International Business Law - Assignment Example

College: International business law Introduction International business is one of the riskiest business areas since it is done on a broader platform that is controlled by wide legal requirements. Since the Second World War, and the subsequent clamor for removal of international trade barriers, it is apparent that many countries have opened up their territories and allowed competition foreign direct investments. Foreign direct investment occurs in various ways such as through multinational corporations, opening foreign branches or wholly acquisition of local firms. Due to this, each country has come up with far reaching legislations that form a legal framework within which international trade should be done. Most of these laws are based on international treaties and conventions, bilateral trade agreements, bilateral tax agreements, international financial and crimes statues, various forms of economic integration, among others. It is worth noting that most of these laws are geared towards protecting investors, residents of investee countries and relevant governments from fraud, exploitations and other malpractices that can stem from illegal operations. Most laws controlling international business deal with taxation, money laundering, employee rights, the process and system of justice, competition, among others (Goode & McKendrick ,2007). International law may be defined as the body of rules that nations or states recognize as binding upon one another in their mutual relations in areas of investment trade and services. In this area some of the Sources of international law are customs, treaties, and general principles of law, resolutions and declarations of international organizations, doctrines of equity and writings of judges together with legal scholars.A company that wishes to begin operation in Germany can choose between three different legal forms under company which are ; the formation of a permanent establishment or the formation of an independent branch establishment, the formation of a German partnership and the formation of a corporation as the Ultra Educational Software Ltd.’s subsidiary. It is also possible when studying the recent rulings of the European Court of Justice for a company to use corporations from other European Member States with a good example of the English Limited Company which is very popular. It is said that more than 30,000 Limited Companies exist in the republic of Germany. Question 1 Definitely may be will be exposing itself to a number of legal risks as it embarks on exporting chocolate to Germany. First of all, the company shall face economic risks that emanate from erratic exchange rates. Although Euros will easily be used as the main currency, it is evident that its value is largely influenced by dollars and pounds. Apart from economic risks, Definitely Maybe shall face a number of legal risks due to capriciousness of Germany legal systems as well as its governance institutions. This is due to the fact that Germany has had a number of legislations that impact on share acquisition and ownership; taxation on profits foreign owned companies, entry duty as well as compliance with the Federal Financial Supervisory Authority. For instance, if it known that definitely maybe is solicitated for (in a closed ended manner) by individual investors or local firms in Germany, then may not fall under there shall be a requirement for licensing and prospectus since it shall have contravened the Investment Act. Furthermore, definitely May be shall face the risk of not knowing the exact tax to be paid in that circumstance. This is because, in Germany, a foreign company that is wholly owned by foreigners shall not enjoy the same tax benefits as a company that is incorporated by locals. Besides, Definitely Maybe is likely to face legal obstacles as far as underwring of its shares is concerned. For instance, the Germany investment Act states that a depository bank or the lead broker cannot be a shareholder of a company that is making entry in to Germany. Therefore, Definitely Maybe is likely to face a numbers of legal challenges as it makes entry in to Germany. Question 2 Ultra-educators Software limited has to weigh a few legal and economic options prior to making entry in Germany. Therefore, it should consider tax implications on both foreign branches and subsidiaries. Furthermore, Ultra-educators Software limited should consider the process of registering a branch against securing a license for a new company. In additionally, Ultra-educators Software limited has to understand the legal parameters that surround the acquisition of funds from banks and other financiers. There are a variety of corporate in software that is operating in Germany including Microsoft Deutschland GmbH. The ideal form of the corporate entity will be determined by the existing ones in Germany and their overall performance in the market (Goode & McKendrick, 2007). Again the company should bear in mind that the Corporations resident or are managed in Germany are as the law requires deemed to have full corporation tax liability. The meaning of this is that their domestic and foreign earnings are all taxable in the republic of Germany. Therefore before investing in this country Ultra Educational Software company should go for those entities that are exempted from tax and see if it falls there. If it is exempted then it will be ideal corporate entity. Remember that some corporate enterprises are exempted from corporation tax examples include Church institutions, charitable foundations, and sports clubs. Question 3 Under the European Union the European Union citizens are legible to start up companies in any country that is a member of the EU. This indicates that Ultra Educational Software Company is legalised to start a business in Germany as UK is a member of European Union. In the formation of the company what is needed is to inform the local registration office and provide the necessary funds. It is a requirement to have a German settlement permit. Again it should be noted that it is possible for non EU citizens to start a business in Germany any time provided the requirements are fulfilled. For non-EU member who possess only a residence permit a separate application process must be undertaken.  