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The Fintech Ecosystem in Brazil

Picture - Local Insight : the Fintech Ecosystem in Brazil

February 2024

The Fintech Ecosystem in Brazil is continuously expanding. With the largest financial market in Latin America, the country has became the biggest hub in this region.

In this article, ALTIOS’ experts share how foreign companies can take advantage of the Fintech Ecosystem in Brazil.

The Brazil's Dynamic Ecosystem

Financial transformation is experiencing a global wave of growth, and Latin America is no exception in leveraging these new technologies to improve access to financial services for its population.

Brazil hosts a continuously expanding FinTech ecosystem with over 1500 startups. These startups encompass a wide range of areas, from digital payments to investment platforms and online lending.

In 2023, approximately 1505 fintech companies were registered, almost half being local companies (447 local fintech).

According to the International Monetary Fund, the proliferation of new financial technology and digital banks is associated with a reduction in lending spreads. Fintech companies do not just compete with banks and insurance companies; they also provide banks and insurance companies with new technologies and services. Indeed, the line between traditional financial companies and fintech companies has already begun to blur.

Infographic - Finnovating Analysis Brazil FinTech Landscape 2023

Brazil's Fintech Dominance: Pioneering Regulation and Market Growth

Brazil is the country with the largest number of fintechs in Latin America, representing more than 30% of the region’s total and accounting for 58% of venture capital transactions in Latin America. In addition, the largest digital bank on the continent was born in that country, Nubank, which has a valuation of more than US$50 billion and has already made its debut on the New York Stock Exchange.

Another factor that has driven the growth of the fintech sector in Brazil has been the progress in the regulation, which is characterized by encouraging and facilitating development scenarios for the industry. In 2013, regulation for payment institutions was issued to allow these entities access to the Brazilian payment system, which was only for banks.

Picture - Market Growth Fintech Brazil

In 2018, the Central Bank of Brazil gave the endorsement for fintechs to provide credit without requiring the intermediation of banks. It has also implemented regulations to regulate cybersecurity and crowdfunding activities. Another initiative has been the ‘open banking’ model, which allows the exchange of data between financial institutions.

The main destination countries for Brazilian startups are in Latin America and the Caribbean. According to Finnovista statistics at the end of 2022, the largest share are Mexico, with 22%; Chile, with 14%; and Colombia, with 9%. Outside the region, the country’s fintechs have expanded to the U.S. (11%), Europe (6%) and Asia (3%).

In addition, the high penetration of technology and the internet in Brazilian society has made it possible to exploit financial services through these means, encouraging customer participation and helping financial inclusion.

Fintech Regulatory Framework

Brazil and Mexico are two of the leading countries in the regulation of fintechs in Latin America. Both have taken steps to foster the growth of this industry while protecting consumers and ensuring financial stability.

In Brazil, the Central Bank has created a specific regulatory framework for fintechs with the objective of fostering innovation and growth of the industry, while ensuring compliance with international regulatory standards. The regulatory framework includes the creation of a specific registry for startups in the sector, the supervision of the activities of these companies and the implementation of security measures to protect consumers.

Picture - Regulatory Framework Fintech Brazil

For its part, Mexico’s National Banking and Securities Commission (CNBV) has taken similar steps to regulate fintechs. The CNBV has established a regulatory framework for fintechs that includes the supervision of the activities of these companies, the creation of a specific registry and the implementation of security measures to protect consumers. In addition, Mexico has developed a favorable ecosystem for the growth of fintechs, with a large number of investors and a growing user base.

Ecosystem mapping in the region

The Inter-American Development Bank (IDB) has reported that Latin America’s fintech sector grew by 112% between 2018 and 2021.

According to the IMF, three key factors seem to have fueled the fintech boom in Latin America:

    • limited access to finance from banks and insufficient competition among banks
    • improvements in digital infrastructure
    • access to venture capital.

In this sense, some Latin American fintech sectors have all grown exponentially:

Digital payments grew from $89 billion in 2017 to $215 billion in 2021 and the number of users of digital payment services exceeded 300 million in 2021. Digital banks had more than 30 million users in 2021, mostly concentrated in Brazil and Mexico.

Business-to-business (B2B) fintech startups providing technological solutions to existing financial institutions on average grew annually by almost 50 percent between 2017 and 2021.

Figure: Distribution of Fintech Companies in Latin America and the Caribbean in 2021

Figure: Evolution of the number of Fintech Companies in Latin America and the Caribbean (2018-2021)

Graph - Evolution of the number of Fintech Companies in Latin America and the Caribbean (2018-2021)

What are the Market Trends and Opportunities for 2024?

Growth of Digital Payments

Digital payments will continue to gain ground in Latin America. McKinsey estimates that the value of digital payments in the region will reach $2.5 trillion by 2025. This momentum is attributed to factors such as increased smartphone penetration, continued improvements in telecommunications infrastructure and the growing adoption of contactless payment solutions.

Development of Open Banking

The open banking trend is gaining momentum in Latin America. Open banking allows users to share financial data with authorized third parties, such as Fintech companies, to access new financial products and services. According to the Allied Market Research report, the open banking market is projected to reach $43.152 billion by 2026.

Rise of Cryptocurrencies

Cryptocurrencies are gaining ground in Latin America, with 46% of banked individuals willing to make payments with bitcoin. Experts highlight that cryptoasset companies are evolving into end-to-end financial technology providers, acting as one-stop shops for investors, consumers and other companies.

