Global Connect Admin B.V in partnership with the DNHK are holding a German webinar on 15 June 2022 at 12:00, titled “Einführung in Global Connect Admin BV & Global Connect Consultancy BV Ein kurzer Überblick über Amelkis XBRL. Register on the following link: https://lnkd.in/eSKqWcQg #webinar #xbrl #german #globalconnectadmin #globalconnectconsultancy #DNHK
Through adversity we grow and this year’s summit taught to inspire just that; the tools needed to adapt in this vast – changing world and in every step of the way, to grow and draw strength and purpose from what has happened in the past.
The PS provided a platform for actionable insights, inspiration and networking with over 2000 meet-ups held per day at the 2021 Summit. Global Connect Consultancy B.V., together with Global Connect Admin B.V. again this year enriched their professional know-how and built on its vast & steadfast network!
It is the ability to find harmony in the noise and to know there is a safety net when we err. According to Itay Talgam this can be achieved by our ability to recognize and explore gaps, our decision to interpret the plans we create. This speaker is an orchestral conductor who teaches leadership by looking at examples of world leading maestros. In his book The ignorant Maestro Talgam explains that sometimes the best way to stimulate and let people develop their full potential under your direction is to be ignorant. Leaders do not have to be the one who knows everything, but the one who helps his leaders to develop their full potential and to coordinate the team so that those energies flow in a common sense, as happens in a well-assembled orchestra. He teaches his audience not to mind the gaps but to use them.
Other experts on the stage included Daniel Pink, expert on human behavior who aims to teach businesses that regret is both healthy and universal and an integral part of human life. Regret is not abnormal or dangerous, it clarifies what we value and teaches us to be better if we can learn from it.
Dr. Frederik Pferdt, CIE of Google teaches around the central idea that “it’s important to create an environment where everyone is allowed to bring in opinions”. His teachings focus on human mindset and how it channels our inner attitude towards every external event and how to reprogram our negativity bias and start inventing a better future, today.
Noteworthy insights from Linda Hill included inter alia that “most innovations arise from the collision of different ideas, perspectives, and ways of processing emotions”. Organizations are increasingly faced with pressure to innovate, but lack the tools to fuel, inspire and sustain that innovation. In summary the professor teaches her audience to reduce their should’ve and could’ve; be collaborative-ready; develop your successors and paying attention to both scale and speed.
We would like to thank our hosts at this years’ President’s Summit for the outstanding event that was had! Your hospitality is remarkable and the teachings are what we will draw from in the coming year. Thank you!
Join the leaders of future, the investors of tomorrow, and the founders of TODAY! Join Global Connect Consultancy B.V., your trusted partner in financial reporting – today, tomorrow and into the future. Our professional global team will ensure that you regain control of your financial data, allowing you to focus on your core business.
Every year, companies have to deal with predictions and challenges regarding global business. One of the well-known elephants in the room is the pandemic, affecting all companies. Next to the virus, other national and international trends keep organizations busy. How can your company respond to current global events? What type of strategies should you carry out to strengthen your brand and market position? We take a closer look into four business trends in 2022 – Data security, e-commerce, hybrid working and sustainability – and share insights on what your company could carry out for the near future.
1. Data security – Often overlooked, but crucial for your brand image and consumer trust
Consumer trust will make or break your brand image, especially how your company ensures data security. When people think of data security, they will most likely think of protecting data against risks, preventing data loss, and ensuring that data will not be misused or fall into unauthorized hands. Your company website should consist of a legal notice regarding your cookies and how your company protects the data of customers and website visitors. However, many companies tend to overlook the importance of detailed measures against data theft. In recent years, cybersecurity risks have been escalating globally. The question “How do I prevent hacking and data breaches?” turned into “When will data breaches happen?”
What can you do when cybersecurity risk prevention is impossible? The answer to that is to ensure that your company is well-prepared to take the necessary actions when it happens. Think of how you will bring the news to the outside world and what resources you have to limit the damages and solve the issue as effectively as possible. If companies want to be well-prepared for data challenges, investments in data security are the norm.
Global Connect Admin heavily invests in data security. Our customers are international companies, as well as private equity families. To ensure that their data is protected to the best of our ability, we secure the highest level of data protection. If you have any questions regarding how we do this, or if you are looking for professionals that can take care of your cybersecurity risks, do not hesitate to reach out to us.
2. E-commerce – Booming, however…
With the high level of convenience for customers, whether B2B or B2C, it is no surprise that e-commerce is booming. Global sales rose to 16.4% during the pandemic and continued to grow further. E-marketers predict that 22% of the global retail sales will increase to 22% by 2023. While e-commerce is booming, e-commerce companies will take a hit due to the economic barriers against Russia. Companies either choose or are forced to discontinue business with Russia, and freight costs will further increase with the rising oil and gas prices and limitations of no-fly zones.