Additionally the following are required, Proof of professional qualifications and experience, application for a residence permit, Business plan and Curriculum Vitae. To qualify to establish a business in Germany one is required to organize two sets of tax registration which are for commercial tax at whose offices are at Gewerbesteueram for the local tax office with offices at Finanzamt and then hire a notary and then go ahead to register the business in a the local court located at Amtsgericht The most fundamental decision in establishing a business is the form the business is likely to take which include non-incorporated, sole proprietorships and incorporated firms. Any business in Germany must be registered with the Trade Office in the municipality where the business is to be started. So that to achieve this the following are required: a residence permit that depends on the sector, a valid ID or passport, a permit or authorization, a craft card if the company is to operate in the craft sector, a trade card, and then the registration fee. The Trade Office will then contact other authorities involved with starting a business such as accident insurance fund, the tax office, chamber of commerce or chamber of crafts, trade register and the appropriate trade supervisory offices. In Germany it is mandatory that a company must be entered in the commercial register in the local court Question 4 The European Union allows the European Union citizens to establish companies in any of the EU member countries. A local partner is not a requirement. The most important requirement is that a person or the corporate entity must have a permanent residence in Germany. So the company in question will have to prove its residence so that to get a permit to start up business in Germany, Before getting permission to live and establish a business in Germany the applicant in this case the Ultra Educational Software Company must show that: 1. its business will have positive results for the economy 2. that there is an important economic interest for the proposed business 3. and that the venture is secured by either credit guarantees or equity This application can be made in Germany or outside the country at the closest German Consulate or Embassy. It is essential to note that any application for a residence permit is considered by a body called the German Foreigners Authority. However, the business plan will be considered by the Commerce Department of the respective state that the applicant plans to start up business. For the Entrepreneurs who invest one million Euros and above and they create at least ten jobs such receive a residence permit (Goode & McKendrick, 2007). Question5 The meaning of double taxation is simply the imposition of two or more taxes on the same income if it is income taxes or asset if it is capital tax or financial transaction in the case of sales tax. The term therefore refers to two different situations, this is to mean taxation by two or more countries of the same income or asset or transaction a good example is the income paid by a Germany entity to a resident of United Kingdom. The issue of double liability is always settled by treaties between countries (Hill,2008) . In Germany if a foreign citizen resides there for less than a relevant 183-day period and it may be possible to claim tax relief under the provision of a particular Double Tax Treaty. The essential 183 day period is 183 days in a calendar year. There is a Double Tax Treaty between Germany and the UK. This treaty looks at a period of 183 days in the German tax year that is the same as the calendar year. Therefore a citizen of the UK can work in Germany starting from1st September through the following 31 May and hence claim to be exempt from German tax while still paying the UK tax. Question six Germany being a member of the European Union there are other bilateral investment treaties with the UK and other member states of the EU in areas such as employment, agriculture, multinational companies and provision of skilled services, not forgetting the area of intellectual property. Question seven It is fundamental to note that Employment laws of Germany must not violate the European Union guidelines for employment because Germany a member of the European Union. The relevant legislation to be used should conform to the general guidelines set up by the European Union. The European Union discourages discrimination by member states when it comes to employment. This means that domestic employees should be treated equally with foreign employees. As such no domestic or foreign employees are allowed to assume a key position in a company unless he is qualified. It can be remembered that Germany recruited many workers from many non European Community member states like Turkey Greece, Portugal, Morocco, Spain and Yugoslavia. One of the reasons was because reduction in German labor force. Starting from 1968 Germany agreed EC countries on freedom of movement rights after January 1968. However since the fall of the Berlin wall employment laws in Germany have restricted the guest worker program and other liberal employment policies within Germany Question eight If it can be remembered since 2005 Germany embarked on making a greater attempt which aimed to encourage highly skilled workers to migrate to Germany. But those who are low skilled workers still find it difficult to obtain permission to work in German. In Germany the highly skilled workers find it easier to gain permanent residency to work there. The professions that are in demand are natural scientists, engineers, professors and scientific personnel specialised in high technology areas. Hence you find that there great difficulty in obtaining work permission for those who are unskilled workers (Schaffer et al, 2008). Works Cited Goode, Kronke & McKendrick, Thomas Transnational Commercial Law – Text, Cases and Materials. London: Oxford, 2007. Hill, Charles W International Business .London: McGraw-Hill/Irwin, 2008 Schaffer ,Richard., Agusti ,Filiberto and Earle, Beverly .International Business Law and Its Environment. New York: Cengage Learning, 2008 Silkenat,James and American Bar Association. The ABA guide to international business negotiations: a comparison of cross-cultural issues and successful approaches .American Bar Association, 2009 Read More