Guide for import of services
Does your company plan to import services from outside the EU? This section helps you understand if your company is ready for importing and outlines the different steps of the import process.
4 Steps to Import a Service
Step 1: Understand how services can be imported
There are typically four different ways to import your service from 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 imports services from a supplier 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.
An insurance company established in Spain receives marketing advice from a supplier company in the US.
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 a company is supplying a service in their domestic market to a foreign customer, this is called consumption of services abroad. This is generally a less relevant mode of supply when importing services. The customer crosses the border and makes use of the service in a foreign market.
An Italian customer travels to South Korea and stays at a hotel or dines at a restaurant, thus consuming the services in South Korea.
Commercial presence abroad (Mode 3):
If a foreign company establishes a presence in the EU, this can be referred to as commercial presence abroad.
This involves opening a subsidiary, branch or representative office in another country.
An American bank opens up a branch in France or a Canadian construction company decides to open a subsidiary in Germany.
Sectors in which this form of service supply is common include:
- financial services
- telecommunication services
- environmental services
In general, the establishment of a foreign company in another country is called foreign direct investment.
Presence of natural persons abroad (Mode 4):
If your company is importing a service via an employee who travels from a foreign country to the EU to provide a service temporarily to your company, then you are importing a service via the presence of a natural person abroad.
Different types of personnel can supply the service to your company:
- intra-corporate transferees:
these are employees from a foreign company (often executives, managers, specialists) that are transferred to this company’s commercial presence in a country inside the EU.
- business visitors:
these are short-term stays of a few months (often limited to 3 months) with no remuneration received in the EU country. Business visitors are usually in a senior position in the foreign company and are responsible for setting up an establishment in the target market.
- contractual service suppliers:
these are employees in a foreign company who supply a service on the basis of a contract that they have with a final consumer in the EU. Contractual service suppliers are sent abroad as the foreign company has no commercial presence in the EU and as their temporary stay in the EU is necessary to fulfil the contract of supplying services.
In addition to these categories of company personnel, independent professionals that are self-employed also fall under the category of presence of a natural person abroad:
- 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.
- 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).
Find a market and a seller
To import services from outside the EU, you should first identify the market and seller you want to import from.
- 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 import market that cover market analysis and assessment of business opportunities can be of help. These bodies often provide studies on key import sectors.
- Consultants and relevant banks can also provide advice.
How to select your market of supply?
Screen potential import markets to assess whether there is supply of your service.
Trade statistics will show if your country of interest is already exporting the service and where the export goes to.
- Check the trade statistics of your potential market of supply.
How to find potential suppliers?
Once you have selected one or more markets of supply, look into 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.
Check if your company can benefit from an EU Trade Agreement
The EU often enters into bilateral trade agreements with countries outside the EU.
è Check whether the EU has a trade agreement with the country you want to import from 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,
- maritime transport,
- professional services,
- digital trade.
How does my company benefit from a trade agreement?
- 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 products
- 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.
Assess the market requirements
- The requirements will depend on where you want to import from and how you want to import (see step 2).
You can investigate detailed information on the specific requirements in your selected market of supply in the market section.
Which requirements do you need to check for cross-border supply (mode 1)?
- Authorisation and licensing requirements: This means that your foreign supplier might need to have certain licences in order to provide the service to the EU.
- Requirement of mutual recognition of diplomas and qualifications: relevant diplomas and other qualifications of service suppliers abroad have to be accepted by the EU in order for you to be able to import services from them. This is true for some imports of professional services: Example: a foreign auditor might not be allowed to check the account of an EU company and hence you as an EU company cannot import this service from the country in question.
- Specific restrictions on some services sectors in the EU: For example, there are sometimes limitations and restrictions on insurance services. Similarly, some imports of financial services products could require an ‘equivalence’ (provided by the EU) in order for you to import them from the country in question.
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 a service that is provided there.
- It is the company that supplies its services to you that should check any requirements that apply in their country in order to provide you the service. Therefore, this is generally less relevant for you as an EU importer of services.
Which requirements do you need to check for commercial presence (mode 3)?
Some EU countries may have commercial presence requirements when it comes to importing a service from a non-EU country.
- Local presence required: Some services, for example some insurance services, cannot be provided into the EU without a local commercial presence of the supplier in the EU.
Which requirements do you need to check for the presence of natural persons (mode 4)?
Importing a service very often requires an employee to travel from a foreign country to the EU in order to temporarily provide a service to your company. For instance, an engineer of a foreign company might need to travel to your country 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 country where your company is located.
- Citizenship requirements: providers of services might have to be a citizen of the country where your company is located.
- Licencing and certification requirements: foreign suppliers of services might have to present specific licences, training, educational or other qualification certificates. It is important to know whether certain certificates are valid in the EU. It can also occur that they must be provided by entities of the EU for certain professions/services.
- Business visa and work permits requirements: temporary stay and visa requirements may be in place and determine for instance whether the foreign employee is allowed to bring their spouse or children during the time of the stay.
- Economic needs tests/labour market tests: the EU may require the foreign company to prove that local labour cannot meet the service need.
- Entry restrictions/quotas: certain entry restrictions or quotas may apply for the supply of services from abroad in specific professions.
- Educational and other qualification requirements: it is important to know whether certain foreign certificates are valid in the EU.
What else do you need to find out?
You also need to identify what tax regulations apply when you buy services from non-EU countries. It is possible that you purchase services from non-EU suppliers free from VAT, but there might be exceptions for certain types of services.
When you purchase services from a non-EU country, the services in question are considered to have been performed in the country where your company is established or has its permanent presence. As a result, services you purchase can be performed in your EU country, meaning that you have to report VAT on the purchase and register for VAT.
Certain services are not covered by this requirement. These exceptions usually depend on the regulations of the EU country where your company has its permanent presence.
Where can you find more information?
Your Checklist: 4 Steps to Import a Service
Step 1: Understand how services can be imported
- Decide how you would like to import the service
Step 2: Find a market and a seller
- Select your new import market and assess the competitiveness of the service (important to include related import costs in price calculations)
- Identify potential sellers
- Identify an agency/institution/partner for support on the formalities of the import process (for instance for preparing contracts, checking payment conditions, capital transfer restrictions in the country of the seller)
Step 3: Check if your company can benefit from an EU Trade Agreement
- Check if the EU has a trade agreement with the country you would like to import from
- Examine the market access conditions in the schedule of commitments
Step 4: Assess the market requirements
- Assess if any restrictions or prohibitions apply to your services imports
- Check which requirements apply to importing your service
- If you want one of the employees of the seller’s company to accompany the service you are importing, check also the specific requirements that apply
- Identify what tax regulations apply when you buy services from outside the EU