E-commerce companies now have to choose alternatives to limit shipping costs and rising prices. For example, many companies tend to move production to Europe instead of Asia or choose green options regarding freight. Your company must communicate with your consumers at moments like this. Tell them what your 2022 actions are and what these mean for the consumer’s wallet and shipping. The good news is that your company is not the only one affected by global issues. The bad news is that if you do not take any action regarding current international events, the competition will eat you.
Have you thought of your short and long-term company strategies? Global Connect Admin assists international companies worldwide and has experience with various industries. If you are looking for distribution centers or would like international tax and VAT professional assistance, please get in touch with us. We would gladly help you with finding the best solutions.
3. Hybrid working – The new future
Remote and hybrid working is nothing new, but it is no secret that the global pandemic sped up the process of moving away from the office as a workplace. Compared to 2015, almost every company can now call itself (somewhat) experienced in hybrid working. While the pandemic heavily affected the global economy, it also proved that employees do not need constant supervision to perform well and be productive.
The main challenge with hybrid working is communication. What works for team A might not work for team B. How do you ensure that employees feel engaged and communicate well with each other, whether there is a lockdown or not? One solution is to establish clear ground rules regarding the workplace.
Since 2015, Global Connect Admin has experience in remote and hybrid working. To create the best hybrid workplace plan for your employees and your company, you need to analyze productivity and employee benefits. Many companies also tend to overlook what is possible in the legal aspect: Can employees work from any place they want to, or will your company experience insurance issues? If you have any questions regarding hybrid working, you can always reach out to us for tips and tricks.
4. Sustainability – Consumers find it essential, but do companies think the same?
Consumers went from requesting companies invest in sustainability to demanding it. The sustainability trend means that no matter the size of your company, you need to innovate your products and services for the greater good. More companies are now investing in green energy and sustainability projects. Meanwhile, international tax authorities are now also demanding sustainability reporting.
Recent years show that many international companies are already taking some actions regarding sustainability. For example, they switch diesel company cars to electric ones and invest in hydrogen projects. Meanwhile, the scarcity of Russian oil and gas further forces governments, companies and households to invest in different – more green – energy sources and solutions.
Sustainability goes further than thinking about how your company can impact the carbon footprint: you must now also think of society as a whole. If you only focus on, for example, your innovative products and services, you are only telling half of the story. Actions speak louder than words, so ensure to listen to your shareholders and customers and then implement the proper steps they want to see.
Global Connect Admin has experience in sustainability reporting regarding international groups. We assist companies with, for example, XBRL reporting. With XBRL software, EU-listed companies can effectively link their data to sustainability information (such as the ESEF taxonomy). Our employees are highly experienced in consolidated annual reporting and will gladly assist you and your team.
Whether global trends enhance or challenge your business, you have to take action for the short and long-term. Even small-sized companies that are only locally active are affected by international developments. The real question is, what can your company do to act accordingly? Your answer depends on which industries your company is active in and what type of products and services you offer. However, one thing is for sure: You need the right tools, expertise and resources to ensure that your business continues to prosper. Take the right actions and communicate accordingly, and you will come a long way.
What you need to know before expanding your Dutch business to Germany
Doing business in Germany from the Dutch point-of-view
Anyone who first enters the European market will quickly discover that every European country is different. The Netherlands and Germany are major international players and share a long trading history. Every year, Dutch entrepreneurs enter the German market but often with a Dutch frame of reference. Is this way of doing business effective, and how can a Dutch company prepare for the German market? Grenzhoppers, Internationales Netzwerkbüro, STRICK and Klaar Voor DE Start examine how to appeal to German customers and create awareness of Dutch companies in Germany.
Economic connections and differences
The Netherlands and Germany have strong economic connections with each other. Therefore, it is no surprise that Germany is the most important sales market for Dutch companies. Compared to other trading partners, such as Japan, neighboring Germany is very close. Nevertheless, successfully entering the German market requires intensive preparations for the Dutch neighbor. Germany is a large country, with significant differences in language, culture and regulations. While it is self-evident for most Dutch companies to be active internationally, it is more self-evident for German enterprises only to be nationally active. This activity is often challenging for Dutch companies: How can a Dutch company excel in the German market? On the other hand, this also has advantages: the physical distance is small, and the German business culture is more apparent than the international business culture.
German companies often sufficiently benefit from the German national market. Despite this, Germany remains a top location in Europe. According to the UK comparison portal, Nimble Fins, the country ranks highly in the business climate, trust in the rule of law and economic health. In addition, foreign companies have many options for applying for subsidies. Nevertheless, foreigners should be prepared for the individual characteristics of the German member states. Each Member State has its own culture, dialect, customs and economic specialization.
The first step: Find and understand the differences
Being aware of corporate and intercultural differences greatly benefits Dutch companies entering the German market. Consider, for example, the separation of work and private life. German business people like to see their life as a role play, based on hierarchy. At work, they show expertise. They let go of the professional role at home, and the personality comes to the fore. In the meantime, it is much more natural for Dutch business people to show personality at work as well. Conviviality takes you far in Dutch business life. With this knowledge, you can already imagine how a business meeting can go when a Dutchman and a German start a conversation without prior knowledge of each other’s culture.
