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Australia

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Australia is generally welcoming to foreign direct investment (FDI), with foreign investment widely considered to be an essential contributor to Australia’s economic growth.  Other than certain required review and approval procedures for certain types of foreign investment described below, there are no laws that discriminate against foreign investors.

A number of investment promotion agencies operate in Australia.  The Australian Trade Commission (often referred to as Austrade) is the Commonwealth Government’s national “gateway” agency to support investment into Australia.  Austrade provides coordinated government assistance to promote, attract and facilitate FDI, supports Australian companies to grow their business in international markets, and delivers advice to the Australian Government on its trade, tourism, international education and training, and investment policy agendas.  Austrade operates through a number of international offices, with U.S. offices primarily focused on attracting foreign direct investment into Australia and promoting the Australian education sector in the United States. Austrade in the United States operates from offices in Boston, Chicago, Houston, New York, San Francisco, and Washington, DC.  In addition, state investment promotion agencies also support international investment at the state level and in key sectors.

Limits on Foreign Control and Right to Private Ownership and Establishment

Within Australia, foreign and domestic private entities may establish and own business enterprises, and may engage in all forms of remunerative activity in accordance with national legislative and regulatory practices.  See Section 4: Legal Regime – Laws and Regulations on Foreign Direct Investment below for information on Australia’s investment screening mechanism for inbound foreign investment.

Other than the screening process described in Section 4, there are few limits or restrictions on foreign investment in Australia.  Foreign purchases of agricultural land greater than AUD15 million (USD11 million) is subject to screening. This threshold applies to the cumulative value of agricultural land owned by the foreign investor, including the proposed purchase. However, the agricultural land screening threshold does not affect investments made under the Australia-United States Free Trade Agreement (AUSFTA).  The current threshold remains AUD 1.154 billion (USD808 million) for U.S. non-government investors. Investments made by U.S. non-government investors are subject to inclusion on the foreign ownership register of agricultural land and to Australian Tax Office (ATO) information gathering activities on new foreign investment.

Other Investment Policy Reviews

Australia has not conducted an investment policy review in the last three years through either the OECD or UNCTAD system.  The last WTO review of Australia’s trade policies and practices took place in April 2015, and can be found at https://www.wto.org/english/tratop_e/tpr_e/tp412_e.htm  .  Australia is not scheduled for a WTO trade policy review in 2019.

The Australian Trade Commission compiles an annual “Why Australia Benchmark Report” that presents comparative data on investing in Australia in the areas of Growth, Innovation, Talent, Location and Business.  The report also compares Australia’s investment credentials with other countries and provides a general snapshot on Australia’s investment climate. See http://www.austrade.gov.au/International/Invest/Resources/Benchmark-Report  .

Business Facilitation

Business registration in Australia is relatively straightforward and is facilitated through a number of Government websites.  The Commonwealth Department of Industry, Innovation and Science’s business.gov.au web site provides an online resource and is intended as a “whole-of-government” service providing essential information on planning, starting, and growing a business.  Foreign entities intending to conduct business in Australia as a foreign company must be registered with the Australian Securities and Investments Commission (ASIC). As Australia’s corporate, markets and financial services regulator, the ASIC website provides information and guides on starting and managing a business or company.

In registering a business, individuals and entities are required to register as a company with ASIC, which then gives the company an Australian Company Number, registers the company, and issues a Certificate of Registration.  According to the World Bank “Starting a Business” indicator, registering a business in Australia takes 2.5 days, and Australia ranks 7th globally on this indicator.

Outward Investment

Australia generally looks positively towards outward investment as a ways to grow its economy.  There are no restrictions on domestic investors. Austrade, the Export Finance and Insurance Corporation (Efic), and various other government agencies offer assistance to Australian businesses looking to invest abroad, and some sector-specific export and investment programs exist.

