upon it. This is the first time
    that equal protection to state and private
    properties has been enshrined in a Chinese law,
    which analysts say marks a significant step in
    the country's efforts to further economic reforms
    and boost social harmony. China's state and
    private properties once suffered from serious
    violations due to a lack of respect for and
    protection of property rights.
  • The law sets a unified income tax rate for
    domestic and foreign companies at 25.Prior to
    the new law, foreign enterprises averaged 15
    while domestic enterprises averaged 25. China
    says unfair and incompatible with WTO
    commitments. Preferential tax treatment for
    foreign invested enterprises resulted in 594,000
    such enterprises by the end of last year, which
    invested US692 billion of capital and paid
    approximately US102 billion in taxes
    representing approximately 21 of Chinas total
    tax revenue.

10
China Investment Structures
China Investment Structures
CURRENT EVENTS
  • Corruption and local issues
  • Shanghai Pension Fund scandal hundreds of
    millions.
  • Guangzhou Pension Fund scandal tens of millions.
  • Property market manipulation According to the
    Ministry of Land Resources last year, between 60
    and 90 of land acquisitions for construction in
    China were illegal.
  • Extortion by journalists A journalist was beaten
    to death after he tried to extort money from a
    mine owner by threatening to publicize his
    illegal operation.
  • 25,000 cases of corruption investigation as at
    30th June with more than 5,500 involving
    government officials.
  • Civil Unrest Every week a new story of unhappy
    workers, poor people, etc.
  • Tax evasion 75 million registered tax payers,
    but only 1.37 million people filed.
  • Litigation Danone in negotiations with JV
    partner regarding breach of contract for Wahaha
    brand.

11
China Investment Structures
China Investment Structures
REPRESENTATIVE OFFICE (RO)
  • Established to represent the parent company in
    China. ONLY permitted to conduct non-profit
    making activities.
  • It has NO legal rights in China.
  • More than one representative office can be set
    up.
  • RO is taxed on its expenses in China at rate of
    10. If RO receives funds from a company other
    than its parent, then it will be considered in
    violation of its license and the tax rate will
    increase from 10 to 33 (25 after January 1,
    2008). In addition, RO needs to file tax return
    and pay taxes every month.

12
China Investment Structures
China Investment Structures
REPRESENTATIVE OFFICE (RO)
  • GCSL Shanghai RO step-by-step.
  • Completed the GCSL Order Form and formed an
    intermediary parent company in Hong Kong.
  • Finding the office, registered address, for
    Representative office was the first step. The
    office was identified and we signed the lease
    agreement for 2 years. Since 2005, due to safety
    reasons, a RO must be located in an approved A
    class building. GCSL Shanghai office is located
    at Number 12 on The Bund.
  • A RO must have a Chief Representative who may be
    a foreign person or a Chinese person, or other
    representatives. GCSL Shanghais chief
    representative is Johnson Chien, who is Taiwanese
    by birth, but a Belize citizen.
  • We made an online application for name approval
    to the local districts (Shanghai has 18
    districts) Administrative Bureau for Industry and
    Commerce. The name of the RO does not need a
    name check for it is impossible to duplicate.
    The format of ROs name is county of
    incorporation (parent company) company name
    location type of entity. For example Hong Kong
    Global Consultants and Services (China) Limited
    Shanghai Representative Office. Name
    approval took about 5 working days.

13
China Investment Structures
China Investment Structures
REPRESENTATIVE OFFICE (RO)
  • Once the name approval was confirmed, the formal
    application with required documents was submitted
    to the Administrative Bureau for Industry and
    Commerce within 30 working days. Otherwise, the
    name approval process will need to be
    re-submitted.
  • After we submitted the formal application and the
    required documents, the Administrative Bureau for
    Industry and Commerce issued the Registration
    Certificate of Foreign Enterprises Permanent
    Office in China within 15 working days.
  • Once the Registration Certificate of Foreign
    Enterprises Permanent Office in China was
    issued, we processed the following
  • engraving 3 official rubber seals,
  • Enterprise Code Registration,
  • Company Identification Code Certificate,
  • statistic Registration Certificate,
  • statement from Statement Administration of
    Foreign Exchange, (SAFE) Registration.
  • State and Local Tax Registrations, and
  • the opening of corporate bank accounts.
  • Via a licensed recruitment agency, we hired a
    local staff member.