In general, the Dutch want to appear sympathetic and demand a comfortable working environment. Germans like to appear competent and demand respect in the workplace. While the Dutch want to have fun with and at work, Germans often find it a challenge to deal with the self-relativization and self-irony of the Dutch. Germans often want to hear concretely how the problem is being tackled, while Dutch are quickly satisfied with a „We’ll get this sorted out, so don’t worry.“ As a result, the Dutch often approach German customers with ‚promises‘ such as „We deliver this product the fastest.“ If this promise is made, German customers will want to see clear proof of why your company is the best, based on facts, not feelings. Dutch consumers respond better to storytelling, so keep this in mind to be very precise in your communication with German consumers. As a result, Germany experts advise against copying Dutch business plans to the German market, as this generally causes miscommunication.
Leistung schafft Vertrauen … Performance inspires trust!
Expanding to Germany or starting a business in Germany requires intensive preparations, but it is certainly possible to achieve success. Be prepared to be patient and assume that the achievements will be long-term. One way to make your company, products and/or services more attractive to the German market is to set up a gmbH. With this ‚camouflage method,‘ you can effectively build a German identity and attract customers and partners.
In addition, your company must comply with German laws and regulations. As mentioned before, these are different than in the Netherlands. As a Dutch company in Germany, your business will be negatively affected if you do not comply with the rules. You will not only run into problems with the German authorities; German consumers and companies will also not trust your company and will not want to do business with you until the distant future. So make sure that the general terms and conditions (Allgemeine Geschäftsbedingungen) are correctly formulated, tailored and legally valid.
Once the first steps have been taken in Germany, the communication to the German market must be formal, detailed and correct. Germany experts recommend avoiding language errors, avoiding conflicts, addressing others by their last name and using precise language. Be tactful, honest, trustworthy and kind. Also make sure that there are German-speaking employees active in your company, as Germans prefer to do business in their language. Understanding the German language and culture prevents projects from missing out due to language problems and intercultural differences.
Communication is key
Approaching customers and partners takes time and effort, but the road to a good deal can be long and tiring if you don’t adhere to the business values and standards. An effective way to build trust and shorten the path to decision-making is to keep meeting reports (Kaufmännische Bestätigungen). The Dutch like to arrange business over the phone, but Germans find it more pleasant to do business by keeping written notices. Has a price been agreed, but one party says €15, and the other says €11? Then it is a matter of looking back at the review reports since the price is written in black and white. With these written summaries, you carefully check the agreements, and immediate (written) action can be taken if people disagree with the content.
In the end, Germans prefer to choose what they already have and prefer to be on the safe side. Ultimately, the boss makes the final decisions, and only these will be accepted and executed. Changes take time and require patience; a Dutchman who prepares properly and accepts this will eventually reap the benefits.
Global Connect Admin is a Dutch company with German influences and customers. We mainly focus on companies that are active internationally. While our managing director is German, he chose the Netherlands as his head office, because of its international nature and attractive corporate culture. While we speak the international language, we also understand national company languages, including Germany. As a Dutch company, if you have questions about the German market or would like assistance with international business as a German company, do not hesitate to contact us. We are happy to help you and your company on the way.
Intercultural differences between West and East
A closer look into the Russian negotiation style
No secret that the west and Russia clash with different views and styles of communication. When taking a closer look at the intercultural dimensions of Hofstede, for example, you can already see vast cultural differences. What does this mean for your business communication? What should you be aware of when negotiating with the West and the East?
Keld Jensen and Michael Gates spoke about the Russian negotiation style and how to prepare for intercultural communication. Keld Jensen is an expert in negotiation, trust and behavioral economics. While he is a managing director of a listed Scandinavian company, he has more than 30 years of experience in international management, negotiation and communication. Michael Gates, managing director of CrossCulture, is an international expert on cross-cultural management. They wanted to share the Russian negotiation style with their expertise and background and gave insightful examples of why Europe and Russia often misunderstand each other.
Before we continue, we would like to share a disclaimer. The main goal is to educate, not to generalize, the Russian business culture. It is like the saying that all Dutch are direct: while this is generally true, very indirect Dutch also exists. Furthermore, we wish to give insights on the intercultural differences between Russia and the West, not to justify the actions of Putin.
Russians tend to trust 'the individual' rather than 'the system'
Gates stated that trust is an issue in general. Furthermore, there seems to be a gap in trust in every culture, especially when you take a closer look into ‘official’ and ‘personal’ trust. It is a long-time dilemma: If your friend commits a crime, will you lie in court to save them? In some countries, such as Russia and Korea, the answer is often “yes.” Yet, in other countries, such as Sweden and Finland, the answer is often “no.” These answers have to do with whether the people trust the system or the individual.