China

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

China continues to be one of the largest recipients of global FDI due to a relatively high economic growth rate, growing middle class, and an expanding consumer base that demands diverse, high quality products.  FDI has historically played an essential role in China’s economic development. In recent years, due to stagnant FDI growth and gaps in China’s domestic technology and labor capabilities, Chinese government officials have prioritized promoting relatively friendly FDI policies promising market access expansion and national treatment for foreign enterprises through general improvements to the business environment. They also have made efforts to strengthen China’s legal and regulatory framework to enhance broader market-based competition.  Despite these efforts, the on-the-ground reality for foreign investors in China is that the operating environment still remains closed to many foreign investments across a wide range of industries.

In 2018, China issued the nationwide negative list that opened up a few new sectors to foreign investment and promised future improvements to the investment climate, such as leveling the playing field and providing equal treatment to foreign enterprises.  However, despite these reforms, FDI to China has remained relatively stagnant in the past few years. According to MOFCOM, total FDI flows to China slightly increased from about USD126 billion in 2017 to just over USD135 billion in 2018, signaling that modest market openings have been insufficient to generate significant foreign investor interest in the market.  Rather, foreign investors have continued to perceive that the playing field is tilted towards domestic companies. Foreign investors have continued to express frustration that China, despite continued promises of providing national treatment for foreign investors, has continued to selectively apply administrative approvals and licenses and broadly employ industrial policies to protect domestic firms through subsidies, preferential financing, and selective legal and regulatory enforcement.  They also have continued to express frustration over China’s weak protection and enforcement of IPR; corruption; discriminatory and non-transparent anti-monopoly enforcement that forces foreign companies to license technology at below-market prices; excessive cybersecurity and personal data-related requirements; increased emphasis on requirements to include CCP cells in foreign enterprises; and an unreliable legal system lacking in both transparency and rule of law.

China seeks to support inbound FDI through the MOFCOM “Invest in China” website (www.fdi.gov.cn  ).  MOFCOM publishes on this site laws and regulations, economic statistics, investment projects, news articles, and other relevant information about investing in China.  In addition, each province has a provincial-level investment promotion agency that operates under the guidance of local-level commerce departments.

Limits on Foreign Control and Right to Private Ownership and Establishment

In June 2018, the Chinese government issued the nationwide negative list for foreign investment that replaced the Foreign Investment Catalogue.  The negative list identifies industries and economic sectors restricted or prohibited to foreign investment. Unlike the previous catalogue that used a “positive list” approach for foreign investment, the negative list removed “encouraged” investment categories and restructured the document to group restrictions and prohibitions by industry and economic sector.  Foreign investors wanting to invest in industries not on the negative list are no longer required to obtain pre-approval from MOFCOM and only need to register their investment.

The 2018 foreign investment negative list made minor modifications to some industries, reducing the number of restrictions and prohibitions from 63 to 48 sectors.  Changes included: some openings in automobile manufacturing and financial services; removal of restrictions on seed production (except for wheat and corn) and wholesale merchandizing of rice, wheat, and corn; removal of Chinese control requirements for power grids, building rail trunk lines, and operating passenger rail services; removal of joint venture requirements for rare earth processing and international shipping; removal of control requirements for international shipping agencies and surveying firms; and removal of the prohibition on internet cafés.  While market openings are always welcomed by U.S. businesses, many foreign investors remain underwhelmed and disappointed by Chinese government’s lack of ambition and refusal to provide more significant liberalization. Foreign investors continue to point out these openings should have happened years ago and now have occurred mainly in industries that domestic Chinese companies already dominate.

The Chinese language version of the 2018 Nationwide Negative List: http://www.ndrc.gov.cn/zcfb/zcfbl/201806/W020180628640822720353.pdf .

