2.3.1.     Introduction
Services make up a large part of international trade, Modern telecommunications and IT have helped make it cheaper and easier than ever before to trade services internationally.
Whether you are importing or exporting services, many of the same basic rules apply as for trade in goods. But there are key differences, from how services are marketed to the taxes and regulations that apply.
2.3.2.      Special features of trading in services
If you want to export services, much of your approach will be the same as if you were exporting tangible goods. Thorough research and a clear understanding of the local culture is a crucial part of entering a new market. But there are also some important differences.
•International services can be provided from within your own country, eg using the Internet, or in the customer’s country, eg making a personal visit. The difference can have important legal and tax consequences.
•Without a physical product to sell, you need to take a different approach to marketing. For example, you can’t show samples to potential customers, or use a local wholesaler to distribute what you offer.
•The lack of a physical product also has important implications for contracts. For example, you are unable to use Incoterms to agree where the service will be delivered or who is responsible for insurance.
•For many service exporters, protecting their intellectual property is a key issue. Imports
Many similar issues apply to the importing of services.
Without physical samples, assessing supplier quality can be difficult. Recommendations and professional accreditation may be more important.
2.3.3.     Legal issues for international services
Different business cultures, legal environments and even languages increase the risk of confusion when you trade internationally. It’s important to have a clear contract.
With trade in goods, attention often focuses on responsibilities for delivery, set out using internationally recognised Incoterms. Other issues, such as what is being supplied, are usually relatively straightforward.
There are other important legal issues to consider:
•The location of supplier and customer can vary, affecting which country’s regulations apply.
•You need to sort out payment issues such as choice of currency and protection against the risk of non-payment.
•You may need to take action to protect your intellectual property in other countries.
2.3.4.     Delivering services internationally
There are four different ways that services can be delivered internationally, depending on the locations of the supplier and the customer:
•Cross-border trade. Both supplier and customer are in their own countries, while the service crosses the border. For example, services like consulting can be provided by phone or over the Internet.
•Consumption overseas. The customer visits the supplier’s country, where the supplier provides the service. For example, international travel and tourism services can be provided in this way.
•Movement of individuals. Individuals who will provide the service travel to the customer’s country. For example, an architect might travel overseas to work on designing a building there.
•Setting up overseas. The supplier establishes a presence in the customer’s country. For example, a law firm or financial services provider might open a branch office overseas.
2.3.5.      Marketing services internationally
The first step to successful marketing overseas is thorough research. You need to understand as much as possible about your target market.
You may need to adapt the service you offer to suit local requirements and comply with local regulations. You may also need to change the way you behave to suit the local business culture.
Sales and distribution
Without a physical product, it can be difficult for the customer to see what you are offering or to check that it meets their needs. Think carefully about what makes the service you offer credible and tailor your sales pitch accordingly. Professional qualifications, a convincing track record and experience on similar projects can be strong selling points.
Depending on your circumstances, there may be other ways to get sales leads and increase your local profile. For example, you might join local professional bodies, or look for public relations opportunities such as speaking at conferences. In some industries, forming a relationship with a local counterpart can be very effective
For some businesses, the Internet is a very effective way of promoting and sometimes selling their services.
2.3.6.      UK regulations and taxes for international trade in services
Unlike goods, services do not have to clear through customs. But there are regulations affecting service imports and exports:
•Most services can be exported or imported freely, though there are some restrictions, eg on technologies with potential military applications. See our guide: Do I need an export or import license?
•Profits on exports by UK businesses are generally taxed in the same way as any other profits. If you have an overseas presence, this could mean that profits are liable both to UK tax and to tax in another country. If so, you may be able to claim double taxation relief. Find information on international aspects of business tax on the HM Revenue & Customs (HMRC) website.
2.3.7.     Overseas regulations and taxes when supplying services internationally
If you supply a service in a foreign country, you must comply with local regulations. For example, it might be illegal for you to provide legal or financial advice unless you have certain professional qualifications.
Before selling your service overseas, you may want to take action to protect your intellectual property there. See the page in this guide on international services and intellectual property.
Overseas travel
If self-employed individuals or employees are travelling overseas to work, they may need a visa and work permit. While they are in the country, they will be subject to local laws and taxes. To find out more, contact the embassy of the country concerned.
Overseas presence
Your business is more likely to be subject to local regulations if you have a permanent presence, such as a representative office.
Local employment regulations apply to any employees you have working overseas.
Overseas regulations and taxes can be a very complex area. Market research is a good starting point. If you are in any doubt, you should take advice from an accountant, lawyer or professional adviser with local expertise before committing yourself.
2.3.8.     International services and intellectual property
Intellectual property can be an important part of what you have to offer, helping you stand out from the competition. For many services, a good reputation and a strong brand name is crucial to winning new customers.
If your business relies on its intellectual property, you may have already taken steps to protect it in your own country. But this may not protect you overseas. National trade mark registration, design registration and patents only cover those registered in your country. Copyright material is automatically protected in many countries.
If you think you can profit from selling your services overseas, it’s worth ensuring that you have the right intellectual property protection.
Licensing
You may be able to exploit your intellectual property overseas even if you have limited time and resources. For example, you could licence your intellectual property to an overseas partner. Instead of selling your own services, you receive a fee for letting your partner provide services using your intellectual property, eg trading using your brand name.
2.3.9.     Payment for international trade in services
Before buying or supplying services, you should make sure you have a clear agreement on payment arrangements.
Key issues to consider include:
•how much will be paid, in what currency, and when
•who is responsible for bank charges •what will happen if the customer fails to pay •where payment will be made, eg to your bank account
•who is responsible for any taxes If you’re supplying services overseas, the risk of non-payment may be high. You cannot protect yourself with payment methods such as documentary collections that are used to reduce the risks when exporting goods. It can also be difficult to prove that you provided the services, and expensive or impossible to recover unpaid debts through the local courts.
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