"I win, you lose"
When taking a closer look into negotiation, Russians tend to find winning the most important outcome. Gates stated that the Russian culture includes obsessions with strength and power. However, when you compare this obsession of strength to, for example, the United States, the Russian Federation tends to be more passive and patient, like Asian cultures. So if Russians tend to wait for the other party to speak first but want to ‘win,’ how do you prepare for negotiations?
Try to find a third way of negotiating instead of seeing negotiations as positional with a win-lose or lose-lose situation. Instead of acting from your frame of reference, try to understand the other party. What are the characteristics? How can the flow of communication go smoothly?
Important factors to know before you start negotiating with Russian enterprises
Geographically, Russia is divided into European Russia and Asian Russia since this country shares its land borders with sixteen countries. Therefore, it is no surprise that the Russian business and negotiation culture is European and Asian. While Russia is relationship-based like Europe, there are vast differences. For example, Russia is more passive and has much patience for doing business. As a European company, if you wish to make it big in Russia, you can only do so by having an extensive Russian network with solid relationships. When European companies negotiate, there is already a level of trust, namely the expectation that the other party also wishes the best for you. In Russia, this is no such thing; Business people tend to be more cautious and want to know what is in it for them.
The start of the negotiation: Be prepared to start strong
When your company starts negotiating with a Russian counterpart, they will most likely ask you first to tell what you think. Afterward, you will most likely hear a form of resistance due to the high level of cautiousness and suspicion. So you might wonder: How do I deal with this? How do I have a healthy negotiation with a partner who does not entirely seem to trust me? Well, Gates stated that you must be strict with Russians.
Russian governments and companies prefer hard power over European ‘soft power.’ To fight pressure, you need to respond with force. Negotiating expects to recommend starting your Russian business journey small but steady. Be well prepared, and expect matters to start slowly. Just as starting doing business in Germany, it takes time for the market participants to trust you fully. If you are working with trial and error, make sure not to do business with life-changing parties that negatively affect your business.
During the negotiation: Mirror and hold your ground
Negotiating and doing business in Russia is a long-term process with much pushing and pulling. It also often happens that Russians have different perceptions of truth. Just as in Korean culture, it is allowed to tell white lies. The views on white lies are often the biggest barricade between European and Russian business; being aware of this will benefit you during negotiations.
Russians tend to be cautious listeners interested in European enterprises, yet also suspicious. Russian culture is full of emotion. However, they do not show emotion and prefer apathy over empathy. You can see this in the way Russians smile. In the Netherlands, it is not uncommon to see people do small talk and smile while doing business. In Russian business life, smiling is seen as a form of intelligence. So actually, if you are communicating with Russian business people, and they never smile at you: See this as a compliment, not an attack. And if you smile, make sure to let your Russian counterparts know it is a form of politeness and trust from the west. Are you unsure how to act? Play it safe and secure by mirroring your negotiation partners.
Finishing the negotiation: Be patient and respectful
As seen in the infographic at the beginning of this article, Russia has a high level of power distance. In general, Russians have different views on trust based on system and personal levels. However, one thing is clear: If you want negotiating to go well, you must have a person in charge that is powerful and a true leader. Russia’s business style is very autocratic.
If you want to finish the negotiation on a positive matter, be sure to build and maintain a close relationship with the CEO and the people the CEO fully trusts. You will find that the process will go much quicker, and the level of trust gaining to go much faster.
Jensen shared a clear overview of steps to take during negotiations, namely:
-Replace if necessary. Does the personal chemistry not work as intended? Do not be afraid to replace negotiators on both sides.
– Silence is key. If you are unsure how to react to certain provocations, respond by silence.
-Do not be afraid to delay the negotiations. Think long-term.
-Be clear in your communication. Choose precise formulations and provide an alternative when necessary.
-Empathy works in the west, apathy in the east — play along with your negotiator. Do not be afraid to think from a different mindset than you usually do.
-Ask questions to make the other party feel heard and show that you respect them.
-If you have no other option, fighting is more effective than giving in.
In the end, Russian organizations that are internationally active will be less challenging to negotiate with than Russian-only enterprises. Currently, doing business with Russia is not recommended due to international sanctions and actions. We hope to show that it is easy to misunderstand other cultures. If you have any questions regarding your international business, please do not hesitate to reach out to us. We will gladly assist you.
The freezing tensions between the EU and Russia
And how this affects your business
Whether you represent a company, political party or government, actions tend to have consequences. While many hope to see the year 2022 as the year of healing, both economically and culturally, past tensions are throwing mud in the water. Conflicts that affect the bilateral political dialogue between the European Union (the EU) and the Russian Federation (Russia) are not new, yet it is still considerably unclear what will happen next. Will the EU citizens sit in the cold and the Russian citizens without certain necessary goods? Or will we be able to celebrate warm holidays and further enhance international trade?
