Avoiding the surprises of European business expansion

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Having weighed up the pros and cons and decided to expand your business into Europe, it’s important to remember that there may be some unforeseen roadblocks and considerations. In this post, we will look into a few common ways these surprises can manifest and discuss some ways to mitigate them.

What does Brexit mean for expansion into Europe?

Of course, the elephant in the room is Brexit. With only around 150 days to go before Britain leaves the EU, it’s unfortunately still the case that nobody really knows what to expect. We can probably assume that most bureaucratic applications will take even longer than they currently do; it may be wise to expect extra red tape in post-Brexit Europe and plan accordingly. The process to open a new business in some EU countries can take up to sixty days at present already, so it’s best to be prepared.

Much has been said about the value of the pound as a result of Brexit, but a sometimes overlooked consideration is that the fluctuating exchange rates have made British goods and services a great deal more appealing to international buyers and represent a great opportunity for UK businesses who deal with overseas customers. A small British start-up is thus in a great position to offer very competitive pricing on a global stage.

The most important thing to say about Brexit is that it is crucial to stay abreast of developments, as the changing landscape of international politics is bound to contain more than a few surprises.

Complying with European laws and regulations

There are many legal ramifications to consider when expanding a business into Europe, such as cross-border VAT concerns - each country has its own unique tax laws which you will be required to observe. Remember that it is not just the process of initial registration you will need to consider, but also the process of ongoing VAT compliance as your company continues to trade and file tax returns. In addition, you will be required to notify relevant tax and customs authorities of any shipment of goods between EU member states.

There are also considerations around international trademarks. If you have a registered trademark on British soil, it won’t necessarily apply in other countries. You can either register your mark for a specific country, or you can apply to have it cover the entire EU; this can be achieved via the EUIPO, the European Union Intellectual Property Office.

Fortunately, copyright is much simpler; thanks to the Berne Convention, anything for which you hold the copyright in Britain will be automatically recognised in every EU country (and in a majority of other nations worldwide).

If you’re planning to hire staff overseas, each country may also have its own specific employment laws that could come as a surprise. For example, it’s legally mandated that employers in countries such as Spain and Greece must pay out 13th and 14th month salary installments to staff, although this is more a quirk of salary distribution than a true bonus; Spanish workers will also expect 30 days’ holiday a year, plus fourteen days for public holidays. In Germany, employers are required by law to pay contributions to staff health insurance. It’s always a good idea to research the particulars of your target country so you don’t fall foul of the local expectations.

Getting to grips with continental logistics

If you’re selling physical products in a remote location, remember that shipping may take much longer than expected and may entail unforeseen complications - the longer the journey taken by your stock to get to its destination, the more things can go wrong. Do you have a contingency plan for if a container gets delayed somewhere, or even goes missing entirely?

For your base of operations itself, don’t assume that everything will be set up the way you need it when you first arrive, as not every country has the same technological infrastructure. If you’re expanding into Turkey or Latvia, for example, less than 60% of the population in these countries uses the Internet (compared to almost 95% here in Britain), and only 61% of Italy has web access. Needing to have broadband cables installed at your overseas premises may come as an expensive shock, so do make sure your new location has everything you need to operate.

Understanding cultural differences in Europe

It’s probably best not to assume anything about the cultural environment your business is expanding into; the way your products or services are perceived at home may have little or no bearing on how they are viewed in Belgium, Lithuania, or Sweden, for example. There are 23 official languages in the EU, and you’re going to need to communicate efficiently in your target location. It’s not just a matter of securing good translations, although that is certainly part of it; the locals in different countries will have different needs and temperaments, and will respond to different things. Therefore, you may need to rethink your branding and even the products you offer to get the best results with your new customers. McDonald’s, for example, offers soups in Spain and Portugal, tzatziki wraps in Croatia, and even pitta bread and yoghurt hamburgers in Greece.

Expanding to a new territory brings a great opportunity to find new ways to sell your products and services; attempting to exactly replicate your UK approach in a new location may be somewhat less effective than tailoring your approach to the target country overseas, and optimising your message for the locals.

Article supplied by Cross Border VAT Support Ltd