14
China Investment Structures
China Investment Structures
WHOLLY FOREIGN OWNED ENTERPRISE (WFOE)
  • The most popular choice for international
    trading, manufacturing, processing, assembling or
    other profit-making activities in China.
  • Limited liability company.
  • Registered Capital is paid up capital. The
    minimum registered capital, which has to be paid
    up within 12 months of operations, is normally
    USD100,000. This amount varies depending on the
    industry, city, and place where the WFOE is
    registered and also on the business nature of the
    WFOE and can be significantly higher for certain
    heavily regulated industries. The registered
    capital can be paid up with a combination of
    equipment and cash. A minimum of 15 of
    registered capital initially must be deposited in
    cash from the parent company into the WFOEs
    capital bank account within 90 calendar days.
  • Business tax of 5 on goods and services sold in
    China. Profits Tax currently between 15 - 33.
    Standardized at 25 on January 1, 2008. WFOEs
    formed before April 1, 2007 continue to enjoy
    special terms previously granted.

15
China Investment Structures
China Investment Structures
WHOLLY FOREIGN OWNED ENTERPRISE (WFOE)
  • GCSL client step-by-step in Guangzhou buying
    bicycle parts in China for sale to Russia.
  • Completed GCSL Order Form and setup intermediary
    parent company in Hong Kong.
  • Found an office,registered address, for the
    WFOE. Unlike RO, the office can be located at
    location where the property title is business
    permitted. Changing registered address is a
    difficult process so client chose permanent
    registered address separate from business
    address.
  • WFOE must have a defined business scope. A
    feasibility study was prepared by client and GCSL
    and submitted with application.
  • WFOE can have either a board of directors or a
    legal representative. Client chose a legal
    representative.
  • Application was submitted to the Foreign Economic
    Relations Trade Commission for approval
    certificate before the official Business License
    application was submitted to the government
    authorities.

16
China Investment Structures
China Investment Structures
WHOLLY FOREIGN OWNED ENTERPRISE (WFOE)
  • The Business License was issued, which was
    followed by obtaining approval permit fromm local
    police department, Enterprise Code Registration,
    State and Local Tax Registrations, Financial
    Bureau Registration Certificate and the statement
    from State Administration of Foreign Exchange
    Registration.
  • Bank accounts were set up to receive registered
    (paid up) capital. This is the capital account in
    foreign currency. A minimum of 15 of the
    registered capital in cash was remitted to the
    companys bank account within 90 calendar days
    from the intermediary parent company. A Financial
    Report on Capital Inspection for each injection
    of the registered capital was prepared by an
    authorized accounting firm in order to obtain the
    Capital Injection Certificate. An operating
    account in RMB was also setup.
  • Upon receipt of the minimum registered capital,
    all the licenses and certificates were renewed.
  • Applied for working visa for expatriates.
  • For WFOE that has VAT status, there is additional
    VAT filing to be done every year on or before
    April 30th. Annual audited financial statements
    and report must be completed and submitted to the
    Foreign Economic Relationship Trade Commission,
    and tax authority renewal.

17
China Investment Structures
China Investment Structures
JOINT VENTURE
  • A legal entity in China composed of foreign and
    Chinese investor(s).
  • The Chinese government favors and encourages this
    form of arrangement. Foreigners generally are
    careful in this regard.
  • A Joint Venture may be more suitable for business
    activities deemed limited and prohibited by
    the Chinese government.
  • This business arrangement is usually set up by
    equity or cooperative methods.
  • A Sino-foreign equity joint venture (EJV)
  • A Sino-foreign cooperative joint venture (CJV)
  • A foreign-invested joint stock limited company
    (FISC)

