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Happy Holidays

22 Dec 2021
Company Updates, Current news, XBRL
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Your Global Connect Admin Team wishes you Happy Holidays!​

Happy Holidays

2021 has been yet another challenging year for everyone. We want to thank you for your continued support. We hope you enjoy the holidays to your fullest.

We have prepared a New Year’s gift: A free webinar on Starting with XBRL

In January 2022, we will help you understand what XBRL is, how your company can benefit from it, and how to avoid missing small yet essential details.

We will soon update you on the date and time through our Global Connect Consultancy website and LinkedIn, or e-mail by registering here.

 

2022: Working-from-home Allowance In The Netherlands

20 Dec 2021
COVID-19, Current news, Netherlands
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With the Covid-19 pandemic changing the working dynamics across the globe, the 40-hours work week is transforming into a flexible job from home. This two-year process now enters the stage of governmental supervision. With this increase in employees working from home, and the fact that employees would like to have the ability to work from home, the Dutch government introduces from 2022 onwards the working-from-home allowance. Is this mandatory? Does this include taxes, and what does this new regulation do with the existing travel allowance?

 

 

Coverage and the new work-from-home trend.

Working from home is the increasingly popular alternative for spending all the days at the office. With the increasing demand by employees to cherish this new system, and the fact that staying from home stimulates the climate-friendly approach of working, working from home is a trend. Instead of travelling by car or plane to your office of clients, Zoom calls and Teams meetings are frequently used to (partly) replace the co2 polluting alternative, and thus emphasises the cautiousness toward the climate.

 

In a survey by the employers’ association AWVN, 60% of the inquired 450 Dutch companies replied that working 2 days from home can be the new norm(al). In this light, combined with the rise in the percentage of employees working from home due to the pandemic, the Dutch government introduced the working-from-home allowance starting from the first of January 2022. This new regulation is a tax-free allowance consisting of maximally 2 euros per day. This allowance is the extra costs for the employee that can be paid by the employer and includes for instance the water and electricity usage (for the computer), heating, coffee, thee and even toilet paper.

 

The new regulation

After research by Nibud, the amount of the working-from-home allowance is fixed at a maximum of 2 euro per day or part of a day worked from home. The employer does not need to pay payroll tax over this allowance. The tax-free travel allowance keeps existing and is fixed at 0,19 cents per kilometre. And most importantly, the employer can give the working-from-home allowance or the travel allowance per day of work.

 

To maintain clarity, for both the employer and the employee, contractual rules can be made to assure the days that the employee works from home, or is at the office. In this manner, the employer can calculate the monthly allowance and does the employee not need to self-handed note the days worked from home or the office. After establishing these rules, and the employee incidentally works from home instead of being present at the office, the calculated allowance does not need to be changed. Only in the case of structurally changing the working flow, the allowances need to be altered to the changing situation.

 

Some employees work one part of the day at home and the other part at the office. Here, the employer chooses to either give the working-from-home allowance (2 euros per day) or the travel allowance (0.19 cents per kilometre). The employer cannot give both these allowances. Employers also have the choice to let the employee choose. In the case of living far from the office, the travel allowance would be more beneficial for the employee. This can differ from the employer.

 

Is the working-from-home allowance mandatory?

Starting from 1 January 2022, employers can give working-from-home employees a tax-free allowance of a maximum of 2 euros per day. This allowance is not mandatory, but can be imposed on the employer in the case working from home is integrated into the branch-related CAO. While not mandatory, employees might expect to get this allowance and can showcase their goodness and willingness as an employer. Potentially, this can stimulate employees to stay longer or attract new employees more easily, as it guarantees the company to not suffer under the employee shortage.

 

The employer pays the working-from-home allowance themselves. This is not compensated by the Belastingdienst (tax authorities). Removing the payroll tax from this allowance is a method by the government to stimulate the companies to give this allowance to the employees. If the employer wants to compensate more than 2 euros per day, payroll tax needs to be paid over the initial 2 euros.