To sum up, the Brazilian market is considered a benchmark in the region for the Fintech industry. This is mainly due to “the size of the market” in Brazil, where 84% of the adult population in a country of 203 million inhabitants is banked.

It is also due to the fact that few banks control this large market, which generates multiple problems that entrepreneurs are trying to solve. A great example of this is NuBank, a provider of credit cards and banking solutions facilitating their use and reducing complicated bureaucratic aspects. Nubank is already considered the largest digital bank in the world outside of Asia and is the largest Fintech company in Latin America. In late 2021, it launched its IPO and went public on the New York Stock Exchange, becoming the most valuable company in Latin America.

Want to learn more?

If, like NuBank, you want to identify business needs that turn into global success, contact us or book an appointment with one of our experts! We can accompany you in your international growth project.

In addition to this article, read about the aerospace industry in Mexico.

What are the advantages of the Australian market?

Advantages of the Australian Market - Photo

December 2023

Australia has a stable and diversified economy, from robust mining and agricultural sectors to growing expertise in technology industries. Its strategic geographic position makes it a key player in international trade, with close commercial links with Asia-Pacific and the Middle East.

In this article, ALTIOS’ experts share how foreign companies can take advantage from what Australia has to offer.

Australia's Economic Excellence

Considered as a model of economic stability, Australia boasts a resilient economy, characterised by steady GDP growth and remarkably low inflation rates. Despite global economic challenges, Australia has maintained robust GDP growth, averaging an impressive 2-3% per year, renforcing its status as an attractive investment destination.

Australia is distinguished by the diversification of its economy, covering key sectors such as mining, agriculture, services and technology. This diversification not only promotes resilience, but also reduces dependence on any single sector. With services accounting for around 60% of Australia’s GDP, alongside significant contributions from mining, manufacturing and agriculture, Australia’s economic landscape offers a wealth of investment opportunities.

Australia’s stable and well-regulated financial sector, which accounts for more than 8% of GDP, is also a key pillar of this economic success. This strength enhances the overall attractiveness to international investors seeking a safe and prosperous market.

In navigating the global business landscape, Australia stands as a strategic partner, providing a stable platform for growth, diverse investment opportunities, and the assurance of a well-regulated financial environment.

A global innovation hotspot

Australia is swiftly solidifying its position as a global innovation hub, drawing substantial investments in research and development. With an annual allocation exceeding $10 billion, the nation is propelling technological advancements and fostering an environment conducive to innovation. This commitment, one of the big advantages of the Australian market, positions it as an ideal destination for businesses seeking to thrive on the forefront of cutting-edge technologies.

Complementing this innovation drive is Australia’s robust commitment to infrastructure development. Ongoing investments, exemplified by the $110 billion National Infrastructure Plan, are strategically enhancing connectivity across transport, energy, and digital sectors. These developments not only bolster economic growth but also streamline operations for companies, creating a seamless environment for international enterprises to operate efficiently and prosper. Australia’s fusion of innovation and infrastructure lays the groundwork for a dynamic and forward-looking business landscape.

A winning combination of good education and quality of life

Australia presents a compelling proposition for international expansion, combining a highly educated and skilled workforce with an exceptional quality of life. With approximately 40% of Australians aged 25-34 holding tertiary qualifications, the country stands as an ideal destination for companies in search of top-tier talent and expertise.

Beyond professional considerations, Australia offers an unparalleled quality of life, making it an attractive haven for professionals and their families. Renowned cities like Melbourne and Sydney consistently rank among the world’s most livable, contributing to an elevated quality of life that goes hand-in-hand with the opportunities for professional growth. The synergy of a skilled workforce and an exceptional quality of life positions Australia as a strategic choice for businesses aiming to expand internationally.

Advantages of the Australian Market - Melbourne

The "Land Down Under"

Australia emerges as a pivotal player for international expansion, strategically positioned as a gateway to the dynamic Asia-Pacific region. With a geographic location that provides unparalleled access to a market exceeding 4.5 billion people, businesses can capitalize on Australia’s unique position to tap into the vast and growing opportunities within the Asia-Pacific market.

In addition to these strategic advantages of the Australian market, Australia has an abundance of natural resources, a cornerstone of its economic strength. Boasting a leadership role as a global exporter of resources such as coal, iron ore, gold, and agricultural products, the country becomes not only a gateway to markets but also a source of valuable resources for industries worldwide. We therefore advise you to make the most of Australia’s strategic location and resource-rich landscape, unlocking the full spectrum of opportunities for your business.

Australia's Pillars of Trade and Stability

Australia emerges as an international business hub, underpinned by robust trade relationships and unwavering political stability. The country’s strong trade ties with global economic powerhouses, including China, Japan, and South Korea, are facilitated by free trade agreements, creating an advantageous environment for international business activities.

Beyond commerce, Australia is distinguished by its political stability and transparent governance, laying the foundation for a favorable business environment. Consistently ranking high in global indices for political stability and transparency, Australia provides businesses with the confidence and security needed to thrive in the international arena.

Would you like to go further and develop your business in Australia?

How to succeed your market entry in India

Image - How to succeed your market entry in India

December 2023

Considered one of the world’s oldest civilizations, India is a land of diversity and contrasts. With its vast market and growing economy, it is an attractive destination for businesses worldwide. However, the Indian market is a complex business landscape that requires careful planning and understanding of the culture.

In this article, ALTIOS’ market entry experts give you key advice to succeed your market entry in India.