18
China Investment Structures
China Investment Structures
JOINT VENTURE
  • An EJV or CJV is a non-share-issuing limited
    liability company incorporated between one or
    more foreign entities, either natural or legal
    persons, with one or more Chinese legal entities.
    Generally, a CJV is allowed to be formed and to
    operate in a much more flexible manner than an
    EJV as long as the parties agree. For example,
    the law permits a CJV to operate with each party
    specifying their respective contributions,
    management matters, profit and liability sharing
    and how to handle properties at the time when the
    cooperation terminates. Foreign investors
    contributions can be repatriated before
    expiration of the term of a CJV. As such, CJVs
    are sometimes referred to as contractual joint
    ventures.
  • EJVs and CJVs were common structures for foreign
    investment in the first two decades of Chinas
    opening up. Foreign investors usually
    contributed cash, technology and management
    know-how, while their Chinese counterparts
    contributed land use rights, buildings, equipment
    and labor. Gaining ownership and management
    control in the existing EJVs or CJVs by
    increasing equity ratio resulted in WFOEs.

19
China Investment Structures
China Investment Structures
JOINT VENTURE
  • A JV step-by-step
  • Preliminary Agreements, i.e. Letter of Intent,
    Memorandum of Understanding, Non-Disclosure and
    Non-Circumvention Agreement
  • Due Diligence
  • Constituent and Approval Documents
  • Ownership of Assets
  • Obligations, Liabilities and Material Contracts
  • Taxation
  • Land Use rights
  • Labor and Social Insurance-related Matters
  • Environmental Matters
  • Intellectual Property rights and Technology
    Transfer Matters
  • Claims, Litigation and Arbitration
  • Antitrust

20
China Investment Structures
China Investment Structures
JOINT VENTURE
  • Set up Registration
  • The registration will vary depending on the type,
    i.e. EJV or CJV.
  • The domestic Chinese entity should apply to the
    local State Administration of Industry and
    Commerce for change of registration and to obtain
    a new Foreign Investment Entity business license.
  • The domestic Chinese entity should submit the
    genuineness and validity documents including
  • An application for the change in registration,
  • An agreement on the purchase of equity in or
    subscription to the increased capital of the
    domestic company,
  • The revised articles of association or amendments
    to the original articles of association, and the
    contract,
  • The Foreign Investment Entity approval document,

21
China Investment Structures
China Investment Structures
JOINT VENTURE
  • Certification for the qualifications of the
    foreign investor (China Embassy Authentication of
    the foreign investors ID or corporate
    documents),
  • The amended list of directors,
  • Other relevant documents and certificates as
    might be required by the authorities.
  • Follow up Registrations
  • Taxation, customs, land administration, foreign
    exchange administration within 30 days from
    issuance of the new business license.
  • The revised articles of association or amendments
    to the original articles of association, and the
    contract,
  • The Foreign Investment Entity approval document,
  • Certification for the qualifications of the
    foreign investor (China Embassy Authentication of
    the foreign investors ID or corporate
    documents),
  • The amended list of directors,
  • Other relevant documents and certificates as
    might be required by the authorities.

22
China Investment Structures
China Investment Structures
JOINT VENTURE
  • Not Jacks favorite!!!
  • If allowed to form a WFOE, why setup a JV?
  • Example of Hong Kong Public Company of which
  • Jack was an Independent Director.

23
China Investment Structures
China Investment Structures
JOINT VENTURE DANONE VS WAHAHA
  • 39 joint ventures 51 owned by Danone and 49 by
    Zong Qinghous company Hangzhou Wahaha.
  • Zong started out in business in 1987, selling
    milk in a school store.
  • The name Wahaha was meant to evoke a laughing
    child, combining the character for baby (wa) with
    the sound of laughter (haha).
  • In partnership with Danone, Wahaha has risen to a
    dominant position in the bottled water market in
    China and sells milk and yogurt drinks,
    carbonated soft drinks, fruit and vegetable
    juices, sports drinks, congee and canned food.
  • Zong had management disagreements with Danone and
    has argued the EJV agreement, despite being
    signed by both parties, was invalid as it has
    never been approved by China's trademark office.
    Zong accused Danone of attempting to strong-arm
    him in a manner reminiscent of the abuse of China
    by Western colonial powers and Japan a century
    ago.
  • Danone claims it has been cheated out of USD100
    million by businesses set up by Zong that are
    selling Wahaha-branded products identical to
    those sold by their joint venture, using the same
    suppliers and distribution network.

