Looking to grow internationally by hiring employees abroad? Just spin the globe- opportunities are everywhere. But choosing the right location can be the difference between success and failure.
Tax benefits, business-friendly environments with flexibility, strong economies, and cost efficiency are key factors to consider when choosing where to launch your global expansion initiative.
The Covid-19 pandemic has created many challenges. But it has also been a catalyst for new opportunities. In the current work environment, companies can source a diverse set of skills, broader than is usually available in any one location, through remote-work options. Turning to a work from home (WFH) model reduces risks for both the employer and employee, creating a way to maintain a safe work environment while continuing to expand and grow.
Taking all these factors into consideration, Papaya Global predicts that the following five locations will lead the way for growth in 2021.
The UAE offers exciting opportunities for entrepreneurs of all backgrounds. It offers a multitude of start-up-friendly initiatives and provides incentives to encourage diversity and equal-opportunity entrepreneurship. Other advantages include extended five-year visas for older professionals, 100% foreign ownership of companies, and even ten-year visas for some business and property owners. Dubai has also launched a new residency program that allows expats working remotely to relocate with their families and live in the emirate while continuing to work remotely for their overseas employer.
The main benefits of expanding to the UAE:
- It is a business hub in the Middle East, with Dubai as a modern city with the resources to invest in exciting business ventures
- Cost-efficiency: there are no employer costs outside of salary or taxes applied to employees
- VAT in UAE is only 5%, low compared to many other countries
- English is a common business language although Arabic is the official language. This is partly due to the high number of expatriate workers in the UAE
- The UAE free zones offer many advantages and are a well-defined part of the state territory with special conditions of taxation, customs duties, etc.
- They allow:
- 100% ownership of the company’s shares without the involvement of local agents
- no currency restrictions
- all capital and profits can be repatriated
- exemption from corporate, personal, or income taxes
- duty-free import of goods, if the goods are not supplied to the local market
- excellent infrastructure and communications
- resident visas are available
- The legal system is strict and new businesses must know all the laws and restrictions to avoid fines or legal issues
- It is important to always carry out background checks when hiring employees and not hire simply based on who you know
- Government administration can be difficult requiring advanced planning
- The societal norms and rules may be different from other cultures and need to be understood and respected
- Finding a local sponsor/guide is helpful in the setting up phases to ensure compliance.
The UAE has many exciting opportunities to offer businesses. It is important to keep in mind that culturally the UAE differs in its outlook both professionally and culturally to other regions in the world and this must be respected.
For companies looking to hire, see our UAE payroll and benefits guide for further information.
India is the world’s second-fastest-growing economy, behind only China, and the fifth-largest economy overall. India’s GDP is expected to grow at a rate of 1.9% in FY2021, making it the only other major economy other than China that is expected to grow. Much of India’s growth could be a related to anti-China sentiment in the post-Covid world. Global companies that thrived on the efficiency and low costs of Chinese production are likely to move their bases in the aftermath of Covid-19 and have expressed interest in migrating to production-conducive economies like India.
Therefore, we believe the growth trend in India is sustainable throughout 2021.
The main benefits of expanding to India:
- India is one of the most in-demand global markets
- Availability of skilled workers
- High level of connectivity and infrastructure
- GDP growth
- Inward investment
- Tax and employment regulations
- Diverse talent pool with a varied skillset
- Economic and political stability
- Access to a massive market that serves as a bridge between East and West
- Cost-efficient with much lower operating and employment costs
- Special economic zones throughout the country that promote competitive business environments
- Tax benefits to start-ups recognized under the National Start-up Policy in order to help strengthen the technology ecosystem in the country and provide support
- Department for Promotion of Industry and Internal Trade (DPIIT) allows benefits such as income tax exemptions, self-certification, patent applications, and Intellectual Property protection
- Other attractive government benefits include a venture capitalist scheme, a technology development program, promotion of innovation rural industries, and an entrepreneurship scheme
- Under-developed Infrastructure – India is a developing country with the challenges that go with that, such as commuting difficulties, telecommunications is under-developed and unstable
- Cultural differences
- Complex tax and legal regulations and systems
Ultimately, India is a developing country and companies could encounter challenges in regard to telecommunications, infrastructure, and culture. However, the benefits outweigh the challenges, especially for a tech company looking to expand.
For companies looking to hire, see our India payroll and benefits guide for further information.
Although the Netherlands is by no means the largest country in the EU, it is one of the most inter-connected, serving as a hub with access to 95% of Europe within 24 hours.
The Dutch business environment rewards companies with government-sponsored incentives, especially for innovators, making it a warm and stable choice for foreign business expansion. The Netherlands’ GDP per capita is above EU averages and ahead of most countries. According to the World Economic Forum, it is the fourth most competitive country in the 2020 IMD rankings and fifth in the 2020 Global Innovations Index.
The benefits of expanding to the Netherlands:
- One of the lowest tax rates in Europe.
- The Dutch have the largest number of treaties worldwide for avoiding double taxation
- No VAT for transactions between states of the European Union and the Netherlands
- Over 90% of Dutch people speak English with many of them speaking other languages as well, e.g., French or Spanish.
- The labor force is highly educated, with the Netherlands ranked third in global education level, according to the Global Economic Forum.
- Holland, in particular, offers an innovative international business atmosphere
- The Netherlands offers a stable legal and political climate as well as superb international relations
- Working in the Netherlands is essentially a door to working with the entire EU, with access to the European Single Market. This allows free import and export services and goods throughout the EU
- The Dutch have strong ties to international trade with accessibility to huge international markets
- In 2021, the tax rates for profits under 200,000 euros will be reduced from 20% to 16%. Profits over 200,000 euros are currently taxed at 25%, but will be reduced to 21%.