Understand the complexity of the Indian market

Conduct thorough Market Research

India is a home to a diverse population with varying needs and purchasing power. Before venturing into the Indian market, you will have to conduct a market research in depth in order to understand the market’s dynamics, consumer behavior and competitive landscape. Be careful not to overestimate the market size ; we strongly advise you to establish a market plan (over at least five years) and to define achievable and realistic goals.

What are the Market trends to consider?

India is witnessing a paradigm shift in consumer preferences, driven by the ‘Make in India’ initiative. This initiative launched by the Indian government in 2014 is reshaping the market towards domestically manufactured products, aligning with the growing demand for sustainable and environmentally conscious offerings. The Make in India Program is based on 4 pillars aimed at boosting economic growth, encouraging investment, and strengthening the country’s manufacturing sector:

  • New Processes (Ease of doing business): Simplify administrative procedures, reduce bureaucracy, and facilitate the creation and operation of businesses in India.
  • New Infrastructure: Develop and modernize key infrastructures to support the growth of the manufacturing sector and facilitate the movement of goods.
  • New Sectors: Identifiy 25 sectors in manufacturing, infrastructure, and service activities to promote under the “Make in India” initiative.
  • New Mindset: Change the traditional perception of the government as a regulator (adopt a facilitator role rather than a regulator), fostering a partnership for the country’s economic development.

In addition to the ‘Make in India’ initiative, sustainability has emerged as a key market trend, with many foreign companies investing heavily in ESG, CSR, and other initiatives. This focus on environmental and social responsibility reflects the growing awareness of sustainability among Indian consumers, who increasingly demand products and services that align with their eco-conscious values. Many European companies are recognizing India’s potential as a sourcing destination and align their strategies with this shift, presenting immense opportunities for businesses worldwide.

The fastest growing sectors in India in 2023

The Indian market is going through exponential growth in technology, renewable energy, healthcare, and education. In addition, E-learning platforms, which disrupt traditional education models, have gained immense popularity, especially among the tech-savvy youth. Health-tech solutions, addressing the growing healthcare needs of the population, are capturing the imagination of Indian consumers with E-learning platforms and renewable products.

If you are a European company aspiring to do business in India, know that European products are renowned for their quality and reliability, especially medical equipment and renewable energy products. This reputation presents significant opportunities because the demand of high-end and durable products on the Indian market is steadily increasing. Sustainable products, aligning with environmental concerns, are gaining traction, driving businesses to adopt eco-friendly practices.

Moreover, with a population of over a billion people increasingly connected to the Internet, the e-commerce sector in the country is also becoming more important. In addition to have physical stores, you should also consider your online presence, because even though Indians shop online a lot, they also like to see the products. While youth, particularly the techsavvy millennials, are drawn to innovative, techdriven solutions, rural consumers prioritize pragmatic yet transformative advancements that align with their traditional values.

India, a multiethnic country

The diverse geography and cultural influences in India lead to significant variations in consumption patterns, preferences and even language; the nation’s linguistic landscape encompasses over 120 languages (only 22 are recognized by the Indian Constitution). This diversity can have a significant impact on market entry strategies, product distribution and brand perception. While national trend may provide a general overview, you will have to adapt your approach to specific regions and states. A comprehensive understanding of these regional nuances is a must to successfully set up a business in India and to ensure that business strategies are aligned with the specific needs and expectations of each states.

Appreciating and adapting to India’s rich cultural heritage is essential for gaining consumer trust and loyalty. Cultural sensitivity permeates every aspect of market engagement, from product design and marketing campaigns to customer service interactions. Furthermore, tailoring product offerings to specific regions and demographics demonstrates cultural respect and resonates with local consumers.

India’s dynamic market, characterized by rapid technological advancements and evolving consumer preferences, demands adaptability. Doing business in India implies to embrace change, continuously evaluate market trends and consumer behaviors to refine strategies and maintain market relevance.

Adopt right distribution strategies

Develop Strategic partnerships

The Indian market presents unique challenges in distribution. Due to the complexity of logistical infrastructures and variations in regulations, you will need to have a strategic approach to supply chain management to overcome operational challenges. The logistical landscape in the country is known for its complexity, ranging from diverse geographic terrains to variations in regulatory frameworks across states.

  • Find reliable and experienced partners, experts in the Indian market, to supervise your operations. It will allow you to manage your operations transparently and to provide rapid customer service.
  • Having a partner who knows your business sector and operational subtleties in India will increase your efficiency and effectiveness and prepare you to meet the challenges of storage and material flow.
  • Ask for help regarding import licenses for goods subject to specific foreign trade rules and restrictions.
  • Dialogue openly and directly with distributors to avoid conflict: understand their concerns and points of view, negotiate, and propose win-win solutions. Always have an emergency solution: Explore alternative distribution channels to reduce dependence on a single distributor and broaden your reach in the Indian market.

Invest in Relationships

Building strong relationships with key stakeholders, including distributors, government officials, and business partners, is a key of long-term success in India. Fostering trust, collaboration, and mutual understanding is essential for overcoming bureaucratic hurdles, gaining market access, and achieving sustainable growth.

Want to learn more?

For more content about doing business in India, read the articles on Maier Vidorno’s blog or contact our experts.

The aerospace industry in Mexico

mexico aerospace industry altios

August 2023

The Mexican aerospace industry has emerged as a force to be reckoned with on the global stage. With its strategic location, skilled workforce, and favorable business environment, Mexico has positioned itself as a key player in the aerospace sector.

As of 2021, Mexico stands as the 14th largest aerospace supplier worldwide, and its growth trajectory indicates a prosperous future for the industry. What opportunities in the years to come?