24
China Investment Structures
China Investment Structures
JOINT VENTURE DANONE VS WAHAHA
  • Significant Company Act issues regarding form of
    paid up capital and trademark law.
  • After rounds of negotiations and an offer to
    buyout the side ventures, Danone finally filed a
    lawsuit in May 2007 in Sweden to settle the
    dispute.
  • Danone recently filed another lawsuit in the USA
    against two companies linked to Zong and two
    individuals, one a USA citizen and one a USA
    green card holder, who it claimed were Zong's
    daughter and her mother.
  • Zong recently resigned as chairman of Wahaha, and
    Danone appointed a replacement who sought to
    pacify Wahaha workers, who have been supporting
    Zong in his battle with Danone, issuing a
    statement saying that Danone would guarantee
    their job security.
  • Open letter from Wahaha distributors that accused
    Danone of humiliating Zong and seeking to destroy
    Wahaha. The distributors threatened to cease
    carrying Danone products.
  • The dispute has brought Danone substantial
    negative publicity in China

25
China Investment Structures
China Investment Structures
CONCLUSION
  • Global economy means it is virtually impossible
    to ignore China.
  • Confusing?
  • GCSL is ready to help! Please visit us in Hong
    Kong or in Shanghai at No.12 on The Bund.

26
THANK YOU
Tel 852 2526 2736 Fax 852 2526 2757 Email
intray_at_gcsl.info Web www.gcsl.info
27
Indo-Swiss-EU A Growing Partnership
  • By
  • Vijay Goel
  • Singhania Co. London UK.

28
India facts and figures-General.
  • Political system- Parliamentary Democracy.
  • India comprises of 28 States and 7 Union
    territories.
  • With two tier government system at Centre and
    local levels.
  • National language- Hindi. Main languages 22,
    dialects- More than 2000.
  • Land area- Ranked in the world at 7th place with
    3,287,590 km² of total land area.
  • Population- 1.1 Billion.

29
India facts and figures-Economic.
  • GDP growth Rate-9.4 expected to grow beyond
    10.
  • Components of GDP- Agriculture 18.5
    Manufacturing 26.4 Services 55.1
  • Inflation rate - Around 5.
  • Forex reserves as on July 20-USD 222.043
    billion.
  • Gross domestic savings as a proportion of GDP-
    Well above 30.
  • Of these corporate savings are at- 8.1.

30
Bilateral trade and Economic ties
  • On 28th June 2007, India and the EU began
    negotiations on a broad-based bilateral trade and
    investment agreement in Brussels, Belgium.
  • This is pursuant to the commitment made by
    political leaders at the India-EU Summit held in
    Helsinki on 13 October 2006.
  • Objective is to move towards negotiations of a
    broad-based trade and investment agreement.
  • India and the EU expect to promote bilateral
    trade by removing barriers to trade in goods and
    services and investment across all sectors of the
    economy.

31
Bilateral trade and Economic ties
  • EU nations primarily import textiles and
    clothing, agricultural products and chemicals
    products from India.
  • Exports from EU to India cover machinery,
    chemical products and gems and jewellery.
  • EU is major destination of Indian FDI with one in
    four dollars invested by an Indian company going
    to the EU.
  • There is enormous growth potential in a number of
    other fields, such as financial services,
    especially banking and insurance mechanical
    engineering, and biotechnology.

32
Indian growth sectors.
  • Infrastructure (Roads, ports, airports, railways,
    electricity generation and distribution, bridges
    and dams, telecom etc.)
  • Organized Retail.(Reliance, Bharti-Wall Mart,
    Tesco, Swiss supermarkets like Migros and Coop
    have termendous opportunity at hands.)
  • Real Estate.( Development of megacities,
    townships, commercial complexes, SEZ, STP, etc.)
  • Banking and Insurance. (Zurich is known name in
    India.)
  • Consumer goods. (Swiss watches are treasured
    possession for decades.)
  • Consumer goods. (Exponential rise in cash rich
    middle class is potentially huge market for white
    goods.)

