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Cultural Intelligence, or Cultural Quotient (CQ) is an ability of an outsider to interpret another culture, another behaviour, another rationality and irrationality. We would like to bring this topic to you because crossing border has certainly become a routine in most businesses and sectors, also because this soft factor is not easy to grasp at once but is playing an important role in becoming a successful business.

This concept was initially developed by Professor Christopher Earley and Soon Ang in their book Cultural Intelligence in 2003. It was defined as the ability to adapt to new cultural settings. It is the ability to understand unfamiliar or ambiguous behaviours and recognize shared influences but yet not to make assumptions or generalizations based on any single aspect. Because people coming from the same country or the same cultural group could behave differently due to their positions in a business, their situations, their age or gender, their education and backgrounds, and sometimes their personalities.

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How tell if an employee has CQ or how to develop CQ when lacking? It is essential to look at the three components of CQ first. The Harvard Business Review identified Head – cognitive, Body – behavioural, and Heart – motivational as the key components of CQ. In simple terms, a person should understand a foreign culture, adapt the right physical behaviours, and take actions accordingly for a success in result.

Take an example of the Dutch and the German. If one would run a quick comparison on the Hofstede Insights on these two countries on the six cultural dimensions, in which Germany is considered more masculine and the Netherlands more feminine. This suggests that the German prioritize career development and high achievements over private life, and the Dutch in the contrary. However, this is only a generalized conclusion. Approach to a cultural group individually, it is also not surprising to see not everyone from that culture follows the same mindset and behaviours. This could vary between subgroups or communities, sometimes in corporations or families. Making appropriate research and observation or gathering the right information and knowledge is usually the first step. Because general ideas do not help as much as expected on an individual basis. Upon necessary knowledge, thinking towards understanding is the next step. From understanding to strategies and then to actions are the last two steps to complete the CQ management.

On 12^th February, we will be speaking more about this topic in Amsterdam with three other speakers under the organization of the Dutch Japanese Trade Federation. Please join us for more discussions in the event or stay tuned for our next article summarizing the discussion and findings in that event.

Global Connect Admin B.V. | Xuan Hao

According to recent information from Reuters, the EU has agreed to remove UAE, Switzerland and the Marshall Islands from the tax haven blacklist in October 2019, which signified another step forward on the journey to global transparency on assets. In the following month, Hong Kong has taken actions and has shut down a large number of offshore accounts. Large-scale tax avoidance has becoming more and more restricted and riskier as the Common Reporting Standards (CRS) are being widely implemented and the trend on global information transparency is growing.

Kelly Sikkema on Unsplash

The EU tax haven list can be viewed in two lines, the blacklist and the grey list. The blacklist was initiated in 2017 and 25 countries has been removed from that list so far. The grey list consists of another 34 countries or regions. They are on grey list because they have agreed at the end of 2019 to commit to improve tax compliance in upcoming years. If their commitments are fulfilled soon, they will be removed from the grey list; Otherwise they will be replaced into the blacklist.

The EU issues these two lists based on three main criteria:

1. Transparency
2. Fair Tax Competition
3. BEPS Implementation

The remaining tax havens which have not committed to improving tax compliance or information exchange mechanism are American Samoa, Guam, Fiji, Samoa, Trinidad and Tobago, US Virgin Islands, Vanuatu and Oman.

Global assets transparency is a result of automatic exchange of financial information based on CSR, which might bring more tax burdens or even fines, if failure to report timely, onto taxpayers possessing various assets in different countries or regions. Passive non-financial companies (aka shell companies) established in favourable tax jurisdictions for assets management or tax avoidance could face more information disclosure to the authorities, which lead to an inhibiting effect on tax avoidance behaviours. Family trusts, large insurances, trade businesses and so forth are all belonging to the information that are being made transparent to many authorities. Tax authorities certainly pay more attention to capital flows and acquisition. Capitals from unknown sources or irregular cash flows are also being exposed, especially regarding those capital activities in relation to tax avoidance.

If you have questions on assets management or cross-border tax issues, please feel free to contact us, we are your GCA team who is always willing to help on your business journey.

Global Connect Admin B.V. | Xuan Hao

2020 has begun. Financial agencies and authorities in China discussed the 2020 financial agenda before the new year has started. Some documents were published very early in the very first week. The Central Bank, the China Securities Regulatory Commission (CSRS), the China Banking and Insurance Regulatory Commission (CBIRC) and the State-owned Assets Supervision and Administration of the State Council (SASAC) have made various announcements on 2020 plans.