Policy dialogues and cooperation are temporarily frozen
The aftereffects of Russia’s annexation of Crimea in 2014 can still be felt in 2022. The world watches Russia’s threats towards a war with Ukraine, unsure if these threats are empty or not. As a result, some policy dialogues and mechanisms of cooperation between the EU and Russia are temporarily frozen. The next question is, will this dialogue continue to freeze shut, or will the two international positions of power allow international defrosting? However, the EU and Russia’s stagnated relationship was not always like this. Both share similar global goals and extensive history in cooperation and trade.
The history of cooperation between the EU and Russia
The European Union and Russia share a longstanding history. Next to cultural, economic and historical ties, Russia is one of the most prominent neighbors in the EU‘ neighborhood.‘ In the past 25 years, Russia and the EU have exchanged information and cooperated in various international matters. They share bilateral global concerns regarding:
With Russia’s permanent UN Security Council membership, the country also engages in various selected points of interest of the EU, which was proven by the implementation of the Minsk Agreements. These Agreements were supposed to put an end to the war in east Ukraine. However, while this seemed like a path to peace back in 2014, the tensions between Russia and Ukraine are still very much alive.
The Partnership and Cooperation Agreement (CPA)
In general, the framework of the political and economic relationship between the EU and Russia is the Partnership and Cooperation Agreement (CPA). Since 1997, the goal of this Agreement has been to promote trade, investment, and the development of economic relations between the two parties. However, what started as healthy manure has slowly but surely transformed into a minefield.
In 2008, the EU and Russia started negotiations of a New EU-Russia Agreement. However, this Agreement is still postponed to this day. With the current challenges in dialogue, the two parties can agree that the existing conversation is either limited or non-existent. Like a domino effect, the EU and Russia are heavily involved in international trade, affecting everyone. What can investors and enterprises expect for the future of their company?
Your opportunities in trade, even with the limitations
Societies, governments and businesses are affected by the EU-Russia tensions; that much is clear. The EU and Russia adopted laws, resulting in various import and export restrictions. Since 2012, Russia moved from third place to fifth place as the EU’s biggest trade partner.
Even with the trade restrictions, the EU still remains Russia’s most prominent trade partner. In 2020, Russia remained representative of 5% of the EU’s merchandise trade. This bilateral trade in goods consisted of €174 billion, which is around 40% of Russia’s trade.
The future of the tensions between the EU and Russia
The EU continues to apply a set of restrictive measures against Russia in response to the Ukraine crisis. As a result, Russia responded with countersanctions. Experts from the Atlantis Council are concerned about the EU’s response to Russia yet state that both parties have various options. The EU should build a common strategic culture in order for European countries to stick together. Simultaneously, both Russia and the Eu are investing in the Transatlantic region for future endeavors. Therefore, it is most likely that the two parties will drive further apart.
Furthermore, in order for Russia and the EU to start an open dialogue again, both parties should look at their strengths and impacts. However, seeing a harmonious EU-Russia relationship in the short term will be most unlikely. While both parties may share similar international goals, they also share different views regarding what is best for them. In this case, the negative highly outweighs the positive.
In the end, Russia and the EU are dependent on each other in one way or another. Just like a neighbor quarrels, only time and actions can tell what the future brings. With the world as a global village, governments and authorities do need to reflect on their position of power: What message will they send out, and what strategies should they entail? One thing we do know is that the current state of affairs will continue to strongly affect international businesses, whether we like it or not.
Are you concerned about your position in international trade? Global Connect Admin has an extensive background and expertise in European and Russian matters, especially regarding international business, financial management and accounting standards. If you require any form of assistance in complex company situations, do not hesitate to reach out to us. Instead of lingering on restrictions, we would gladly review possibilities with you.
With the opening of the Chinese economy to foreign investments in the past 40 years, China is transforming into a global economic hub. However, with the standardisation of business administration with the International Financial Reporting Standards (IFRS), foreign investors need to be cautious of the differences between the global IFRS and the local Chinese GAAP. In this article, these inconsistencies between IFRS and Chinese GAAP are getting analysed, as well as looking into the optimal preparation for this challenge.
To increase the foreign direct investment (FDI) into the Chinese economy, the Public Republic of China (PRC) implemented special economic zones (SEZs) to further develop towards the biggest global economy. Hence, on the business administration level, this inquires for own accounting rules referred to as the Chinese Accounting Standards (CAS) or the Chinese General Accepted Accounting Principles (Chinese GAAP). While the CAS is implemented to reduce financial fraud or to optimize China’s tax strategy, in an international context the function of IFRS is to streamline international accounting regulations and transparency. Meaning, that the IFRS should be applied on top of the CAS so that the company can both adhere to the international and the local rules. Nowadays, while China starts to converge more with the IFRS principles, the Chinese GAAP still differs from the well-known and familiarized IFRS trademarked by foreign investors.