33
Biotechnology
  • One of the main areas of Indo-Swiss cooperation
    is in the Biotechnology Sector.
  • Switzerland is one of the leading nations for
    innovation.
  • Swiss Institutes like Federal Institutes of
    Technology in Lausanne and Zurich amongst top
    rankers.
  • Cooperation between Indian and Swiss Research
    Institutes launched under Agreement on Scientific
    and Technological Cooperation signed in November
    2003.
  • We need to carry our cooperation further in this
    area

34
Common Values and Interests
  • Our two countries have a deep-rooted democratic
    system, Multilanguage and diverse cultural
    setup.
  • Switzerland has a market-driven economy
    established long ago, and India has been rapidly
    transforming its economy to open-market
    conditions. Indian rupee is fully convertible on
    current account very soon it will be convertible
    on capital account.
  • The services sector plays a major role in both
    our economies and is showing a tremendous
    performance.
  • Over the years, Switzerland and India have been
    able to establish a flourishing relationship that
    covers diverse fields - economic, social,
    cultural and political.

35
Advantage of doing business in India.
  • Well trained and low cost labour force.
  • Highly-skilled mechanical electronics engineers
    . English speaking and western thinking.
  • Quality conscious industry with rapid learning
    curve.
  • Effective environment for RD.
  • Strong Universities (engineering and medicine).
  • Industry is investing in RD and moving to
    high-end products.

36
Advantages continued-
  • Governments patents recognition (Intellectual
    Property Right laws).
  • Price competitive raw materials (pharma,
    textile).
  • Advanced legal and financial systems, no
    bureaucracy.
  • Special Economic Zones (SEZs).
  • Duty free enclaves for trade operations.
  • Compliance and infrastructure advantages.
  • Tax exemption for first ten years.
  • Around 60 active SEZs, and recently 341 formally
    approved.

37
Advantages of doing business in Switzerland.
  • Switzerland one of the preferred destinations for
    foreign investors due to a series of advantages.
  • Strategic location in the center of Europe,
    long-term stability, legal security, dedicated
    professional labour force, liberal market
    conditions, reliable and highly developed
    financial center, high-tech infrastructure,
    modest tax system, Switzerland offers all these.
  • This is why, in spite of a small domestic market,
    Switzerland has attracted big names from Indian
    IT companies, such as Tata consultancy Services,
    Infosys, Wipro, Satyam and Polaris

38
Opportunities for Swiss-EU companies.
  • Almost all manufacturing sectors. (Engineering,
    pharmaceutical, chemical, white goods ..)
  • Petrochemical (Including exploration and
    refining.)
  • Infrastructure projects. (Roads, Bridges, Dams,
    Electricity distribution, etc.)
  • Retail, Food processing. (Distribution, shopping
    malls, multiplex, etc.)
  • Real Estate. (Townships, Mega cities.)
  • Insurance and Banking. (Including retail banking.)

39
Opportunities in Retail.
  • Indian retail industry size is 230 bn USD, with
    penetration of organized retail of only 3 (7 bn
    USD) Organized retail is expected to grow to 35
    bn USD by 2010
  • Due to favorable socio-economic conditions Retail
    industry is set to witness 50 million sq.ft. of
    floor space addition over 2007-10, with a huge
    growth in number of shopping malls, hypermarkets.

40
EU companies in India.
  • Companies from Germany, France, Italy, Spain are
    active in India.
  • They operate in diverse fields such as
    engineering and industrial equipment, chemical
    and pharmaceutical, precision instruments,
    services and textile etc.
  • Swiss companies-Nestle, Ciba, ABB, Sulzer, EMS
    Inventa, Specialty Chemicals, Rieter,
    Electrowatt, Novartis, Alusuisse, Bühler,
  • Italian companies-Alitalia Ansaldo Caldaie
    Boilers Banca Monte Dei Paschi Di Siena SPA
    Banca Popolare Di Vicenza Banco Popolare Di
    Verona E Novara Benetton India Bisazza India.
  • We can name equal number of companies from
    France, Germany, Denmark and other EU countries.

41
Indian companies in EU.
  • Several Indian Companies are also making their
    mark in EU such as TATA AG, Birla AG, Ramco,
    Infosys, Wipro and TCS.
  • Main focus is on Outsourcing. More surprising
    outsourcing is not limited to IT and IT enabled
    sector. India is providing excellent outsourcing
    opportunities in diverse sector such as Precision
    Engineering, Auto Components, Textiles and others.