 

Home workplace equipment

To decorate the home workplace, the employer is already able to give a tax-free allowance. The costs for needed equipment for this home workplace such as a computer or a phone can be done through the already-existing werkkostenregeling (WKR) (work-related cost arrangement). While the CAO can include liabilities regarding the home workplace, the home workplace allowance is, on par with the working-from-home allowance not mandatory. Furthermore, according to the Arbowet, every workplace needs to be included in the Arbo health and safety policy. The employer or company needs to assure that the workplaces, including the home workplaces, are ergonomically designed and have the correct equipment to let the employees correctly and healthy work (from home).

 

Conclusion

With the new demand for working at home, the Dutch government established the new working-from-home allowance that covers the basic needs of the employees and does not include payroll taxes. While this allowance is not mandatory, incentives to pay this financial contribution are showing willingness and goodness of the employer, attracting new employees or maintaining employees in the current era of employee shortage. Next to this allowance, the travel allowance stays in existence with the rule that only one of these allowances can be applied. In the case of working from home and working from the office on the same day (two different parts of the day), only one allowance can be given. While the working-from-home allowance is not mandatory, the branch-related CAO should also be taken into consideration for the correct rules and regulations.

Curious about these new allowances, or your want more information about personal advice regarding international business advice, tax situations or consolidation? Global Connect Admin B.V. can assist you with these challenges due to the rich experience and framework of connections.

 

Sources

Thuiswerkvergoeding 2022 | Ondernemen Met Personeel

Plannen kabinet voor thuiswerkkostenvergoeding van maximaal € 2 per dag | Prinsjesdag: Belastingplan 2022 | Rijksoverheid.nl

The Estonian Unicorns: Opportunities For Startups in Estonia

13 Dec 2021
Actual, Investment, Startup
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Estonia has the highest number of unicorns per capita in Europa. Fostering an environment for these booming startups or so-called unicorns, the Estonian economic growth in the 3rd quarter of 2021 (8,6%) showcases the successful Estonian development strategy. Hence, using the pandemic situation to their advantage, Estonia continues to emphasise the importance of startups. Curious to read what economic sectors yield to most opportunities?

 

Unicorns

Estonia is the leader in unicorns per capita in Europe. With 7 unicorns, despite a population of 1.3 million people, Estonia is a breeding ground for companies valued at more than $1 billion. Currently, these 7 companies are the following ones: Skype in 2005, Playtech in 2007, TransferWise in 2015, 2018 with Bolt, Pipedrive in 2020, and in 2021 both Zego and id.me became Estonian-founded unicorns. As noticeable, the time between the rise of a unicorn is constantly decreasing. Further, looking at the sectors these companies are concerned with, the overarching trend is the connectedness with technology and communication.

 

Economic Analysis

This relation between breakthroughs and technology is elaborated on by Robert Müürsepp, a leading analyst at Statistics Estonia: “the economic growth was driven by construction, information and communication, real estate, and transportation and storage activities. Also manufacturing and professional, scientific and technical activities recorded positive results”. These three economic activities contribute more than 3% out of 8,6% to the GDP growth of the 3rd quarter of 2021. In comparison, the biggest decreases in terms of percentage of GDP are, as expected with the pandemic and lockdowns related to the pandemic situation, the leisure and entertainment, transport, hotels and restaurants, and clothing and footwear sectors.

Müürsepp also argued that the fall in investments (-8,8%) in the third quarter is due to smaller investments in general, yet yielded a significant increase in the investments in transportation equipment (32%) and 15,1% in other machinery and equipment. Furthermore, foreign trade continued to grow rapidly: The export and import both accounted for a growth of 17,5%, while the emphasis was on the export of service (38,9%) powered by 1) computer, 2) technical and 3) business services. In comparison to the previous quarter, the seasonally adjusted GDP grew by 0,7% and grew by 9,2% compared to the third quarter of 2020.

 

Estonia

“We are eager to make relevant changes happen quickly. This makes Estonia a perfect testing ground for innovative solutions. As a small country we value flexibility and diversity and therefore we welcome foreign investors and talent in Estonia – together we can build a better future for everyone,” states Prime Minister Kallas concerning the ideal testing ground for the unicorns.

While the unicorns get encouraged by the Estonian government, the unique selling points of this technological country are not covered yet.