The aerospace industry in Mexico takes flight as a global contender

  • Looking ahead to 2025, the Mexican aerospace industry is expected to remain stable, with exports surpassing an impressive US $12 billion. This projection demonstrates the robustness and potential for continued growth within the sector.
  • The government’s commitment to promoting investment and creating a supportive ecosystem for aerospace companies has contributed to this positive outlook.
  • One of Mexico’s key strengths lies in its ability to attract foreign companies to its aerospace sector. Numerous international players have recognized the advantages of establishing a presence in Mexico, leveraging its skilled labor pool and competitive cost structure.
  • These foreign companies have become instrumental in driving the growth and expansion of the Mexican aerospace industry. Their investments have not only created job opportunities but have also stimulated the development of local suppliers, contributing to the overall growth of the sector.

Discover the key factors and statistics of the Mexican aerospace sector in our infographic:

aerospace industry mexio altios

Want to learn more?

Interested in Mexico and its other sectors? Check out our most recent article on Tech StartUps: Mexico, a land of opportunities

Why expand in the UK after Brexit?

local insight uk altios

June 2023

The UK has a population of 67.9 million people, making it the third most populous country in Europe, after Russia and Germany. It is the fifth biggest economy in the world and the second biggest in Europe, with a steadily growing GDP since 1950.
In January 2020, the United Kingdom officially exited the European Union.
Brexit has undoubtedly caused a great deal of uncertainty for businesses operating in the UK. However, with uncertainty comes opportunity, and there are several business opportunities that have emerged in the wake of Brexit.

In this article, ALTIOS’ experts share how foreign companies can still grow their businesses and expand in the UK.

Attractive tax rates and business ecosystem

The U.K.’s corporation tax system is very attractive in comparison to other European destinations.

The UK corporation tax (CT) currently stands at 25%, since April 2023, which is one of the lowest corporation tax rates in the G20. The U.K. also offers a number of attractive tax credits and incentives that companies can take advantage of when expanding their business overseas.

The UK has an ambitious policy agenda that focuses on sectors such as tech, life sciences, chemicals, AI, and renewables, explains Gus Wiseman, Deputy Director of Investment Opportunities & Propositions for the Department for International Trade.

We are trying to attract world-leading talent and firms in these sectors and to do so we not only offer great financial incentives but also a very welcoming business environment

Foreign companies should know that the Department has 32 clusters emerging across the country, where companies, governments, and universities have come together to create eco-systems of global prominence. For example, South Wales is one of the world’s foremost centres of excellence for semiconductors, with excellent infrastructure and supply chain for any companies that want to set up shop.

The universities and schools in the region focus on the technical skills that are important for this sector, there are grants and incentives available, and everything is ready for SMEs to plug in and play.” Gus also points out that the UK government is always looking at policy with an investor lens and focuses on making regulation as easy as possible for foreign investors. “The UK offers major opportunities and supports businesses in achieving success

Expand in the UK: subsidiary set-up

Brexit has not changed the opportunities of setting up a company in the U.K. in any fundamental way. It can still be a much faster and cheaper process in the U.K. than in other European countries, even for European companies.

There are three types of entities foreign investors can choose from when settling in the UK: the Limited Liability Partnership (LLP), the UK Establishment (Branch) and the Limited Liability Company (LTD).
Whilst the Limited Liability Company remains the most commonly used option, each entity type carries varying advantages, as well as legal and compliance requirements.

Setting up a business in the UK is a very straightforward process. Usually, companies are incorporated electronically either on the same day or within one to three working days.

To register a limited company, an article of association is needed. This is a legal statement signed by all initial shareholders agreeing to form the company. The articles of association do not need to be written from scratch and can be amended further down the line by way of special resolution if needed.

Besides this, contact should be made with HM Revenue & Customs (HMRC) to complete the registrations for corporation tax (CT),
pay-as-you-earn
(PAYE), and value-added tax (VAT) if the taxable turnover will be over £85,000 per year. Companies need to look into employer’s liability insurance, property insurance, and other areas that need to be covered.

subsidiary set up uk

To set up a company, the UK only requests proof of address and proof of identity of the future director(s), in order to create an electronic signature with the Registrar. It is not necessary to have a bank account while setting up the company, because this can be a time-consuming process in the UK.

Mergers and acqusitions

Until the beginning of 2022, mergers above a certain size needed to be cleared by EU authorities, because the UK remained subject to EU rules governing anticompetitive behaviour during the transition period. From January 2022 onwards, major transactions involving multinational entities active in the UK must comply with a new UK competition system as well as the existing EU one.

Larger deals involving companies with activities in the UK now need to be assessed by the European Commission and the Competition and Markets Authority in London. Even relatively small deals, which in the past would have been waved through by the EC, will need to be formally assessed by UK authorities.

uk m&a altios

At the same time, the UK government is in the process of tightening its regulation for clearing deals ,
which could lead to more deals having to be assessed by the Department for Business, Energy, and Industrial Strategy than in the past. Up to now, only one or two deals were called each year for further examination, but under the new proposal, M&A across a much broader range of sectors will now have to notify the BEIS department. This includes sectors such as energy, transport, technology, communications, data infrastructure, and computer hardware. If deals are not reported in these areas directors may face criminal charges and the deals could be declared void.

uk brexit

Brexit may also affect the smooth running of major debt restructuring deals. Previously, EU regulations effectively allowed court judgments in one jurisdiction of the EU to be recognized throughout the Union. No For this reason, support from our local teams can help with these updates.