42
Main challenges.
  • What EU companies need to encounter in India.
  • Market complexities.
  • Logistics.
  • Geography.

43
Success recipe.
  • A long term commitment/investment view.
  • Adapt the whole business system to local
    conditions.
  • Products and supply chain must be redesigned to
    cut costs/adapt to the market.
  • Product decontenting, if needed, to compete
    with local players lower price points.
  • Get distribution right using third party
    distributor to overcome rural divide.
  • Educate the consumer shape the market.

44
Legal structure.
  • India has strong judiciary that is above
    government.
  • India has strong well developed contract law,
    company law, intellectual property law,
    employment laws and economic legislation. India
    has well documented Foreign Direct Investment
    Policy.
  • All legislation and policies are transparent,
    well documented and followed to the letter of law
    and spirit.

45
Entry strategies.
  • EU companies can carry business in India either
    though-
  • Liaison office.
  • Branch office.
  • Project office.
  • Joint Venture with Indian partner.
  • Wholly owned subsidiary.
  • Entire investment and Income earned on
    investments are fully repatriable subject to
    payment of Indian income and capital gains tax as
    applicable.

46
Thank You.
  • Singhania Co.24, Buckingham Gate,London SW1E
    6LB.
  • Phone- 44 (0) 207 233 5511.Fax-     44 (0)
    207 233 5522.Web- http//www.singhania.com
    Email- info_at_singhaniauk.com

47
PITFALLS TO AVOID WHEN DOING BUSINESS IN RUSSIA
  • Alexander Alexeev
  • GSL Law Consulting Ltd.

48
PITFALLS TO AVOID WHEN DOING BUSINESS IN RUSSIA
Doing Business in Russia frequent pitfalls
and unexpected joys
  • A Local Perspective by
  • Alexander Alexeev
  • GSL Law Consulting Ltd.

49
Investment Climate
  • Credit Rating
  • SP Investment grade
  • Fitch Investment grade
  • Moody's BBB-
  • Direct Investments
  • motor industry (GM, BMW, Ford, Renault)
  • banking sector (RZB, CitiGroup, SG, CS, UBS, BNP)
  • retail sector (Metro, Ikea, Ramstore)
  • wines spirits (Sun Interbrew)
  • food industry (Danone)
  • Cosmetics (Oriflame)
  • Luxury products (available)
  • Changing Policy in Raw materials sector (Shell,
    BP)

Examples Credit Swiss Case,
50
Russia is a Corrupted Country
You might think
And You are right
Partly
51
Corruption
  • 86th of 130 acc. to CPI of Transparency
    International
  • Corruption Services
  • export and quotas
  • federal budget
  • privatization
  • tax transfers
  • custom duty

Examples American Businessman Case,
52
Commercial Bribery
  • Rates vary from
  • 20 to 50
  • Art. 204, Chapter 23 Criminal Code
  • Kickbacks less quality for double price

Examples Cell Phone retailer and Cell Phone
Brand Case,
53
Personnel
  • Well-educated, motivated hard-working
  • Labor law protects employees
  • Employees indifferent to their legal rights

Examples Kelly Services Case, Greythorne Case
54
Customers and Business Partners
  • Two and more diplomas of higher education,
    European diplomas included
  • Good command of English
  • Foreign business experience
  • Understanding the western mentality

Examples Coca Cola Case, Mars Case
55
Moscow and Province
  • Moscow is not Russia!
  • Moscow draws the best labor resources
  • Moscow accumulates up to 95 of all financial
    resources

Examples Arcelor Case, Wood Industry Case,
56
Real Estate
  • investment in commercial real estate, brings from
    10 to 25
  • Moscow is the 5th in the world as regards office
    rent rates
  • the portion of unoccupied A-class office space
    makes 2,5
  • there are still no strict regulations as to the
    terms of construction
  • you should decide upon the office rent one year
    before you plan to occupy it

Examples Knight Frank Case, Kushman Wakefield
Case,
57
Legal System
  • The total wealth of legal provisions is
    overwhelming
  • Legal collisions and blind spots
  • Russian legislation updates constantly
  • Tax laws make 25 to 33 of the whole bulk of the
    Russian laws
  • The laws are strict and bulky, but optional

Examples Wolf Systems Case,
58
Exchange Control Abolishment
  • No exchange control

Examples Blocked Share Capital Case,
59
Vodka Business Style
  • Russian practice of conducting negotiations with
    vodka.
  • Is this practice alive now ?