 

Opportunities

After restoring its independence in 1991, economic freedom has been highly valued in Estonia. While being ranked fifth in Europe for economic freedom, the Estonian economic environment created by the state encourages people to start and grow businesses. Moreover, Estonia has also been a steadfast global leader in tax competition for the last seven years in a row. Not only this tax system without corporate income taxes, capital taxes and property transfer taxes, makes people entrepreneurial. There is also Estonia’s advanced digitalisation which reduces the hassle and costs and, a wide range of encouraging success stories (such as Skype and Bolt), and sociological characteristics such as a developed and affordable living environment, a long and full-paid parental leave, and a welcoming and supportive startup community. Besides this, Estonia’s entrepreneurial activity is the highest in the world due to the innovative, productive and curious mindset of the Estonians. According to Atomico in “The State of European Tech 2020 report, Estonia has 865 startups per capita with a steadily growing number.

Knowing these reasons, Estonia is often seen as the leading startup-friendly country in the world. Moreover, you do not need to reside in Estonia to enjoy these benefits of the business environment. Estonia’s innovative e-Residency programme, itself referred to as a state startup, enables anyone to log into our country to establish and manage a company here, regardless of their physical location.

 

Conclusion

Even with the best business environment and the most entrepreneurial people, it is no guarantee for automatic success. With stories and information from the vibrant startup community, such as the foundation of the EU Unicorns Group to accelerate Europe’s green transformation and tech innovation, together with a little bit of luck, Estonia can be the “perfect testing ground for innovative solutions” in the words of the Prime Minister. Interestingly, Estonia maintains to further develop into a tech-savvy country focussed on digitalisation and communication. Knowing that the interest in digitalisation and tech is growing in both society and business, it is recommended to not only keep an eye on the developments but also on the (new) unicorns. While these unicorns can be beneficial contacts or partners for your existing company, the ideal business environment due to tax reasons and state encouragement make Estonia a perfect choice as the breeding ground for your next startup.

Curious about these new opportunities, or your want more information about personal advice regarding international business advice, tax situations or consolidation? Global Connect Admin B.V. can assist you with these challenges due to the rich experience and framework of connections.

 

Sources

https://investinestonia.com/from-the-production-lines-of-the-unicorn-factory-estonia-is-the-champion-in-founding-billion-dollar-startups

https://investinestonia.com/estonian-bolt-and-skeleton-together-with-other-european-unicorns-founded-the-eu-unicorns-group-to-accelerate-europes-green-transformation-and-tech-innovation

https://investinestonia.com/estonian-economy-grows-8-6-in-third-quarter-of-2021

https://www.stat.ee

https://www.workinestonia.com

Global Connect Admin meets Canon in Venlo

18 Nov 2021
GCA on Tour, Investment, Netherlands
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When you think of printing, you may think of digitalization or paper waste. When you think of 11 November, you might think, “That is just a normal day” or “The 11th of the 11th is once again canceled in Limburg. What a bummer!” For Global Connect Admin, 11 November 2021 was the day to celebrate high-end innovative printing technologies. With the DUJAT Meets Limburg event, we traveled to Venlo to visit the new state-of-the-art Canon headquarter and the Customer Experience Center. But first, what makes this new headquarters so unique, and why invest in Limburg?

Limburg and innovation

Limburg, the southern Dutch province located next to Belgium and Germany, knows several key sectors, such as agri-food, life sciences & health, logistics, chemicals & materials and high-tech systems. Companies and the environment benefit from innovation and growth, with thriving ecosystems around different hotspots. The Dutch are well-known for being fluent in English. In Limburg, it is also prevalent to be native in other languages, such as French and German.

Several sectors have started to cooperate, creating ideal locations in combination with knowledge institutions. In recent years Limburg has grown into a multi-language and intercultural hotspot for many sectors. A prime example is the high-tech systems, making it more inviting for companies to thrive there. Canon, one of the biggest employer of Limburg, is a big player in this integral growth.

Green printing solutions

Canon invited companies to their newest ‘Green Landmark’: The Canon headquarters in Venlo. The location opened in the summer of 2020. However, many companies only recently have the chance to pay a visit. Global Connect Admin and the DUJAT community were one of the first to marvel at the new Canon accommodation. Inside the building are the four Green Plazas that provide an open and inviting atmosphere, ideal for stimulating synergy and exchange of knowledge.