Ownership Restrictions

The foreign investment negative list restricts investments in certain industries by requiring foreign companies enter into joint ventures with a Chinese partner, imposing control requirements to ensure control is maintained by a Chinese national, and applying specific equity caps.  Below are just a few examples of these investment restrictions:

Examples of foreign investments that require an equity joint venture or cooperative joint venture for foreign investment include:

  • Exploration and development of oil and natural gas;
  • Printing publications;
  • Foreign invested automobile companies are limited to two or fewer JVs for the same type of vehicle;
  • Market research;
  • Preschool, general high school, and higher education institutes (which are also required to be led by a Chinese partner);
  • General Aviation;
  • Companies for forestry, agriculture, and fisheries;
  • Establishment of medical institutions; and
  • Commercial and passenger vehicle manufacturing.

Examples of foreign investments requiring Chinese control include:

  • Selective breeding and seed production for new varieties of wheat and corn;
  • Construction and operation of nuclear power plants;
  • The construction and operation of the city gas, heat, and water supply and drainage pipe networks in cities with a population of more than 500,000;
  • Water transport companies (domestic);
  • Domestic shipping agencies;
  • General aviation companies;
  • The construction and operation of civilian airports;
  • The establishment and operation of cinemas;
  • Basic telecommunication services;
  • Radio and television listenership and viewership market research; and
  • Performance agencies.

Examples of foreign investment equity caps include:

  • 50 percent in automobile manufacturing (except special and new energy vehicles);
  • 50 percent in value-added telecom services (excepting e-commerce);
  • 51 percent in life insurance firms;
  • 51 percent in securities companies;
  • 51 percent futures companies;
  • 51 percent in security investment fund management companies; and
  • 50 percent in manufacturing of commercial and passenger vehicles.

Investment restrictions that require Chinese control or force a U.S. company to form a joint venture partnership with a Chinese counterpart are often used as a pretext to compel foreign investors to transfer technology against the threat of forfeiting the opportunity to participate in China’s market.  Foreign companies have reported these dictates and decisions often are not made in writing but rather behind closed doors and are thus difficult to attribute as official Chinese government policy. Establishing a foreign investment requires passing through an extensive and non-transparent approval process to gain licensing and other necessary approvals, which gives broad discretion to Chinese authorities to impose deal-specific conditions beyond written legal requirements in a blatant effort to support industrial policy goals that bolster the technological capabilities of local competitors.  Foreign investors are also often deterred from publicly raising instances of technology coercion for fear of retaliation by the Chinese government.

Other Investment Policy Reviews

Organization for Economic Cooperation and Development (OECD)

China is not a member of the OECD.  The OECD Council decided to establish a country program of dialogue and co-operation with China in October 1995.  The most recent OECD Investment Policy Review for China was completed in 2008 and a new review is currently underway.

OECD 2008 report: http://www.oecd.org/daf/inv/investment-policy/oecdinvestmentpolicyreviews-china2008encouragingresponsiblebusinessconduct.htm  .

In 2013, the OECD published a working paper entitled “China Investment Policy: An Update,” which provided updates on China’s investment policy since the publication of the 2008 Investment Policy Review.

World Trade Organization (WTO)

China became a member of the WTO in 2001.  WTO membership boosted China’s economic growth and advanced its legal and governmental reforms.  The sixth and most recent WTO Investment Trade Review for China was completed in 2018. The report highlighted that China continues to be one of the largest destinations for FDI with inflows mainly in manufacturing, real-estate, leasing and business services, and wholesale and retail trade.  The report noted changes to China’s foreign investment regime that now relies on the nationwide negative list and also noted that pilot FTZs use a less restrictive negative list as a testbed for reform and opening.

Business Facilitation

China made progress in the World Bank’s Ease of Doing Business Survey by moving from 78th in 2017 up to 46th place in 2018 out of 190 economies.  This was accomplished through regulatory reforms that helped streamline some business processes including improvements related to cross-border trading, setting up electricity, electronic tax payments, and land registration.  This ranking, while highlighting business registration improvements that benefit both domestic and foreign companies, does not account for major challenges U.S. businesses face in China like IPR protection and forced technology transfer.