The organ of the Accounting Regulatory Department of the Ministry of Finance (MoF) is responsible for setting the accounting standards in China. As the previous regulations of the CAS were mainly concerned with sorting a balance sheet of the state-owned industry in the socialist era, the regulations in current years are aimed to reflect the financial status, analyse the operating results, and maintain transparency (for the state). The Chinese GAAP has two subordinate accounting policies:
In 2001, the GAAP initialy included the Accounting Standards for Business enterprises (ASBE01), however, the ASBE01 was in 2006 further transformed into the ASBE06. The ASBE06, which currently is still required for all publicly traded enterprises in China, is the main set of accounting measurements. Luckily, the Chinese GAAP (ASBE06), has key similarities with IFRS. For small-sized business cooperations, there is a special set of accounting measurements called the Accounting Standards for Small-Sized Business Enterprises (ASSBE). This standard can be seen as a merger between IFRS and ASBE06 and has the goal to make it easier for small enterprises to follow the tax regulations and accounting standards.
Differences Chinese Generally Accepted Accounting Principles (Chinese GAAP or CAS) and International Financial Reporting Standards (IFRS)
Knowing that the CAS and IFRS have similarities, it is evident that the foreign investor should be aware of the regulations that differ within these sets of accounting rules. Hereby the differences between the CAS (GAAP) and IFRS:
- Valuating Fixed Assets
Whereas the IFRS has the choice to utilize the preferred method of valuating fixed assets, the CAS does not endorse this flexibility. In IFRS, one can opt for re-evaluating the assets or use the historical-cost valuation method. In CAS, only the latter is agreed upon to be used when valuating fixed assets.
- Implementation Delays
Whenever IFRS updates/changes are released, these new IFRS rules are not immediately, and in some cases never, adopted in the CAS. In short, the Ministry of Finance (MoF) will review the latest release of the IFRS and see if it can be adopted into the China business framework. For foreign investors, this means that 1) the IFRS updates are delayed, 2) the IFRS might never be applied and thus results in 3) the IFRS regulations can be different than in other countries. This can lead to serious problems in companies with an overarching implementation of IFRS changes (e.g. software) in all of the subsidiary ventures.
- Common Services in China
When handling cases of common service in China, the CAS has a more detailed description of the situation. For example, In the case of merging two companies with similar interests and under the control of one entity. The CAS requires a restatement of the figure while IFRS has no specific rules for this situation.
- Uncommon Services in China
Opposite to the previous point, uncommon situations in China are less detailed than the IFRS counterpart. The Italian-Chinese Chamber of Commerce exemplifies this difference by looking at employee benefit plans. The CAS has no specific rules for staff benefits offered by international firms besides payments in the firm’s stock. In the case of using benefits packages for its subsidiaries, the mother company can get into serious problems and should always have contact with the MoF to address and record such transactions accurately.
- Fiscal Year
The fiscal year of the CAS starts from January 1st, while the start of the fiscal year can be decided by the company when applying IFRS. Regarding IFRS, the year must be 12 consecutive years.
How to successfully do business in China regarding the Chinese Accounting Standards?
To minimalize the potential risk of conflicts with the law, it is recommended for foreign investors to notice the differences between CAS and IFRS and apply both of the accounting standards in the right way. In this process of familiarizing with CAS, the differences should be known, and the contact between the firm and the Ministry of Finance should be optimal to resolve challenges and uncertainties. Moreover, be aware that the CAS can only be filed in the China language, and that short-cuts in the Chinese accounting world often result in serious delays and non-compliance: further complicating the international business. Thus, in the case of maintaining an overview of both CAS and IFRS, even while it is about 90-95% similar, it is recommended to have (specialized) agencies on your side. With experts on the topic, it is evident that the venture is assisted by experience. This way, the short straw will not be drawn when dealing in an unknown and new business environment.
For more assistance in the field of IFRS, the newest software by Amelkis can support enterprises to customize and analyse data while preserving an overview of the IFRS regulations.
If interested in personal advice regarding international business advice, tax situations or consolidation (in China), Global Connect Admin B.V. can assist you with these challenges due to the rich experience and framework of connections.
When intrigued by the personal IFRS-software solution, Global Connect Consultancy B.V. offers help with the installation, optimization, and customization of the Amelkis software Solution.
Doing business in Europe means taking into account the many local rules, EU laws and international regulations. It is not unusual to benefit from various tax benefits or to research the best possible tax solutions. However, tax evasion and aggressive tax schemes are highly unwanted and will be fined. Therefore, it is beneficial to look into the DAC6: The EU Mandatory Disclosure Rules for cross-border arrangements. Let’s check if your company is well-prepared for cross-border arrangements.
What is DAC6?
DAC6 is an EU Council Directive that entered into force on 25 June 2018 and is implemented by EU jurisdictions into EU national law. Furthermore, DAC6 amends the cooperation between the EU Member States by focusing on joint actions and audits.