Examples ExxonMobile Case,
60
The Russian Tax Law
  • The Tax Code taxpayers, tax base, maximum tax
    rates, tax exemptions, tax administration, tax
    liabilities, special tax regimes
  • Other Codes and subordinate laws
  • International tax treaties DTAs with 66
    countries, most of them follow OECD model
  • Tax law interpretations applicability and
    enforceability

61
Three levels of taxation
Federal taxes
Regional taxes
Local taxes
  • VAT
  • Excise tax
  • Personal income tax
  • Unified social tax
  • Corporate tax
  • Mining tax
  • Water tax
  • State tax
  • Corporate property tax
  • Transport tax
  • Gambling tax
  • Personal property tax
  • Land tax

There is also tax administration powers
distribution foreseen for certain
taxes Example 24 of standard profits tax rate
includes invariable federal portion of 6.5 and
regional budget portion of 17.5, reducible to
13.5
62
Corporate Profits Taxes
Table 1
Due for permanent establishments of foreign
companies
63
Cross-border payments
  • Royalties WHT 20 (in the absence of DTA)
  • Royalties attributable to a PS in Russia
    (permanent establishment) the WHT does
    not apply 24 of profits tax is due
  • Thin Capitalization Rules max. debt to equity
    ratio 31
  • Transfer Pricing Rules general rule price
    adjustment criteria (arms length rate test)

64
Moscow Traffic
  • Moscow traffic as a visual reflections of the
    Russian business people's psychology

Examples UBS Case,
65
Taxation of Dividends
Physical Persons
Legal Body
Residents
Non Resisdents
Russian
Foreign
  • 9
  • (art. 224(4)
  • Tax Code)
  • 9 From Russian
    legal bodies (??. 284 (3.1) Tax Code)
  • - 15 from foreign legal bodies (art. 284(3.2)
    Tax Code)
  • 15 from Russian legal
    Bodies (art. 284(3.2) Tax Code)
  • 30
  • (art. 224 (3) Tax Code)

66
Russian Girls
  • Are they
  • pitfalls to avoid or
  • unexpected joy

67
Registration of Foreign Companies for Tax
Purposes
  • If the business activity is carried through
    branches, ROs,
  • and other special offices over 30 days p.a.

In the tax authority assigned to the place of
business
(ii) If the company holds real estate or
transport vehicles placed in Russia, on the
title of ownership/custody/disposal
In the tax authority assigned to the place of
location or registration of the property
(iii) If the company opens bank account in rubles
or foreign currency in the Russian banks
In the tax authority assigned to the bank
location
In the tax authority of the place of source of
payment and in the Russian Tax Ministry
(iv) If the company receives income from the
sources in Russia, independently on its Russian
subsidiaries
(v) When the companys activities meet the
criteria of permanent establishment under the
national laws or DTA
In the tax authority specialized on foreign
companies and in the Russian Tax Ministry
(vi) When the company is tax liable, being
entitled to hold personal property, on the basis
of ownership/custody/ disposal
In the authority assigned to the place location
of the real estate
In the tax authority assigned to the place of
location of subsurface recourses, made available
under the production sharing agreement
(vii) Investing companies, acting under the
production sharing agreements, including the
function of Contract operator
68
And now you can ask your questions,
  • and you will see that the English you've just
    heard is not my asset, it just shows the
    professional level of GSL translators who
    translated this speech for me.

Alexander Alexeev GSL Law Consulting Ltd.
69
Comparative Analysis
Cristiano Medori Partner The Benedict
Partnership, LLP
70
Comparative Analysis China
71
Comparative Analysis India
72
Comparative Analysis Russia
73
THANK YOU
  • The Benedict Partnership LLP
  • Hotel Baur au Lac
  • Zurich 18 September 2007