The Government Enterprise Registration (GER), an initiative of the United Nations Conference on Trade and Development (UNCTAD), gave China a low score of 1.5 out of 10 on its website for registering and obtaining a business license.  In previous years, the State Administration for Industry and Commerce (SAIC) was responsible for business license approval. In March 2018, the Chinese government announced a major restructuring of government agencies and created the State Administration for Market Regulation (SAMR) that is now responsible for business registration processes.  According to GER, SAMR’s Chinese website lacks even basic information, such as what registrations are required and how they are to be conducted.

The State Council, which is China’s chief administrative authority, in recent years has reduced red tape by eliminating hundreds of administrative licenses and delegating administrative approval power across a range of sectors.  The number of investment projects subject to central government approval has reportedly dropped significantly. The State Council also has set up a website in English, which is more user-friendly than SAMR’s website, to help foreign investors looking to do business in China.

The State Council Information on Doing Business in China: http://english.gov.cn/services/doingbusiness  

The Department of Foreign Investment Administration within MOFCOM is responsible for foreign investment promotion in China, including promotion activities, coordinating with investment promotion agencies at the provincial and municipal levels, engaging with international economic organizations and business associations, and conducting research related to FDI into China.  MOFCOM also maintains the “Invest in China” website.

MOFCOM “Invest in China” Information: http://www.fdi.gov.cn/1800000121_10000041_8.html  

Despite recent efforts by the Chinese government to streamline business registration procedures, foreign companies still complain about the challenges they face when setting up a business.  In addition, U.S. companies complain they are treated differently from domestic companies when setting up an investment, which is an added market access barrier for U.S. companies. Numerous companies offer consulting, legal, and accounting services for establishing wholly foreign-owned enterprises, partnership enterprises, joint ventures, and representative offices in China.  The differences among these corporate entities are significant, and investors should review their options carefully with an experienced advisor before choosing a particular Chinese corporate entity or investment vehicle.

Outward Investment

Since 2001, China has initiated a “going-out” investment policy that has evolved over the past two decades.  At first, the Chinese government mainly encouraged SOEs to go abroad and acquire primarily energy investments to facilitate greater market access for Chinese exports in certain foreign markets.  As Chinese investors gained experience, and as China’s economy grew and diversified, China’s investments also have diversified with both state and private enterprise investments in all industries and economic sectors.  While China’s outbound investment levels in 2018 were significantly less than the record-setting investments levels in 2016, China was still one of the largest global outbound investors in the world. According to MOFCOM outbound investment data, 2018 total outbound direct investment (ODI) increased less than one percent compared to 2017 figures.  There was a significant drop in Chinese outbound investment to the United States and other North American countries that traditionally have accounted for a significant portion of China’s ODI. In some European countries, especially the United Kingdom, ODI generally increased. In One Belt, One Road (OBOR) countries, there has been a general increase in investment activity; however, OBOR investment deals were generally relatively small dollar amounts and constituted only a small percentage of overall Chinese ODI.

In August 2017, in reaction to concerns about capital outflows and exchange rate volatility, the Chinese government issued guidance to curb what it deemed to be “irrational” outbound investments and created “encouraged,” “restricted,” and “prohibited” outbound investment categories to guide Chinese investors.  The guidelines restricted Chinese outbound investment in sectors like property, hotels, cinemas, entertainment, sports teams, and “financial investments that create funds that are not tied to specific investment projects.” The guidance encouraged outbound investment in sectors that supported Chinese industrial policy, such as Strategic Emerging Industries (SEI) and MIC 2025, by acquiring advanced manufacturing and high-technology assets.  MIC 2025’s main aim is to transform China into an innovation-based economy that can better compete against – and eventually outperform – advanced economies in 10 key high-tech sectors, including: new energy vehicles, next-generation IT, biotechnology, new materials, aerospace, oceans engineering and ships, railway, robotics, power equipment, and agriculture machinery. Chinese firms in MIC 2025 industries often receive preferential treatment in the form of preferred financing, subsidies, and access to an opaque network of investors to promote and provide incentives for outbound investment in key sectors.  The outbound investment guidance also encourages investments that promote China’s OBOR development strategy, which seeks to create connectivity and cooperation agreements between China and countries along the Chinese-designated “Silk Road Economic Belt and the 21st-century Maritime Silk Road” through an expansion of infrastructure investment, construction materials, real estate, power grids, etc.