The event

First, Mr. Asada, CEO of Canon, Mr. Leurs, Board Member of DUJAT and Managing Director of Canon Benelux and Mr. van Elk, Director of LIOF, welcomed everyone with a presentation and a tour of the sustainable building.

Secondly, everyone was invited to the Customer Experience Center, where Canon showcases its brand-new innovations for potential clients. During the networking lunch, Mr. de Goeijen, VP BL CTS of Canon, introduced everyone to insights into innovative printing technologies.

Key takeaways: Kyosei 共生

What impressed us the most was the corporate philosophy of Canon. Their philosophy is Kyosei, which translates to “Living and working together for the common good.” This corporate philosophy conveys the dedication to see all people, regardless of culture, customs, language or race, harmoniously living and working together in happiness into the future. Realizing Kyosei is a challenge due to current factors related to economies, resources and the environment. Nonetheless, Canon strives to eliminate difficulties through corporate activities. They believe that a genuinely global company must foster good relations with customers, communities, governments, regions and the environment. Therefore, Canon embraces the Sustainable Development Goals of the United Nations, creating new value while conserving the environment, solving social issues and responding as a responsible corporate citizen.

One of the key takeaways is the San-ji (Three Selfs) Spirit, embracing self-motivation, self-management and self-awareness. We agree that taking the initiative and being proactive is crucial for motivation. To manage your business and yourself well, you need to conduct yourself with responsibility and accountability. Especially with the state of our world, we need to understand our situation and our role in this world.

Conclusion

The printing business is far from dying; it is evolving! The time of paper waste and office buildings swallowing energy like a hungry monster is slowly but surely coming to an end. Suppose you want your company to inspire others, or you want to see a long-term profit. In that case, it does pay off to invest in green energy and innovative solutions. It is a challenge to evolve your business. However, the good news is that you do not have to take this step alone. Many organizations and sectors, either in Limburg or worldwide, cooperate to find the best possible solutions for companies and society.

We want to thank Canon Production Printing Netherlands, DUJAT and Limburg Investment and Development Company LIOF for hosting this event and introducing us to this innovative location.

Sources

DUJAT – Canon – LIOF

Non-Fungible Tokens (NFTs) in the Era of Online Investment: What are Your Opportunities?

15 Nov 2021
Actual, Investment
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Non-fungible tokens or NFTs are gaining momentum in contemporary society. These non-fungible coins or assets are often presented in the form of artwork as part of a whole collection (e.g. Bored Ape Yacht Club). The main question is if the insane price for acquiring an NFT is worth the benefits. In this article, we explore what NFTs are, the benefit of buying an NFT and the opportunities this purchase can have for your business. Moreover, we provide tips and risks needed when intrigued by this new investment phenomenon.

 

 

Introducing NFTs and the operational method

The NFT or Non-Fungible token is a token within a blockchain (digital ledger) connected from an account to a unique and digital item via a smart contract. Most NFTs are part of the Ethereum blockchain, a cryptocurrency, and are currently seen in the rise of buying and selling digital art using this blockchain technology for multiple reasons (e.g. investment). In simple words, the NFT is a unique link between an account and a digital item that assures that said item is uniquely yours. This blockchain technology is non fungible which means that the item or artwork is unique and cannot be replaced with something else. As the trading dynamic can be seen as investing just like is the case with bitcoins and altcoins, the difference is that the NFTs are one of a kind. Whereas you can trade a bitcoin for a bitcoin, the NFT is distinctive and can never be fungible for the same artwork.

 

 

The uniqueness and function of the NFTs

The NFT gets seen as the new era of art. Both art collection and art investment are considerable motives for buying an NFT. As mentioned before that every NFT is a unique piece of artwork including the corresponding blockchain entry (proof of authenticity) plus the fact that these tokens are limited and tradeable, making all the NFTs depend on the supply and demand principle. NFTs are nowadays often seen as pictures and videos, but can also cover the realm of music and other forms of art. The next paragraph will thoroughly explain the four motives for purchasing an NFT.

 

 

Four motives of buying an NFT

Knowing the technical information and the uniqueness of the NFT, the question might arise why someone wants to spend money on NFT artworks.

