Version: 1.0.20.21 (2020-10-12 14:45)

Guide for export of services

Does your company plan to export services outside the EU? This section helps you understand if your company is ready for exporting and outlines the different steps of the export process.

4 Steps to Export a Service

 
 

Before you get started - Is your company ready to trade?

Are you planning to export a service for the first time?

Before doing so, check whether your company is ready:

  • Is your service already successful in your domestic market or in other EU countries?
  • Does your company have the capacity to offer this service in foreign markets outside the EU? Does it have sufficient staff, time, financial and legal resources?
  • Is your company’s management committed to expanding to export markets outside the EU?
  • Does your company have a comprehensive financial/marketing/business plan with clearly defined goals in support of exporting to markets outside the EU?
  • Does your company have a concrete strategy for how to export the service outside the EU? For example, you can export your service directly to your buyer in your export market, such as another company or a consumer. Or you could export via e-commerce platforms.
  • If applicable, does your company have the necessary intellectual property protection abroad?
  • Does your company have the capacity and expertise to adapt its service according to cultural preferences or different standards in countries outside the EU?

Before you continue, consider the questions above carefully and discuss them within your company to decide whether you are ready to export your services to non-EU countries, or which steps you need to take to prepare yourself to do so.

 

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Step 1: Understand how services can be exported

There are typically four different ways to export your service to a market outside the EU (also called ‘modes of supply’). These are defined in an international agreement, namely the General Agreement on Trade in Services of the World Trade Organisation.

Cross-border supply of services (Mode 1):

 

If your company is based in one country and supplies services to a customer in a different country, this is called cross-border supply.

Only the service crosses the border.

This type of service is often supplied via online portals, phone or email.

Example:

A consulting company in Germany provides economic analysis reports to a client company in India.

Other examples of services that are often exported through cross-border supply include:

  • market research
  • statistical analysis
  • communication advice, such as consulting services on marketing
  • professional services (such as legal, architectural, accounting services)
  • computer related services
  • telecommunication services
  • courier services

Consumption of services abroad (Mode 2):

 

If your company is supplying a service in your domestic market to a foreign customer, this is called consumption of services abroad.

The customer crosses the border and makes use of the service you supply in your market.

Example:

A Japanese customer travels to Ireland and stays at a hotel or dines at a restaurant, thus consuming the services in Ireland.

Commercial presence abroad (Mode 3):

 

If your company establishes a presence in a foreign market, this can be referred to as commercial presence abroad.

This involves opening a subsidiary, branch or representative office in another country.

Example:

A Danish bank opens up a branch in Canada or a French telecoms group decides to open a subsidiary in Australia.

Sectors in which this form of service supply is common include:

  • financial services
  • telecommunication services
  • environmental services

In general, the establishment or acquisition of a foreign company abroad is called foreign direct investment.

When you plan your investment in a foreign market, the country that you want to invest in may apply certain limitations. These depend on its legal framework and can include:

  • restrictions on foreign ownership:
    Typically these take the form of limiting the share of companies’ equity capital that non-residents of the country are allowed to hold.
  • restrictions on the type of legal entities allowed:
    These can include specific prohibitions of certain legal entities, such as joint ventures or sole proprietorship.
  • screening and approval procedures:
    These can require that foreign investors show economic benefits or that they get prior approval for the investment.
  • constraints on foreign personnel:
    Typically these take the form of limiting the number/percentage of foreign nationals who manage or work in affiliates of foreign companies and other operational controls on these companies.

You can contact an investment promotion agency of the country that you want to invest in, a local tax adviser or a lawyer for setting up an investment contract and request information on other obligations of investors in the specific sector.

The Trade Barriers database allows you to search for ‘Investment related barriers’. Such barriers are also displayed in the search results of ‘My Trade assistant’.

Presence of natural persons abroad (Mode 4):

 

If an employee of your company travels abroad to supply a service in a country outside the EU on temporary basis, then you are providing this service via the presence of a natural person abroad.

Different types of personnel can supply the service of your company:

  • intra-corporate transferees:
    these are employees in your company (often executives, managers, specialists) that are transferred to your company’s commercial presence in a country outside the EU.
  • business visitors:
    these are short-term stays of a few months (often limited to 3 months) with no remuneration received in the foreign country. Business visitors are usually in a senior position in your company and are responsible for setting up an establishment in the target market.
  • contractual service suppliers:
    these are employees in your company who supply a service on the basis of a contract that you have with a final consumer in the foreign country. Contractual service suppliers are sent abroad as your company has no commercial presence in the foreign country and as their temporary stay in the foreign country is necessary to fulfil the contract of supplying services.