Germany

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Germany has an open and welcoming attitude towards FDI.  The 1956 U.S.-Federal Republic of Germany Treaty of Friendship, Commerce and Navigation affords U.S. investors national treatment and provides for the free movement of capital between the United States and Germany. As an OECD member, Germany adheres to the OECD National Treatment Instrument and the OECD Codes of Liberalization of Capital Movements and of Invisible Operations.  The Foreign Trade and Payments Act and the Foreign Trade and Payments Ordinance provide the legal basis for the Federal Ministry for Economic Affairs and Energy to review acquisitions of domestic companies by foreign buyers, to assess whether these transactions pose a risk to the public order or national security (for example, when the investment pertains to critical infrastructure).  For many decades, Germany has experienced significant inbound investment, which is widely recognized as a considerable contributor to Germany’s growth and prosperity. The German government and industry actively encourage foreign investment. U.S. investment continues to account for a significant share of Germany’s FDI. The investment-related challenges foreign companies face are generally the same as for domestic firms, for example, high marginal income tax rates and labor laws that complicate hiring and dismissals.

Limits on Foreign Control and Right to Private Ownership and Establishment

Under German law, a foreign-owned company registered in the Federal Republic of Germany as a GmbH (limited liability company) or an AG (joint stock company) is treated the same as a German-owned company.  There are no special nationality requirements for directors or shareholders.

However, Germany does prohibit the foreign provision of employee placement services, such as providing temporary office support, domestic help, or executive search services.

While Germany’s Foreign Economic Law permits national security screening of inbound direct investment in individual transactions, in practice no investments have been blocked to date.  Growing Chinese investment activities and acquisitions of German businesses in recent years – including of Mittelstand (mid-sized) industrial market leaders – led German authorities to amend domestic investment screening provisions in 2017, clarifying their scope and giving authorities more time to conduct reviews.  The government further lowered the threshold for the screening of acquisitions in critical infrastructure and sensitive sectors in 2018, to 10 percent of voting rights of a German company. The amendment also added media companies to the list of sensitive sectors to which the lower threshold applies, to prevent foreign actors from engaging in disinformation.  In a prominent case in 2016, the German government withdrew its approval and announced a re-examination of the acquisition of German semi-conductor producer Aixtron by China’s Fujian Grand Chip Investment Fund based on national security concerns.

Other Investment Policy Reviews

The World Bank Group’s “Doing Business 2019” and Economist Intelligence Unit both provide additional information on Germany investment climate.  The American Chamber of Commerce in Germany publishes results of an annual survey of U.S. investors in Germany on business and investment sentiment (“AmCham Germany Transatlantic Business Barometer”).

Business Facilitation

Before engaging in commercial activities, companies and business operators must register in public directories, the two most significant of which are the commercial register (Handelsregister) and the trade office register (Gewerberegister).

Applications for registration at the commercial register, which is publically available under www.handelsregister.de  , are electronically filed in publicly certified form through a notary.  The commercial register provides information about all relevant relationships between merchants and commercial companies, including names of partners and managing directors, capital stock, liability limitations, and insolvency proceedings.  Registration costs vary depending on the size of the company.

Germany Trade and Invest (GTAI), the country’s economic development agency, can assist in the registration processes (https://www.gtai.de/GTAI/Navigation/EN/Invest/Investment-guide/Establishing-a-company/business-registration.html  ) and advise investors, including micro-, small-, and medium-sized enterprises (MSMEs), on how to obtain incentives.