- The official language of the Netherlands is Dutch, and it is used in nearly all documentation provided by the government. This makes it difficult to understand tax rules and legal issues without assistance
- Dutch law significantly favors the employee. Dutch employment law is complex and gives employees a strong legal position. While this is good for workers, it can be unfair and challenging to small businesses and start-ups
- Employees working under Dutch law enjoy relative job security and many benefits and generally feel more entitled, including at least 20 days of paid leave each year. Employee satisfaction is high, which is good, but it tends to be taken for granted, resulting in an entitlement mentality among many Dutch employees.
Despite some of the challenges of Dutch law and an entitlement culture, the government works to bring more foreign investors by providing a strong investment climate. This makes right now the ideal time to start a business in the Netherlands!
For companies looking to hire, see our Holland payroll and benefits guide for further information.
Although small, Denmark has a strong, open economy. With high living standards, quality goods and services, minimal bureaucracy, high education, widespread use of the English language, and unequivocal tax laws, it is the ideal starter market for small- to medium-sized businesses looking to expand abroad.
Denmark was ranked the 5th most productive economy in the world by the World Bank last year – for the seventh year in a row. It has one of the best economies in Europe due to its low unemployment, moderate inflation, and high growth. Denmark participates fully in the EU’s economic collaboration but has not yet joined the European Economic and Monetary Union (EMU). That means Denmark uses its own currency instead of adopting the Euro. Licensing or incorporating a business in Denmark must be regarded as a valuable option.
The benefits of expanding to Denmark:
- Some of the lowest bureaucratic business regulations in the world: it takes less than 24 hours to set up a company and the procedure itself is simple
- There are many tax laws to help corporations
- Denmark acts as the center for other Nordic and European corporate activities
- It ranks among the top locations for Global Entrepreneurship, scoring top marks on opportunities for start-ups, technology absorption, and production
- There are many opportunities for public funding schemes with access to local and international investors and accelerator hubs, and internationally focused business development organizations
- The Danish government runs public innovation centers as part of its globalization strategy to help fund start-ups. It aims to invest much earlier than a standard VC. An initial investment round can be as much as 3-4 million DKK
- With a thriving economy, Denmark has been rated by the European Commission as the most digital country in the EU, making it fertile ground for fostering new technical innovation
- Productivity is key, with Denmark’s economy being the fifth-most productive in the world even though they have the second-fewest actual hours worked.
Although productivity is strong, it includes high wages, which are a key cornerstone in the Danish economy. High wages are especially important for productivity as working hours are low – some Danish companies are now even experimenting with a 30-hour work week.
- Denmark has high tax rates.
- Denmark has complex labor laws which means foreign companies need to have the right support in place to ensure they are compliant.
Though Denmark is an expensive place to run a business, it is a hub for excellence and innovation with high productivity levels yet a strong work-life balance, making this a very attractive location.
For companies looking to hire, see our Denmark payroll and benefits guide for further information.
Many companies have chosen to expand into Portugal. There are tech start-ups and digital development centers set up all over Portugal. The Portuguese labor force is known for its motivation, adaptability, and willingness to work, while wages continue to be comparatively low. Due to the healthy level of growth in the economy, there is a high standard of living. Portugal can be an excellent strategic location of operations for businesses seeking overseas expansion. Moreover, expanding a business in Portugal means gaining a good base for penetrating markets in Brazil and Africa.
The benefits of expanding to Portugal:
- The cost of running a business e.g., office space, is relatively cost-effective compared to many other European locations
- Salaries are lower compared to other EU countries
- Portugal offers a talented workforce with excellent English-speaking skills
- The Portuguese government has eased residency programs for foreign start-ups and removed red tape so that setting up a company is simplified and can be done through an online process
- The government has allocated €200 million to help foreign companies invest in local companies and/or relocate to Portugal
- Portugal’s geographical location makes it very attractive, falling in the same time zone as London, an hour behind Central European Time and a three-hour flight from key cities such as Zurich, London, and Stockholm
- The country has established strong business relationships with its neighbors, with improves trade and offers the ability to market services efficiently at the international level
- Portugal has ready-to-develop sites for businesses – many business parks, complexes, and malls available for establishing a business in the country
- The country is easily accessible with many airports and highways for efficient transport
- Portugal’s education system is known for producing skilled minds ready to take up role in developing businesses
- Portugal has highly attractive and business-friendly tax policies with tax credits between 10% to 20%. Corporate tax and VAT are comparatively lower than in other countries
- Portugal offers generous incentives, many of them backed by EU funds, to attract foreign companies wishing to invest. Special incentives have been set up for large investment projects and proposals to impact positively on tourism, science, and the environment.
The challenges of expanding to Portugal
- It can be difficult to get contracts enforced in the country. The procedure is time-consuming and can lead to delays. In many matters, the business community must grant approval and the government give its authorization
- The court system often fails to control illegal activity, making this a hindrance for companies to grow
- Portugal’s culture follows a hierarchical system and it is required to have a local resident in the company in a high position in order to grow
Portugal does have a number of challenges for businesses when it comes to its legal system. However. the low operation cost, ease of setting up a business, and excellent geographical placement mean there is much to be offered by expanding to this location and 2021 will continue to be a growth year in Portugal.
For companies looking to hire, see our Portugal payroll and benefits guide for further information.
With a local presence in more than 140 countries, Papaya has highlighted these 5 locations as the top expansion trends for 2021. Papaya’s resources include up-to-date labor laws and tax rates in order to guide you through the maze of business practices and help you make good decisions on global expansion.
Contact us for a consultation.