In addition to these categories of company personnel, independent professionals that are self-employed fall under presence of natural persons abroad too:

  • independent professionals:
    these are self-employed persons who supply a service on the basis of a services contract in a foreign country.

Sectors which often supply services via employees abroad include ICT services, engineering or professional services, or other services which rely on after sales support.

Examples:

  • information technology companies, which send their IT experts to provide advice on a project or install a software locally
  • engineering companies, which send their staff for on-site operations to projects
  • lawyers travelling to advise customers located in another country
  • industrial companies, which send their staff for planning and maintenance services.

As a general note, the same service can be supplied in different modes:
For example, legal services may be supplied to the customer through e-mail (mode 1), by an established affiliate abroad (mode 3) or by the lawyer's presence abroad (mode 4).

 

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Step 2: Find a market and a buyer

To export services outside the EU, you should first identify a market and a buyer for your service.

  • Chambers of commerce can give you information about different markets and business partners, and direct you to relevant reports.
  • Trade-specific news providers or trade promotion agencies in your country or in your selected export market that cover market analysis and assessment of business opportunities can be of help. These bodies often provide studies on key export sectors.
  • Export consultants and relevant banks can also provide advice.

How to select your target markets?

Screen potential export markets to assess whether there is demand for your product and consider if your product would be competitive on the export market?

 

Check the trade statistics of your potential target market.

Import statistics can show if the country you want to export to is already importing your service, where the imports come from and if there is already a high supply of your type of service in the market.

How to find potential buyers?

Once you have selected one or more target markets, the next step is to identify potential trade partners and business contacts.

You can find partners and contacts at:

 

  • trade fairs specifically organised for buyers and sellers to meet. For example, the Enterprise Europe Network organises regular matchmaking events for specific sectors in which also companies from non-EU countries participate.
  • events or assistance provided by Chambers of Commerce to establish contacts between potential business partners.

You can also check if you are allowed to sell to the government in your potential export market.

 

 

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Step 3: Check if your company can benefit from an EU Trade Agreement

The EU often enters into bilateral trade agreements with countries outside the EU.

Check whether the EU has a trade agreement with the country you want to export to in the Markets section.

EU trade agreements may cover trade in services in key sectors and often reduce or even eliminate barriers for exports in those sectors. Examples of such key sectors include:

  • financial services
  • telecoms
  • maritime transport
  • professional services
  • digital trade

What benefits do trade agreements bring for your foreign direct investments

If the EU has a trade agreement in place with the country, the barriers to foreign direct investment may be reduced or even eliminated in certain sectors, and it may include specific investment provisions that legally bind a level of protection for foreign investments.

 

EU Trade Agreements

  • provide a more stable and predictable set of rules for you when you trade with foreign markets
  • ensure that the non-EU country’s laws do not discriminate against EU services
  • create new and better export opportunities for your company and make it easier to invest abroad.

What if my service is not covered by an EU agreement?

If the EU does not yet have a trade agreement with the country you want to export to or if your sector of interest is not covered by a particular agreement, you should:

check the market access conditions listed under the WTO’s General Agreement for Trade in Services.

WTO members list there their barriers to services exports in their schedule of commitments.

 

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Step 4: Assess the requirements in your export market

 

  • The requirements will depend on how you want to export (see step 2) and on your target market.

You can investigate detailed information on the specific requirements in your selected target market in the market section.

Which requirements do you need to check for cross-border supply (mode 1)?

  • Authorisation and licensing requirements: Your company might need to obtain certain licences in order to provide the service in the export market.
  • Requirement of mutual recognition of diplomas and qualifications: Relevant diplomas of service suppliers and other qualifications will have to be accepted by the country you want to export to in order for you to be allowed to supply your services abroad. This is true for some exports of professional services: Example: an EU auditor might not be allowed to check the account of a foreign company, and hence you as an EU company cannot export your service to the country in question.
  • Specific restrictions on some services sectors: For example, limitations and restrictions on insurance services may occur. Similarly, some exports of financial services products might require an ‘equivalence’ (provided by the target country legislators) to be accepted in the foreign market.

Which requirements do you need to check for consumption abroad (mode 2)?

Consumption abroad takes place when the customer travels outside their country and consumes the service that you are providing in your country.

  • In most cases, the requirements you would need to comply with are the same as when providing your service in your national or EU market.

Which requirements do you need to check for commercial presence (mode 3)?

Countries outside the EU may have commercial presence requirements or restrictions, which EU exporters should take into account when investing in these countries.