This directive’s primary goal is to harmonize tax rules in Europe by providing tax authorities an early’ warning system’ that notifies potentially aggressive tax planning schemes. Therefore, intermediaries are obligated to disclose potentially aggressive tax planning schemes on cross-border arrangements, otherwise called ‘reportable cross-border arrangements.
Step 1: Check who is required to disclose reportable cross-border arrangements
Intermediaries, and in certain situations, taxpayers, have an obligation to report cross-border arrangements to the authorities. An intermediary may be relieved from its reporting obligation if they can prove that another intermediary has already reported the relevant arrangement. The image below shows an overview of who is required to disclose these arrangements.
Step 2: Check if the arrangement is cross-border and ‘reportable’
For an arrangement to be cross-border, at least one of the participants must be located in more than one EU Member State. There is no reporting obligation if all participants are tax residents in the same jurisdiction or if there is no connection with any EU Member State. However, even an arrangement between two entities from the same EU Member State may be considered cross-border in some cases. A prime example is an EU entity with foreign shareholders. Below is a short overview of examples of non-cross-border and cross-border transactions.
For an arrangement to be reportable, one or more of the DAC6 Hallmarks must be met as set out in Annex IV of the DAC6 Directive. Therefore, a cross-border arrangement will only be reportable if one or more DAC6 Hallmarks are met. These hallmarks are characteristics or features of a cross-border arrangement that may indicate a potentially aggressive tax planning structure. The five categories of the hallmarks set out by the DAC6 directive are:
- Generic hallmarks linked to the main benefit test
- Specific hallmarks linked to the main benefit test
- Specific transactions related to cross-border transactions
- Specific hallmarks concerning automatic exchange of information and beneficial ownership
- Specific hallmarks concerning transfer pricing arrangements
The ‘arrangements’ mentioned in the hallmarks represent undefined terms included in the five hallmark categories.
Step 3: Do the Main Benefit Test
The intermediary or taxpayer may benefit from a tax advantage when they fulfill the ‘main benefit test.’ However, this tax advantage may only be considered under generic hallmarks of categories A, B, and (some parts of) C.
However, it is crucial to keep in mind that due to the broad scope of the hallmarks, DAC6 creates a risk of under-reporting and over-reporting. Furthermore, there is no consistent interpretative guidance agreed between the EU Member States.
Step 4: Act on time and prepare for penalties
You should report reportable cross-border arrangements through a special reporting form. Each Member State has its tax authority, so it is recommended to check out your local tax authority website. Generally, you must report a reportable cross-border arrangement within thirty days of the earliest of:
- the day after the arrangement is made available for implementation;
- the day after the arrangement is ready for implementation; or
- when the first step in the implementation of the arrangement has been made.
In case of non-compliance, such as non-reporting, incomplete or inaccurate information, the relevant intermediary and taxpayer may be subject to penalties. These penalties are up to a maximum of €870,000. In some instances, there will be a criminal prosecution. In other words, it is better to prevent penalties altogether. After all, significant sanctions and reputational risks apply to not only the businesses but also the intermediaries!
As mentioned earlier, there are risks in reporting your cross-border arrangements, such as under- and over-reporting. Meanwhile, many companies either miss out on tax benefits or end up overlooking essential hallmarks. We at Global Connect Admin provide tax advice for many European companies and international companies that have activity in the EU. Do you have any questions regarding the DAC6, (reportable) cross-border arrangements or other vital information to do business successfully? Feel free to send us any questions our way; we would love to assist you.
From paper to digital, from local to international standards (such as IFRS). Annual changes are no longer a surprise for companies. In addition to local rules and standards, more and more companies are confronted with international innovations, such as the influence of the Standard Business Reporting (SBR) system. For example, the XBRL format is not new and is not mandatory for everyone. Yet, it is fiscally helpful to keep an eye on updates regarding XBRL. This article briefly explains what XBRL is all about and how you can prepare for any (future) obligations.
XBRL in a nutshell
XBRL (EXtensible Markup Language) is an open international standard for digital business reporting. Millions of XBRL documents are added every year, with paper reports replaced by more effective and accurate digital versions. With XBRL, reporting terms can be authoritatively defined. Furthermore, you can represent the contents of financial statements, compliance, performance and business reports. For example, you can convert paper, PDF, and HTML-based reports into a digital XBRL-format in no time, allowing for quickly and accurately moving information between organizations. Therefore, using XBRL allows more people to use, share and analyze the data.
With XBRL, organizations can publish reports to ensure that the content can be accurately consumed and analyzed. Following a set of business and logical rules will go smoother and captures any errors at the source, ensuring error avoidance. In addition, it is crucial to ensure that the data provided conforms to advanced pre-defined definitions and taxonomies, which vary by country. The user can customize language and currency in their preferred style as well. Finally, comprehensive taxonomies and accurate tags allow for continued preparation, validation, publication, exchange, consumption and analysis.