The UK has also lost access to some of the benefits under EU Directives that facilitate cross-border M&A within the EU.

For example, the EU Cross Border Mergers Directive allows mergers between companies established in different European Economic Area (EEA) member states. Before the end of the UK/EU transition period, this included the UK but, following its expiry, UK companies can no longer participate in EU cross-border mergers.

Any merger between a UK and an EEA company must now take the form of a share or business transfer, followed by a dissolution/liquidation of the transferring entity.

Similarly, in a taxation context, UK companies have now lost the benefit of the EU “Parent-Subsidiary Directive” and “Interest and Royalties Directive”.

UK companies receiving dividends, interest, and royalties from companies established in the EU/EEA, will no longer be able to rely on those directives to optimize their international tax scheme (withholding taxes will now follow the domestic laws of EU/EEA member states).

Why expand in the UK through M&A?

Even though a merger with or acquisition of a UK company might require more steps and checks after Brexit, it is still one of the fastest ways for international companies to establish themselves in the mature and competitive British market.

An acquisition gives you instant access to a new market, which makes it the quickest
and most efficient way to grow your business in a foreign country.

Instead of having to wait numerous months to get the proper accreditation or invest a lot of time and energy in developing a commercial partnership with an uncertain outcome, an acquisition gives you clarity in where you stand from day 1.

When you buy a company, you buy an established brand that is known by customers and suppliers. You buy an existing client base, technology, patents, contracts, the employees, and of course existing turnover and profit.

Alexandre Kaplan
Corporate Finance Director ALTIOS

Kaplan warns companies that are looking for M&A opportunities in the UK to not only take regulatory differences into account but to also be aware of cultural differences in the negotiation process.

European owners are, generally speaking, less direct than Anglo-Saxons when it comes to discussing strategy or negotiating the terms of an agreement“, explains the finance director.

It is, therefore, advisable to seek assistance from a third party with local experience and knowledge, that can help you adapt your speech and to bridge the cultural gap. Understanding the key steps of an M&A process and establishing trust between the two parties are essential elements for a successful outcome.

alexandre kaplan altios
Alexandre Kaplan

ALTIOS teams can help you succeed your M&A operations, as well as guide you through the entire subsidiary set-up process. Book an appointment with one of our experts to discover our personalized offer.

Want to learn more?

If you’re looking for a more in-depth and step-to-step guide to expand in the UK after Brexit, download our whitepaper: How to expand in the UK after Brexit?

How to choose a manufacturing site in Vietnam

local insight vietnam altios

March 2023

Vietnam ended 2022 with a GDP growth rate of 8%, placing the country at the top World GDP growth rate. With its dynamic economy, and as one of the major ASEAN countries in China + 1 Strategy, the demand for having a manufacturing site in Vietnam has skyrocketed. Now more than ever, companies should seize the opportunity to expand in the country. But how to pick location that meets your business’ needs?

In this article, ALTIOS’ experts will share with you 3 key steps for a mistake-free choice.

1. Secure your manufacturing site in Vietnam's location

This is the key bottleneck for site selection. Many projects were denied after the site check because the government had not approved of the location or park.

In fact, each park has a previously admitted sector list: light and heavy industries can locate in it, as well as sectors whose wastewater reaches National Type B. In other cases, certain parks accept safer industries.

To maximize your and your investor’s time, make sure to secure your business’ location approval and feasibility.

2. Consider these 6 factors for optimal selection

Location:

A well-connected location will become a unique value for a manufacturing site in Vietnam. In fact, the country is divided into 3 main zones: North, Middle, and South, and each one contains different regions with unique advantages. In addition, the presence of possible and future clients, as well as the proximity with local suppliers, also plays a huge role in your factory’s success. Choosing where to set up your business will have a major in pact on its profits.

Manufacturing site legal conditions:

Vietnam has the overall rule for IRC, ERC, environmental, and fire certificates. Certain regions are more preoccupied with investment quality and environmental security, so further documentation may be required, along with evidence for the investors.

These aspects should be well-defined and clarified before the final decision. Moreover, an expert operator can strategically guide the investors to complete processes.
Our international expansion specialists can support you through these crucial steps.

Infrastructure:

Logistics supports:

Every manufacturing site in Vietnam is legally obliged to include:
an internal traffic system, electricity and water systems, a drainage system, a wastewater treatment system, fire prevention and fighting systems, and telecommunications systems.

Since not all locations meet the legal infrastructure standards, ensuring that is the case for your factory will make a huge difference.

Pay close attention to wastewater treatment systems. International investors need good wastewater treatment support to ensure the commitment to the cross-country compliance and ESG values of the global group.

An incidence in a subsidiary can diminish the stock price of the whole group on the Nasdaq or Euronext.

When choosing the right location for your manufacturing site in Vietnam, it is important to consider logistics availability in its varied aspects.

Transportation (road, highway, inland waterway, seaports), high-quality transport supplier–forwarder, as well as the cost for the distance between the different locations.

Abunding with logistical options can positively impact your business’ adaptability to variation.

Keep in mind that the logistics cost in Vietnam is still higher than neighbor countries Thailand and Singapore. For this reason, a fine decision needs to be made to insure an optimal cost

Human resources:

Nowadays, general workers have a fluctuating supply in Vietnam. In some periods, it’s very easy to hire. Sometimes, it’s extremely rare to find general workers. Finding a location that can provide
a stable supply of workforce
is important if your business needs
a high quantity of workers.