The 14^th Conference was held by the Financial Stability and Development Committee under the State Council (the FSD Committee) on 7^th January. The main topic discussed was easing accessibility and affordability of funds in SMEs financing. This general focus entails that efforts will be primarily vested in the following three directions:

1. Highlighting the directory functions of monetary policies;
2. Promoting reforms on financial supplies to stimulate vitality of the financial market in entirety and to bring actual support to real economy; and
3. Supervision will closely follow development by means of differentiated supervision and incentives to help with market polarization.

Joshua Hoehne on Unsplash

The Central Bank moved forward before the official conference by reducing the reserve ratio (also referred to as “RRR”) on 1^st January, which will amount to 800 billion RMB. This RRR in consequence lowers the cost in bank funds by 15 billion per year and will be conducted into support in financing by micro, small and private companies.

The CSRC published a draft Directive on Public Securities Investment Funds investing in Quoted Shares of National SMEs in Transfer System on 3^rd January to openly draw opinions from the public. Introducing public funds is a means to amplify investors pool and increase the liquidity of quoted shares. The CBIRC also published Guidance on Promoting Premium Development in Banking and Insurance Industries, which depicts a five-year plan for an optimized financial structure in banking and insurance institutional system. The SASAC is working on a better and more updated supervision mechanism with its first step dipping into Trial Measures on Administration of Prohibited or Limited Personnel Entrance in State Enterprises. This is aiming at a stricter policy ensuring unjeopardized supervision in upcoming years.

A signal from all these new year resolutions is that more reforms are expected in China’s financial market. What new things are to come in 2020 that might lead an impact on your (expected) business in China? Stay tuned and ask us to help with your financials when you cross borders.

Global Connect Admin B.V. | Xuan Hao

On 22^nd November, a public consultation was held in Paris by the OCED (the Organization for Economic Cooperation and Development), in which a plan on reforming the global tax system was proposed. More dispute resolution mechanisms are desired for increasing the certainty of outcomes in international tax disputes.

Kelly Sikkema on Unsplash

Tax is a dynamic matter worldwide. For the global tax system to move forward, the OECD is seeking a new dispute resolution mechanism that would include more options for multinationals to solve disagreements between them and governments. The currently available mandatory binding arbitration is in place to ensure the dispute resolution between taxpayers and tax authorities to resolve issues in a given period of time. Having a mandatory arbitration mechanism is to prevent any undue delay. Any new options to be in place should have an equivalent effect as of the mandatory arbitration, said by the deputy director at the OECD’s Centre for Tax Policy and Administration.

The proposed reforms on dispute resolution are a follow up work under Action 14 of the BEPS Action Plan (Action Plan on Base Erosion and Profit Shifting) in 14 countries: Aruba, Bahrain, Barbados, Gibraltar, Greenland, Kazakhstan, Oman, Qatar, Saint Kitts and Nevis, Thailand, Trinidad and Tobago, the United Arab Emirates, and Vietnam. The attitudes from companies and some countries differ widely. Most companies consider reforms on enlarging possibilities in dispute resolution a desirable way to go in global tax system. Oppositions are mostly from development countries due to a concern of infringed sovereignty.

At this moment, the Mutual Agreement Procedure (MAP) peer review is in process. Taxpayers’ perspectives and opinions are being gathered for the above 14 countries. This process will be finished by 16^th December 2019.

Are you interested in knowing what will come afterwards? Then stay tuned for updates in our further articles. If you have any questions concerning the OECD tax regulation or if your organization is to be affected, please contact us for assistance.

Global Connect Admin B.V. | Xuan Hao

This month, a new tax ruling on small businesses flushed into the many medias, which is the Small Business Scheme (kleineondernemingsregeling, KOR). This ruling is a new amendment of the existing rules on VAT taxes, which will bring down the VAT taxes to be paid by small undertakings as of 1^st January 2020. In some cases, there could be no VAT tax to be paid.

Four main conditions must be met to enjoy this new ruling.

1. Being registered in the Dutch Chamber of Commerce as a small business or at least a permanent establishment in The Netherlands.
2. The business must be either a one-man business (eenmanszaak) or an entity formed by natural persons, such as partnerships (maatschap or vennotschap onder firma).
3. Annual VAT threshold under €1,883 after deducting the input tax (voorbelasting).
4. All tax obligations under the Tax Authority and the Custom Administration are up to date, including any exemption.

Christian Dubovan on Unsplash

This KOR ruling does not apply to private limited companies (BV), foundations (stichting), associations and professional partnerships in which one partner is a legal entity.