  • Local presence required:
    some services cannot be provided into non-EU countries without having a local presence in that market. This can be the case for some insurance services, for example. Your company might thus need to establish a commercial presence abroad, for example by establishing a subsidiary or entering in cooperation with local companies in the foreign market, e.g. via joint venture.
  • Foreign equity caps:
    certain countries apply restrictions on the maximum share of foreign equity allowed when it comes to investments.
  • Limitations on investments:
    such limitations can be linked to specific licences necessary for individuals or companies or limitations on the number of companies allowed.
  • Restrictions on the type of legal entity:
    certain foreign markets might have legal provisions in place only allowing for joint ventures, or expressly prohibiting other legal forms of investment such as sole proprietorship.
  • Restrictions on the number of suppliers:
    such restrictions may be relevant when it comes to specific licences that suppliers must have.
  • Nationality requirements:
    certain sectors or product types might require investors to have licences that are limited to individuals that have the nationality of the country you want to export to, or might require managers of the establishment to be of that nationality. Also, the acquisition and use of land and real estate by foreigners may be restricted.
  • Tax provisions:
    specific tax provisions can apply to foreign investments and specific countries might have a legal framework in place that includes discriminatory taxation of foreign investments.
  • Financial restrictions:
    certain financial restrictions may apply to foreign direct investments. For example, these can include restrictions on remittances, capital transfers, and currency conversion. Cross-border mergers and acquisitions may be restricted as well.

Which requirements do you need to check for the presence of natural persons (mode 4)?

Exporting a service very often requires the temporary stay of your employees abroad in the target market to actually supply the service.

For instance:

  • an engineer of your company might need to travel to update a machine/software or maintain equipment. But there might be restrictions to the mobility of persons when supplying services in this way.

Requirements to investigate include the following:

  • Residency requirements:
    the providers of services may have to be a resident in the target country.
  • Citizenship requirements:
    suppliers of services might have to be a citizen of the country to which you want to export services.
  • Licencing and certification requirements:
    suppliers of services might require specific licences, training, educational or other qualification certificates. It is important to know whether certain certificates are valid in the foreign country. It can also occur that they must be provided by entities of the target country for certain professions/services.
  • Business visa and work permits requirements:
    One specific example related to temporary stay and visa requirements is whether the employee is allowed to bring their spouse or children during the time of the stay.
  • Economic needs tests/labour market tests:
    some countries may require you or your customer to prove that local labour cannot meet the service need.
  • Entry restrictions/quotas:
    certain entry restrictions or quotas may apply for the foreign supply of services in specific professions.
  • Educational and other qualification requirements:
    it is important to know whether certain certificates are valid in the foreign country in question.

What else do you need to find out?

When you supply services to non-EU countries you also need to check what tax regulations apply. This includes:

  • local taxes
  • VAT payments

Different tax regulations may apply in your export market. Some services may be subject to exceptions depending on the country that you want to export to, for example if your company has a permanent presence in that country.

Where can you find more information?

Your Checklist: 4 Steps To Export a Service

Before you begin: Assess the export readiness of your company

  • Consult the checklist of questions for assessing the export readiness of your company
  • Discuss and decide whether your company is ready to trade with non-EU countries, or which steps need to be taken in preparation for future trading activities outside of the EU

Step 1: Understand how services can be exported

  • Decide how you would like to export your service

Step 2: Understand how services can be exported

  • Select your new export market and assess business potentials and the competitiveness of your services (important to include export related costs in price calculations)
  • Identify potential buyers
  • Identify an agency/institution/partner to support you in the organisation and formalities of the export process (such as preparing contracts, checking payment conditions, credit-worthiness of buyer, capital transfer restrictions in the country of the buyer)

Step 3:Check if your company can benefit from an EU Trade Agreement

  • Confirm whether the EU has concluded a trade agreement with the country you would like to export to
  • Identify sources for more information on the relevant trade agreement
  • Examine the market access conditions for your service in the schedule of commitments

Step 4: Assess the requirements in your export market

  • Assess if your service is allowed to enter the export market you are interested in, i.e. whether any restrictions or prohibitions apply
  • If you want to supply your services across borders, check which requirements may apply (for example authorizing or licensing requirements)
  • If your want to establish a presence in a foreign market, check which restrictions may apply (for example on foreign ownership, on the type of legal entities allowed or the approval procedures )
  • If you want one of your employees to accompany the service you are exporting, check which specific requirements may apply (for example on qualifications, work permits nationality requirements or entry restrictions)
  • Check which tax regulations apply when you provide services outside the EU

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