As for hiring skilled workers, it is another story. Skilled workers’ availability depends on the current businesses on the site and the existing training and formation in the region. Some training is rare in Vietnam, like die-casting or dyeing. Some training is only concentrated in big cities like IT, and finance.

A good scan of human resources availability needs to be made before choosing your manufacturing site in Vietnam to facilitate recruitment in the future.

Facilities for staff relocation:

When developing abroad, numerous businesses relocate experts and managers from other countries. To ensure international standard lifestyles, the new factory must be well connected to a modern city with international education and healthcare systems.

A prior scan before the final decision can help not only in location selection but also in cost estimation.

3. Build your Business Plan

A check of your manufacturing site in Vietnam will give you many details, including land price, legal consultancy cost for the administrative procedure, current local salary, relocation costs, etc. With this information, the investors can estimate the P&L project.

In many cases, land price is much higher in an adequate location than it is in a less appropriate one, in addition to the logistics costs.
In other cases, every other condition is good, but the lack of international facilities limits the foreign expert relocation.

An optimal decision always needs local insights, that’s the reason why third-party consultation does a great contribution to the expansion’s success.
Reach out to one our experts for more information.

Want to learn more?

If you are interested setting up in Vietnam, read our article How to ensure effective interultural communication for doing business in Vietnam

HR regulations change in Poland

After several tax changes for 2023, Poland updates HR regulations as well.

Business trips

There will be a new per diem rate for business trips as of 1 January 2023. As a consequence, the lump sums for transport travel expenses and for overnight stays will also change.

  • a per diem for a business trip – PLN 45
  • lump sum to cover the costs of travelling by public transport – PLN 9
  • lump sum for an overnight stay – PLN 67.5
futuristic business people expo concept

Employee Capital Plans

If an employee does not wish to save in a PPK, then they must, once again, submit a written declaration resigning from the scheme to the employer. If the employee does not make such a declaration, the employer will have to start making contributions for that employee from April 1st, 2023.

Labour Law (should take effect in Q1 2023)

  • The concept of remote working – will be agreed upon between the employer and the employee and included in the remote working regulations
  • Legal grounds for employers to carry out preventive checks for the presence of alcohol or substances acting similarly to alcohol in the bodies of their employees
  • Measures enabling greater use of flexible working arrangements
  • Changes to parental leave and maternity benefits
  • New rules on paternity leave
  • New carer’s leave and leave of absence for urgent family reasons

For more content about reforms in Poland: click here

What to know about Poland in 2023

Poland is one of Europe’s most attractive locations for overseas companies to set up a business (economic stability, a well-educated and diverse workforce, favorable location at the heart of Europe)

Economic Outlook

Economic growth is expected to decelerate to 1.6% in 2023, due to:
    • High inflation – after peaking at the beginning of 2023 at almost 19%, inflation is projected to decelerate to 4.3% towards the end of 2024
    • Monetary policy tightening
    • Negative confidence effects related to the war in Ukraine
    • Slowing demand in key trading partners

Supply-side disruptions, high input costs, and uncertainty related to the war in Ukraine can affect private investments.

The National Recovery and Resilience Plan is expected to support public investment.

Higher energy and food prices can weigh on household demand and can affect heavily poorer segments, who devote 50% of their monthly spending to food and energy.

The general government deficit is expected to increase to 5.5% of GDP in 2023 (5.2% of GDP in 2024)

poland flag on a mat in the wind and blue sky

Minimum wage growth is expected to be outstripped by inflationary pressures, leading to a decline in the real minimum wage in 2022, which will be moderated by the phased adjustment of the minimum wage in 2023 up to 3 490,00PLN from January 1st and up to 3600,00PLN (probable) from July 1st, 2023.

Poland avoids recession but may see bumpy road ahead.

Taxes in Poland

Regulatory changes introduced over the past 12 months are designed to simplify and modernize the Polish tax and corporate compliance regimes.

Poland has implemented significant reforms in its tax system and corporate compliance regime over the last few years:

  • Mandatory disclosure rules are stricter in Poland than across the EU, and cover internal transactions over a certain value as well as those that cross-borders

  • Environmental obligations in Poland follow EU regulations but are generally stricter and require specific registration and mandatory reporting to Polish authorities

  • Most official company applications and returns can now be submitted electronically, but they must be signed using a qualified certificate that meets the EU’s Electronic Identification, Authentication, and Trust Services (eIDAS) regulations

  • In 2016 Poland introduced its Standard Audit File for Tax (SAF-T) system known as JPK. This incorporated seven regulated JPK structures, of which two, JPK_VAT and JPK_FA, were relevant for VAT. The requirement for monthly submissions of JPK_VAT, was extended to all taxpayers on 1 January 2018. JPK_VAT was combined with the VAT return during 2020 and the consolidated JPK_V7M/K is submitted per the frequency of the VAT Return (monthly or quarterly). The remaining six JPK structures are submitted upon request of the tax authority in event of an audit.

Improvement in the area of digitalization for both companies and individuals – especially– some are taking time to work through the system and have increased the complexity of doing business in Poland.

All above makes it even more important for overseas companies and seek expert guidance when incorporating or doing business in Poland.

Even though changes work through the system and things are improving on an almost daily basis, but the Polish tax and regulatory environment remains still highly complex.