XBRL in the Netherlands: From Micro to Large Enterprises
As of the financial year 2016 (1 January 2017), micro and small enterprises are no longer allowed to deposit publication documents via paper. In the Netherlands, electronic deposits are made through SBR, a digital delivery via Digipoort, by the intermediary or entrepreneur. In addition to this SBR method, entrepreneurs can also use the online service of the Dutch Chamber of Commerce, where they can deposit annual reports.
From the financial year 2017 (1 January 2018), the mandatory digital depositing also applies to medium-sized companies, except for medium-sized subsidiaries with a large company or listed company as a parent company. Large companies will still be excluded from the obligation in 2021.
Meanwhile, listed companies must adhere to the European Securities and Markets Authority (ESMA). ESMA prescribes that European listed companies must file their deposit accounts from the 2020 financial year based on ESEF (European Single Electronic Format).
At present, further mandates of XBRL and ESEF are still underway, with delays related to the current pandemic. Nevertheless, the first official Dutch ESEF publication was included in February 2021. Furthermore, SBR has set goals for organizations in the Netherlands to help exchange data in a structured, standardized and electronic manner according to a fast, effective and error-free method. SBR will continue to collaborate with the Dutch government. However, they will also collaborate with other organizations.
The technical aspect of XBRL and XBRL-based software is often underestimated. Especially for large international companies, a good eye for detail can make all the difference in complex situations. XBRL itself is not a commercial product. However, XBRL-certified organizations and software vendors offer specific applications and services. They can significantly speed up and simplify the processing process. An example of a software supplier and service provider is Amelkis. With the Amelkis XBRL software, companies can import PDF registration documents and quickly convert them to HTML. In addition, they offer workshops for full software support. Therefore, they help hundreds of organizations every year with XBR-related matters, such as exchanging data between systems and periodically compiling reports from various sources.
In the end, there are several advantages to invest in commercial XBRL software. For example, the larger and more complex a company structure, the more tags and details apply. Subsequently, the ESEF requirements and the accounting standards selected by the organization must also be taken into account. With XBRL-software, you can process XBRL-based data in any XBRL-enabled software. In addition, the XBRL format is based on taxonomies, with tags depending on the need or demand. In addition, to save much time, you do not always have to re-enter specific data in the software.
Making the right choices can be challenging. In addition, constant updates from SBR, XBRL International and local governments require constant attention. If you have any questions about your business situation, please do not hesitate to contact us. Although XBRL may or may not be mandatory for your company, being well-prepared creates more certainty in the long term. A good start is half the work, which we are happy to help you with.
Header image by Mikael Bomkvist
Every year organizations, accountants and regulators keep up to date with local and international rules and laws regarding accounting and finance. In recent years, digitalization is rapidly growing, including electronic formats and reports. Therefore more European countries start to apply the European Single Electronic Format (ESEF). While the world of financial services moves towards international standards and formats instead of localized ones, each country does this at its own pace. What can we expect from ESEF, and why is it convenient to use this electronic reporting format to prepare annual financial reports?
ESEF is assigned by the European Securities and Markets Authority (ESMA), an independent EU Authority. ESMA has one mission in mind: enhancing investor protection and promoting stable and orderly financial markets. Therefore, this EU Authority safeguards the stability of the EU’s financial system. This safeguarding includes the protection of investors while promoting stable and orderly financial markets. They mainly assess risks to investors and markets, contribute to a rulebook for EU financial markets, and promote supervisory convergence and directly supervising specific financial entities.
ESMA wishes to make reporting easier for issuers and facilitate accessibility, analysis and comparability of annual financial reports. The digitalization of annual financial statements in the EU is nothing new; in 2013, the Transparency Directive amended a requirement for electronic reporting formats. Only recently, ESEF became mandatory, with the following criteria:
- Issuers must prepare annual financial reports in XHMTL;
- Annual financial reports that contain IFRS consolidated financial statements must be labeled with XBRL ‘tags’;
- The XBRL ‘tags’ must be embedded in the XHTML documents with Inline XBRL technology;
- The taxonomy must provide the hierarchical structure used to classify financial information. This classification is essential for structured electronic reporting using XBRL as an extension of the IFRS taxonomy
- Mark-up disclosures using the taxonomy element must have the closest accounting meaning to the marked up disclosure;
- Primary financial statements must be marked up in detail, with the application of mark-ups for the whole sections of the Notes, otherwise called block tagging.
ESEF is more than just the digitalization of financial reports. To ensure your company publishes the annual financial statements correctly, constant attention to detail is in order. While ESEF is mandatory in the EU, the XBRL-format is still in the application process. Even with one format and one accounting standard, per country rules and annual reporting laws may differ. We at Global Connect Admin BV make sure we stay up-to-date with local changes, so if you have any questions, or wish assistance regarding ESEF, fiscal reporting and cross-border transactions, feel free to contact us anytime. We would love to help out.