 

Firstly, the NFT is currently in a hyped-up phase. Newspapers, NFT creators and NFT purchasers are trying to start the momentum of this “new era” to get more recognition among the people. This triggers the Fear Of Missing Out (FOMO) effect that stimulates the demand of the NFTs – as these groups wish. This is noticeable in the fact that NFTs are sold from hundreds to millions of euros worth of Ethereum. Exemplifying the prices of

Figure 1. NFT properties of Bored Ape Yacht Club #9355

NFTs,  this video made by the famous creator Beeple got sold for 6.6 million dollars (5.8 million euro). Further, NFTs within a specific group like the TrendyTigers or Bored Ape Yacht Club have different characteristics that make them more special and more valuable to stand out from the crowd. Here we can think of background, clothes, eyes, fur, hat and mouth as depicted in figure 1.

 

 

Secondly, you get complete ownership of the work. Instead of downloading the video or picture, the purchaser owns the artwork including proof of authenticity. This can be seen in the way that copying (downloading) a Van Gogh painting is still possible, but only one person can have the original. However, on par with physical artwork, the artists can still retain copyright and reproduction rights.

 

Thirdly, the purchaser can show off their new asset and try to fan the flame for interest in NFTs and in particular the purchaser’s artwork. Owners of an artwork change their profile picture to their acquired NFT to show the everyone that they own an NFT, brag with their latest purchase, and show the world they are part of a particular niche or group. This phenomenon of showing-off is mostly visible on Twitter.

 

Lastly, and maybe the least concerned with investment, is that the purchaser can (financially) support the creator of the art.

 

 

Opportunities for you

As the hype is getting a boost by the media and the groups associated with the NFTs, the incentive to buy might seem bigger than it is. Knowing that an NFT can be an investment strategy – just like cryptocurrency – we should be careful with the post-hype stage, as this might be unpredictable. The NFT market including the price of the NFTs -without the hype- can collapse and result in loss after this high gamble. While this is part of investment in general, we should look at the other main benefit the NFTs give over for example cryptocurrencies: the community.

Pudgy penguins, CrytoPunks, TrendyTigers or Bored Ape Yacht Club are examples of NFTs with a community around the ownership of their NFTs. The latter is a project concerning, as the name suggests, 10.000 NFTs of Apes. Only 10.000 proud ape owners can be part of the clique. Important is that the Bored Ape Yacht Club functions like a family. The occasional networking events among the Apes are used to get to network and to get beneficial connections for the business. Furthermore, this nepotism is noticeable in the example of producer and songwriter Timbaland searching for Bored Ape Yacht Club owners to form an artist-owned entertainment company Ape-In Productions.

 

 

Conclusion

In short, the price for NFTs can be feasible when being able to network with celebrities, business leads, or new friendly contacts. In case you are intrigued by NFTs, please be aware that many individuals and/or corporations are trying to hop on the bandwagon of the NFT hype. This means that thorough research in this particular NFT community/club is absolutely necessary. Always look at the benefits, the listing date and amount of followers. Do not forget to analyse the follower-to-like ratio on social media to notice, as is often the case, fake and bought followers. NFTs are often listed on the trustable platform OpenSea.io where Ethereum is mostly used as currency to purchase the NFTs.

Finalizing, NFTs as investments bring the known risks of (heavy) value fluctuation just like cryptocurrencies and comparable investments. However, while NFTs can be pricey, these revolutionary blockchain technologies assure ownership and bring an additional opportunity to network and make contacts in the NFT clique or group. As mentioned before, when you are part of this community, the nepotism and proudness of the NFT ownership can possibly result in great opportunities.

 

For more information about personal advice regarding international business advice, tax situations or consolidation, Global Connect Admin B.V. can assist you with these challenges due to the rich experience and framework of connections.

Business Opportunities in Shandong Province’s Hydrogen Industry

02 Nov 2021
China
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Hydrogen energy is the new priority in battling the pressing issues of climate change. China Hydrogen Energy Alliance predicts that this industrial development will result in a hydrogen energy market demand of 35 million tons by 2030 and that hydrogen energy will be 10% of the total energy supply in China by 2050. Shandong Province launched on June 18th 2020 the guidelines for the upcoming 10 years regarding the medium- and long-term development of the hydrogen industry. In this article we elaborate on the tactical choice for Shandong Province, discuss the goals of the development plan and look at the opportunities this upcoming industry can have for you.