In the EU, MSMEs are defined as follows:

  • Micro-enterprises:  less than 10 employees and less than €2 million annual turnover or less than €2 million in balance sheet total.
  • Small-enterprises:  less than 50 employees and less than €10 million annual turnover or less than €10 million in balance sheet total.
  • Medium-sized enterprises:  less than 250 employees and less than €50 million annual turnover or less than €43 million in balance sheet total.

Outward Investment

The Federal Government provides guarantees for investments by German-based companies in developing and emerging economies and countries in transition in order to insure them against political risks.  In order to receive guarantees, the investment must have adequate legal protection in the host country. The Federal Government does not insure against commercial risks.

Japan

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Toward Foreign Direct Investment

Direct inward investment into Japan by foreign investors has been open and free since the Foreign Exchange and Foreign Trade Act (the Forex Act) was amended in 1998.  In general, the only requirement for foreign investors making investments in Japan is to submit an ex post facto report to the relevant ministries.

The Japanese Government explicitly promotes inward FDI and has established formal programs to attract it.  In 2013, the government of Prime Minister Shinzo Abe announced its intention to double Japan’s inward FDI stock to JPY 35 trillion (USD 318 billion) by 2020 and reiterated that commitment in its revised Japan Revitalization Strategy issued in August 2016.  At the end of June 2018, Japan’s inward FDI stock was JPY 29.9 trillion (USD 270 billion), a small increase over the previous year. The Abe Administration’s interest in attracting FDI is one component of the government’s strategy to reform and revitalize the Japanese economy, which continues to face the long-term challenges of low growth, an aging population, and a shrinking workforce.

In April 2014, the government established an “FDI Promotion Council” comprised of government ministers and private sector advisors.  The Council remains active and continues to release recommendations on improving Japan’s FDI environment. The Ministry of Economy, Trade and Industry (METI) and the Japan External Trade Organization (JETRO) are the lead agencies responsible for assisting foreign firms wishing to invest in Japan.  METI and JETRO have together created a “one-stop shop” for foreign investors, providing a single Tokyo location—with language assistance—where those seeking to establish a company in Japan can process the necessary paperwork (details are available at http://www.jetro.go.jp/en/invest/ibsc/  ).  Prefectural and city governments also have active programs to attract foreign investors, but they lack many of the financial tools U.S. states and municipalities use to attract investment.

Foreign investors seeking a presence in the Japanese market or seeking to acquire a Japanese firm through corporate takeovers may face additional challenges, many of which relate more to prevailing business practices rather than to government regulations, though it depends on the sector.  These include an insular and consensual business culture that has traditionally been resistant to unsolicited mergers and acquisitions (M&A), especially when initiated by non-Japanese entities; exclusive supplier networks and alliances between business groups that can restrict competition from foreign firms and domestic newcomers; cultural and linguistic challenges; and labor practices that tend to inhibit labor mobility.  Business leaders have communicated to the Embassy that regulatory and governmental barriers are more likely to exist in mature, heavily regulated sectors than in new industries.

The Japanese Government established an “Investment Advisor Assignment System” in April 2016 in which a State Minister acts as an advisor to select foreign companies with “important” investments in Japan.  The system aims to facilitate consultation between the Japanese Government and foreign firms. Of the nine companies selected to participate in this initiative to date, seven are from the United States.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private enterprises have the right to establish and own business enterprises and engage in all forms of remunerative activity.  Japan has gradually eliminated most formal restrictions governing FDI. One remaining restriction limits foreign ownership in Japan’s former land-line monopoly telephone operator, Nippon Telegraph and Telephone (NTT), to 33 percent.  Japan’s Radio Law and separate Broadcasting Law also limit foreign investment in broadcasters to 20 percent, or 33 percent for broadcasters categorized as “facility-supplying.” Foreign ownership of Japanese companies invested in terrestrial broadcasters will be counted against these limits.  These limits do not apply to communication satellite facility owners, program suppliers or cable television operators.