Tax changes 2023 in Poland:

Corporate Income Tax:

  • Minimum income tax – came into force in 2022, but have been suspended until December 31 2023, giving taxpayers another year to prepare for their application; profitability ratio increased from 1% to 2%; the formula used to calculate the tax base has been adjusted.
  • From 1 January 2023, social contributions resulting from the employment relationship in the part financed by the contribution payer, contributions to the Solidarity Fund, the Labor Fund and the Guaranteed Employee Benefits Fund will be classified as tax costs in the month for which they are required, but only if in which they will be paid within the time limit resulting from separate regulations.
  • Changes to the method of charging debt financing costs into tax-deductible costs – exclusion relates to an amount exceeding one of the two: PLN 3 million or 30% of EBITDA, yet not the sum thereof
  • Amendments to and clarification of provisions on profit shifting (costs incurred directly or indirectly to the related entity outside of Poland) – introduction of provisions on taxable base, changes to the method of establishing preferential taxation

Value Added Tax:

  • From January 1, 2023, basic VAT rates will apply again, ranging from 8 to 23% for individual products (termination of the so-called anti-inflation shields, which will expire on December 31, 2022).
  • The VAT rates will again cover, among others: fertilizers, plant protection products and energy carriers such as natural gas, electricity and system heat.
  • The exception will be the extension of the anti-inflation shield for food, which will most likely be maintained by the government. In 2023, or at least for part of it (until mid-year), the VAT rate for food products will still be 0%.
  • From January 1, 2023, new category of VAT payers will be introduced to the VAT Act – VAT Group – it means a group of entities related financially, economically and organizationally, registered as a VAT payer.
  • Electronic invoicing, along with real-time tax submission, will become compulsory in Poland from 1 January 2024.

Transfer Pricing:

The key amendment repeals the requirement to follow the arm’s length principle and the documentation obligation for indirect “tax haven” transactions:

  • PLN 500 thousand (base threshold)
  • PLN 2.5 million (for financial transactions)

Withholding Tax:

The main purpose behind amending withholding tax (WHT) provisions is to relax the rules for tax collection – commonly referred to as the pay & refund mechanism – or make it more feasible

Other changes in tax law that are worth paying attention to:

  • Simplification of the relief for “bad debts” – no attachment for declaration submission required – change from January 1, 2023;
  • Simplification of the procedure for refunding tax on income from buildings;
  • CIT exemption of income of social enterprises;
  • Changes in SLIM VAT 3 – probably change from July 1, 2023;
  • The obligation to record turnover by car washes, including self-service ones.

ALTIOS Poland monitores tax law regulations in Poland and will inform you about the tax changes related to your specicfic business activity.

More content about Poland: click here

Hong Kong Bouncing Back

Local Insight HK

January 2023

After 3 years of pandemic restrictions and economic stagnation, Hong Kong and China are expected to fully open their borders in the beginning of 2023. Preparations are being made to reopen as Beijing is eager to bring back social and economic stability.

Foreign companies should be preparing to seize the opportunities which comes with opening up, as Hong Kong is back in action after the long pandemic.

Hong Kong, special administrative region of Republic of China, is under “One country, Two system” policy, which lets Hong Kong have its own currency, political and legal systems. As the core of innovation in Asia, the region is also a center of commerce, trade, and finance in the continent.

Hong Kong is a focal point of the generation of Intellectual Property (“IP”). It is also the focus for the trading in IP, including technology transfer, licensing, franchising, merchandising and copyright trading.

Business Facts to consider:

  1. Unique Trade Access: Hong Kong has tied Free Trade Agreements (FTAs) with 20 economies around the world. There are 0 duties on goods originating from Hong Kong, in the coming years.
  1. International Hub – The region’s strategic position makes it a great location for international trade and travel. It’s at a 4-hour-flight to major Asian cities: 3h40 from Seoul, and 4h from Tokyo.
  1. No custom duties on imported goods – Hong Kong is an unique logistic center in Asia.
  1. Low cost of business operations for international companies – Companies looking to invest or expand in Hong Kong, will incur no VAT, no taxation on dividend (compared to 10-20% in China ).

Some numbers to keep in mind:

  • GDP: $341
  • GDP growth: 3.8%
  • GDP per Capita: $46,200
  • Trade Balance: 4.3%
  • Population: 7.2 Million
  • Unemployment: 3.1%
  • Inflation: 1.5%

Hong Kong: A Gateway to Mainland China

Here’s two reasons why companies who plan to reach China should use Hong Kong as a bridge to achieve their goal:

  1. GBA (Greater Bay Area): with an economic integration of 11 most dynamic cities in Canton province, Hong Kong ensures its role of finance & international business center, connecting GBA to the rest of the world.
  2. Free Movement of Goods, Talent, and Capital: in 2022, GBA’s population was over 86 million, compared to Germany’s 83 million, and the U.K.’s 67 million. As for its economic power, Hong Kong’s GDP in 2020 was USD 1,958.14 billion (less than 10% of total China GDP).

Post-COVID: Business opportunities in Hong Kong

After the COVID-19 restrictions, international companies looking to invest or expand in Hong Kong may feel discourage to do. However, there are numerous reasons to consider this promising market in 2023:

  • Honk Kong is known as a center for innovation and technology.
  • Start-ups and R&D centers can benefit from Honk Kong’s active Corporate Finance industry and supportive policy.
  • It is also considered a regional center for intellectual property (IP) trading.
  • Thanks to its legal system, Hong Kong is the 3rd best arbitration institution in the world, right after London and Paris.

Rediscovering success in Hong Kong & China

Companies looking to recapture the market China must understand the stakes, and the direction that would lead them to success. Some main points to know include:

A State of Law

China will reinforce its legal environment. Governing China by law has been the trend since years, which shows the determination from the Central Government to create an arbitration with more fairness & justice.