 

 

Why Shandong?

Shandong Province (山东省) lies on the east coast of China. With a population of around 102 million and a coverage of 157 square kilometres of land, it is the 3rd largest economic powerhouse in China. Only the Jiangsu Province and the Guangdong Province trump the Shandong Province. Knowing the facts, there are three arguments that the Shandong Province published the hydrogen plan.

 

  • Shandong Province has a solid foundation for green hydrogen production. With the largest installed capacity of photovoltaic power, the 4th largest installed capacity of wind power in China, and 5.7 million kilowatts of nuclear power, Shandong has the foundation to produce green hydrogen in the future utilizing these new and green energy systems.

 

  • Shandong Province is one of the frontrunners in China in terms of chemical, metallurgical and energy industries. Originating from the rich petroleum and coal reserves, and decades of large-scale mining and investment in petro-and coal-chemical facilities, Shandong holds a unique advantage in producing hydrogen as a by-product of fossil-powered industries. This so-called grey hydrogen is produced around 2.6 million tons annually in the Shandong Province, resulting in an opportunity for large-scale utilization with comparably low costs and maintaining high quality.

 

  • Shandong has deep collaboration with research institutes and leading universities across the country. More than 50 enterprises and research institutes in Shandong have been involved in the hydrogen industry and combine powers to make significant progress in aspects such as key materials, core components of fuel cells (FCs), system integration, high-end and efficient energy storage and more.

 

 

Goals

The plan argues to establish Shandong in the leader position in hydrogen development. Aspects under this denominator are constructing hydrogen and Fuel Cells (FC) demonstration zones by strengthening innovation and research, accelerating hydrogen applications and demonstrations, improving the manufacturing on the equipment level, as well as building and maintaining the industrial chain and ecology. This plan consists out of three stages.

 

 

 

Opportunities

The Rijksdienst voor Ondernemend Nederlands (RVO)  argues that there are opportunities on this market for companies and research institutes who “have developed advanced technologies and/or products for the hydrogen industry”. To carry out a joint venture in Shandong, strong R&D and innovation capabilities can be helpful. While Shandong has the competitive advantages in the production of grey hydrogen from their industrial activities, large-scale mining and coal and petroleum reserves, the main flow of innovation and R&D, is found in external institutions outside the province and even outside the country. Resulting in heavy dependence on these institutes. However, and obvious from their reliance, Shandong is openly welcoming new international parties, starting fruitful cooperation’s, and welcoming hydrogen talents. Shandong Province will keep focussing on strengthening their relation, cooperation and exchange with international organisations such as International Hydrogen Energy Association and the International Hydrogen Energy Commission. Further, Shandong enterprises will be encouraged to set up R&D platforms and create joint ventures (JV’s) abroad to facilitate cooperation. To maintain Shandong’s position in the case of the hydrogen industry, Shandong proposes to formulate standards for the hydrogen industry chain with the assistance of thorough cooperation with foreign standard organisations.

 

RVO argues about the major technical bottlenecks in the hydrogen industry. Acting upon these can enhance the Shandong hydrogen chain/systems and guarantee your place in the industry. Examples are hydrogen storage and materials for fuel cell vehicles (FV’s), fuel cell (FC) oil-free air compressor and/or hydrogen pump, transportation equipment, high-efficient production & storage & transportation of liquid hydrogen and pipeline transportation. Recommended sectors to adhere to are FC technology and application to commercial vehicles and equipment, green hydrogen technology utilizing solar, wind and nuclear energy in Shandong. To read all the bottlenecks and recommended sectoral perspectives, we kindly request to visit RVO.nl

For more information about 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.

 

Source

https://www.rvo.nl/sites/default/files/2020/08/Report-on-Shandong-Hydrogen-Industry.pdf

 

Special Economic Zones (SEZs) in China: How can they benefit your company?

25 Oct 2021
China
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Benefits | China | Comparison | Development | Incentive | Industry | Investment | SEZ | ShenZhen | Special Economic Zone

Marking the 40th anniversary of China’s Special Economic Zones (SEZ), further scrutinization can start regarding the influence of the Special Economic Zones. Opposing the frequent usage of “SEZ” as a buzzword, what does it precisely entail and more importantly what advantages have these zones. How do the rules and incentives set these economic zones apart from Mainland China, and are these capitalistic hotspots beneficial for your organisations?