The calculation of the VAT tax to be deducted is done under two thresholds, respectively €1,883 and €1,345. With VAT due in between €1,883 and €1,345, the tax deductible should be 2.5*(1.883 – (VAT tax declaration 5a – input tax declaration 5b)). With VAT amount falling under €1,345, declaration is needed but the whole amount is not expected to be paid any more. (further information here)

A kind reminder would be to register yourself to the new small business scheme before 20^th November 2019, if you haven’t yet. The next step is to apply for the definite VAT deduction, where you can apply the deduction to the last return of this year or the first return of next year. There is also a provisional option that you could apply the deduction monthly or quarterly.

Global Connect Admin B.V. | Xuan Hao

Last month, the consumption tax in Japan had seen an increase from 8% to 10%. Although the effect was said to be milder than the increase from 5% to 8% in 2014, about 70% companies stocked up their products or materials before the new rate came effective and private consumption was expectedly hit by a blow. This increase has been brought up in 2014 but was postponed twice due to unwillingness of the public.

The authority explained that this increase on tax will help with the national debt. But on the other side of the balance are the drop of consumption and decline in real income, albeit the anticipated milder impact. Indeed, there has been an increase in wages in September, so was the private consumption in that month. However, this offers only a temporary relief as most of the companies surveyed plan to keep the same wage level as before. Some companies plan to reduce the workforce or even lower the payroll wages.

Tirachard Kumtanom on Pixels

Most services and goods are now subjected to the 10% tax, including some public services such as water, gas and electricity supplies. It is estimated that this tax hike should bring in 5.7 trillion yen (approx. 47 billion euro) to the government. According to the government planning, this income from tax will be used to cover social security expenses. Basic preschool education and care have been made free of charge since 1^st October. Subsidies to the retired elderly group are said to be increased.

Considering the negative impact on the low-income population, some items are kept under the 8% cap, including fresh produce, vegetables, rice, meat, fish, food delivery and paper-based news subscriptions. In addition, the government did issue provisional policies offering a total of 2.3 trillion yen (approx. 19 billion euro) to small businesses and individuals. Non-cash payments are particularly encouraged in this relief measure, because extra 2% in value will be rewarded to consumers to ease out the increase in tax. The businesses will be subsidised by the government on this 2% value. To boost the economy, buying properties, getting housing mortgages and car purchases are also included in subsidized category.

One could compare this tax increase with the VAT increase in the Netherlands at the beginning of 2019, when most of the goods and services would be levied with 9% of VAT instead of 6%, except some basic consumptions remained in 6% category. In the case of the Japanese economy, the issue of aging and shrinking population is a difficult one to overcome than balancing the increase of tax burdens. More taxes generally lead to less hiring and low consumptions, which will create a dead loop to hinder the recovery of the economy. Japan is the world third-longest economy, keeping it stably growing is both important and challenging.

Global Connect Admin B.V. | Xuan Hao

As of today, 1^st November 2019, 5G network service is rolled out in 50 major cities in China by the three giants of telecommunication carriers, namely China Mobile, China Unicom and China Telecom.

The infrastructure has been well prepared for the 5G network to be widely implemented. Around 12,000 5G base stations have been activated to support the coverage in Shanghai alone. It is estimated that 600,000 base stations will be in place worldwide for 5G networks next year in which half would be in China. The Chinese government also subsidises this new technology. Consumers can get a 5G plan that offers ultra-fast internet services for as low as 128 RMB (approx. 16 EUR) for 30GB of data.

Pete Linforth on Pixabay

What is 5G and why is it better? 5G is the 5^th generation cellular network technology. Huawei is on top of other developers on the 5G technology in competing to develop and implement 5G. To many internet users, 5G internet means faster speed in both download and upload activities, wider coverage of signals and more stable connections. Consumers can enjoy high quality videos in less time and more reliable live map and so forth. Other than mobile and smartphone users, 5G technology can also be applied in driverless autos, internet of things, traffic monitoring systems, or even drones. Qualcomm considers 5G to have the speed 10 to 20 times faster than 4G connection. The world will become more simultaneous than before.

While the US is attacking Huawei products and services, the European approach on 5G internet, Huawei products and cybersecurity concerns has interested many. Huawei said that they have signed over 50 commercial contracts on 5G internet so far and the 6G technology is on the way. The US said that European countries should totally ban Huawei products. The approach taken by the EU officials is being discreet­. A total ban has never been issued in the EU, but safety and security evaluations must be performed before contracting any products or services from Huawei. Such evaluations shall be construed in a way that suits the European policies and standards instead of any other command.

Attention should also go for other companies trying to develop 5G technologies at the same time. The competition has not stopped. Therefore, the EU might have some potential room to choose in its own preference on 5G in the future.

Global Connect Admin B.V. | Xuan Hao