Foreign companies in China may be treated the same way as Chinese local companies, making it easier for them to understand and operate locally.

Doing in it the Chinese Way

The closure of the borders for almost 3 years has raised patriotic sentiment among Chinese consumers. Geopolitical influence has split the world, resulting in Chinese companies being more competitive on the local market.

To take advantage of the market, foreign companies need to adapt their products and services to the Chinese local market.

Trade and investment liberalization” VS. “Increased self-reliance”

To companies that plan to invest in China, this approach may seem contradictory, give China’s self-reliant position. However, upcoming legislation will undoubtedly be much more favorable for FDI (Foreign Direct Investment). China plans to create a “world-class business environment while adapting to a stronger CCP influence”.

Particularly, according to “Plan 2025”:

  • 500 billion USD shall be allocated to local R&D in China. 70% of which to private players.
  • 10% SOE (State Owned Enterprises) will contribute 50% of total revenues (tax).
  • China’s take on sustainability: the destruction of older buildings will be prohibited, relocations of residents will be limited as well, to allow the industry developement of waste management and clean-tech.

Entering Hong Kong's market with ALTIOS

Companies interested in entering the Chinese market, and access to its economic potential, should consider local partners and M&A’s. Channel partnerships, trade fairs, incubators and accelerators, are other great options to prepare the entry process.

ALTIOS is an worldwide business development and market entry expansion firm, with over 30 years of experience in helping clients explore their international potential. Thanks to its strategic network of 22 offices, ALTIOS has helped more than 3500 companies identify, qualify and collaborate with local partners, in Distribution, Joint Ventures and Acquisitions.

Our FDI experts in Shanghai can grant you with suitable resources to position yourself onto the Chinese market.

To discuss about Hong Kong’s business opportunities, book a consulting session with ALTIOS.

Want to learn more?

If you are interested in reading about Hong Kong or China, check out our latest article: China’s MedTech Market

China’s MedTech Market

china medtech market

December 2022

The MedTech sector in China is quickly becoming the most attractive industry for investors.

With a 70% importing ratio, China is one of the world’s largest medical device manufacturing hubs, as well as a market dominated by foreign multinational companies. In this dynamic context, what will be the potential challenges, and keys to success for foreign players in the coming years?

Key Market Data

The Chinese MedTech market has grown at a consistently rapid rate in the past five years, and in 2019, the market reached RMB 7.82 trillion (US$1.1 trillion), an increase of 10 percent when compared to that from the previous year.

For companies that plan on investing in this promising sector, it is crucial to have an understanding of the Chinese MedTech industry’s statistics:

  • In 2020, China’s GDP saw a slower 2.3 percent growth, but its healthcare spending still rose from RMB 6584.14 billion (US$1,033.1 billion) in 2019, and to RMB 7230.64 billion (US$1,134.5 billion) the following year. However, it is still the 2nd fastest growing industry in the world.
  • China’s revenue in the Medical Technology market is projected to reach US$40.96bn in 2022.
  • The market’s largest segment is Medical Devices with a projected market volume of US$29.07bn in 2022.
  • By 2027, revenue is expected to show an annual growth rate (CAGR 2022-2027) of 8.12%, resulting in a market volume of US$60.51bn.
  • In global comparison, most revenue will be generated in the United States (US$200.20bn in 2022).

MedTech Market Trends

Medical Technology grows steadily due to China’s aging population: the elderly are predicted to reach 300 million by 2025 and 400 million by 2035. Due to a strong rebound of revenue structuring in 2022 and a steady rise in 2023, stable and consistent growth in the industry are anticipated as seen before Covid-19.

This ensures sustained investment in research and development, a proliferation of healthcare services, and the implementation of existing technology.

Moreover, the market presents considerable opportunities for growth. This is possible since the Chinese Government has more recently laid out multiple initiatives to support long-term growth and innovation in healthcare delivery. As for this sector, it will feature more heavily in the 14th Five-Year Plan (covering 2021-25) than it did in the 13th Five-Year Plan.

China’s Market Entry Strategy for Foreign Players

International foreign companies that wish to enter China, usually operate in three ways:

  1. Direct Investing by setting up a base in China via opening a WOFE, Subsidiary, or JV.
  2. Partnership with OEMs
  3. Importing to sell in the market.

However, things are evolving. Following recent global changes, since the pandemic and the tense political restructuring, most firms have realized which is the best way to take advantage of China’s profitable market.

Now companies are focusing on monetizing by selling to local markets rather than exporting. While developing with the end market, businesses are choosing to acquire bigger market shares by localizing the supply chain, rapidly responding to customer demand, and taking advantage of tax policies favorable to investment in R&D.

By localizing, the companies have enhanced their financial incentives, including, but not limited to, lower company tax of 15% and reduced VAT.

At the business model level, MedTech majors are stepping out of their comfort zones with cross-sector partnerships with peers, pharmaceutical companies, providers, and payers alike for disease and health solutions.

Some case studies to explore would be Radiometer’s partnership with AstraZeneca for kidney diseases, Illumina & Sanofi in rare disease treatments, and more.

Conclusion

With the right strategy and partnerships, China’s MedTech industry provides significant opportunities. Medtech companies should evolve and innovate to keep pace with the healthcare system highly driven by digital data-driven trends.

Want to learn more?

If you are still interested in reading about China, you can also read our latest article: Hong Kong Bouncing Back