 

What are Special Economic Zones?

Chinese Special Economic Zones are areas with different regulations and business policies than in  Mainland China. These zones can vary in function and scope but all adhere to the principle of supporting (specific) economic functions in globalising aspect. SEZs have been implemented since the late 1970s as part of the Chinese market reform in the conquest of realising the entrance to the international market. Remarkable is the placement of these SEZs: manifested in areas with a potential for high import and export volumes, being in the vicinity of airport and harbours, and / or being nearby natural sources. Resulting in the coverage of the east coast of China in the early stages of the SEZs to the establishment of SEZs in rural Xinjiang, to trade free zones (Shanghai), and regional zones that stimulate technology as seen in Dalian. Thus, in these 40 years of development, China opened coastal cities and created national and local high-tech zones to further attract investments. Nowadays, the fruitfulness of these experimental zones can be analysed:  SEZs contribute 22% of China’s GDP, 45% of total national foreign investment and 60% export, and created an estimate of 30 million jobs.

 

The purpose of the Special Economic Zones

The purpose of the Chinese Special Economic zones, including the open coastal cities and the regional zones, is to attract foreign investments, innovation, and knowledge. These opportunities for China, and the fact that it is a cheap labour country, stimulates the build and development of infrastructure. Shenzhen in the Guangdong province, as one of the initial four SEZs, is the beneficiary of this Special Economic Zone: transformed from a fishing village to a nationwide, even worldwide, centre of innovation and development. Housing tech giants, telecommunication companies and even claiming to be the first to achieve “full coverage” of 5g within the tech hub of China’s Silicon Valley. As a reaction, the initial four SEZs transformed into 19 local development zones, 7 large-scaled SEZs, local and national free trade areas, and high-tech zones. As the purpose to foster globalisation in China becomes evident. However, how are SEZs applicable to your business?

 

What are the benefits of China’s Special Economy Zones?

To ensure and stimulate foreign investors, the regulations in the SEZs (including open coastal and local zones) are made to attract. While exact policies or regulations can change over time (e.g. due to supply and demand of investors), the overarching advantages are as follows :

  1. Tax incentives:
    • Reduced income tax: down to 15% (SEZ) versus 33% (Mainland)
    • Elimination of corporate tax under losses;
      • Being profitable after losses will result in reduced taxes for 5 years
    • Exemption of local taxes in certain industries
  2. Special economic policies:
    • Duty-free export
    • Lowering import tariffs
  3. Foreign companies are allowed to set up joint ventures
  4. The local government has legislative authority

With all these benefits it is no wonder that SEZs attract a lot of foreign investments and thus benefit the flourishment of the Chinese economy. However, while SEZs are keeping the interests of investors high with the incentives, special economic policies and other benefits, China is slowly starting to applying these experimental policies as tested in the SEZs into the national policy. Furthermore, in line with the changes in Mainland China: the newest procedure is cutting the red tape to ameliorate the investment options in Mainland China.

 

Conclusion

Currently, the incentives of the SEZs do not need to be causally related to the success of the high-tech and developed metropolises (e.g. Shenzhen). While the economic liberation is surely impactful for the growth of certain districts and businesses, not all of the 54 “special” zones have been successful. With constant development, creating new SEZs, changing regulations, the business-friendliness and the special tax programs for new entrants, the Special Economic Zones are even more convenient for new investors that are aiming to advance to the Chinese market. Knowing this, will your company be the next booming business in one of the Chinese Special Economy Zones?

If interrested, we at Global Connect Admin provide administrative advice for European and cross-border businesses. Do you have any questions regarding the Special Economic Zones, or need other information to do business successfully? Feel free to send us any questions our way; we would love to assist you.

 

Sources

Experts hail pivotal role of special economic zones – Chinadaily.com.cn

经济特区：中国改革开放的伟大创举__凤凰网 (ifeng.com)

Special Economic Zones in China (SEZs): Characteristics & Benefits – Intrepid Sourcing

investing-in-africa-forum-chinas-special-economic-zone.pdf (worldbank.org)

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