The Foreign Exchange and Foreign Trade Act governs investment in sectors deemed to have national security or economic stability implications.  If a foreign investor wants to acquire over 10 percent of the shares of a listed company in certain designated sectors, it must provide prior notification and obtain approval from the Ministry of Finance and the ministry that regulates the specific industry.  Designated sectors include agriculture, aerospace, forestry, petroleum, electric/gas/water utilities, telecommunications, and leather manufacturing.

U.S. investors, relative to other foreign investors, are not disadvantaged or singled out by any ownership or control mechanisms, sector restrictions, or investment screening mechanisms.

Other Investment Policy Reviews

The World Trade Organization (WTO) conducted its most recent review of Japan’s trade policies in March 2017 (available at https://www.wto.org/english/tratop_e/tpr_e/tp451_e.htm  ).

The OECD released its biennial Japan economic survey results on April 15, 2019 (available at http://www.oecd.org/economy/surveys/japan-economic-snapshot/  ).

Business Facilitation

The Japan External Trade Organization (JETRO) is Japan’s investment promotion and facilitation agency.  JETRO operates six Invest Japan Business Support Centers (IBSCs) across Japan that provide consultation services on Japanese incorporation types, business registration, human resources, office establishment, and visa/residency issues.  Through its website (https://www.jetro.go.jp/en/invest/setting_up  /), the organization provides English-language information on Japanese business registration, visas, taxes, recruiting, labor regulations, and trademark/design systems and procedures in Japan.  While registration of corporate names and addresses can be completed through the internet, most business registration procedures must be completed in person. In addition, corporate seals and articles of incorporation of newly established companies must be verified by a notary.

According to the 2018 World Bank “Doing Business” Report, it takes 12 days to establish a local limited liability company in Japan.  JETRO reports that establishing a branch office of a foreign company requires one month, while setting up a subsidiary company takes two months.  While requirements vary according to the type of incorporation, a typical business must register with the Legal Affairs Bureau (Ministry of Justice), the Labor Standards Inspection Office (Ministry of Health, Labor, and Welfare), the Japan Pension Service, the district Public Employment Security Office, and the district tax bureau.  In April 2015, JETRO opened a one-stop business support center in Tokyo so that foreign companies can complete all necessary legal and administrative procedures in one location; however, this arrangement is not common throughout Japan. JETRO has announced its intent to develop a full online business registration system, but it was not operational as of March 2019.

No laws exist to explicitly prevent discrimination against women and minorities regarding registering and establishing a business. Neither special assistance nor mechanisms exist to aid women or underrepresented minorities.

Outward Investment

The Japan Bank for International Cooperation (JBIC) provides a variety of support to Japanese foreign direct investment.  Most support comes in the form of “overseas investment loans,” which can be provided to Japanese companies (investors), overseas Japanese affiliates (including joint ventures), and foreign governments in support of projects with Japanese content, typically infrastructure projects.  JBIC often seeks to support outward FDI projects that aim to develop or secure overseas resources that are of strategic importance to Japan, for example, construction of liquefied natural gas (LNG) export terminals to facilitate sales to Japan. More information is available at https://www.jbic.go.jp/en/index.html  .

There are no restrictions on outbound investment; however, not all countries have a treaty with Japan regarding foreign direct investment (e.g., Iran).

Korea, Republic of

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The ROK government’s approach toward FDI is positive, and senior policymakers realize the value of foreign investment.  In a March 28, 2019, meeting with the foreign business community, President Moon Jae-in equated their success “with the Korean economy’s progress.”  Foreign investors in the ROK still face numerous hurdles, however, including insufficient regulatory transparency, inconsistent interpretation of regulations, ongoing regulatory revisions that the market cannot anticipate, underdeveloped corporate governance structures, high labor costs, an inflexible labor system, burdensome Korea-unique consumer protection measures, and market domination by large conglomerates, known as chaebol.

The 1998 Foreign Investment Promotion Act (FIPA) is the basic law pertaining to foreign investment in the ROK.  FIPA and related regulations categorize business activities as open, conditionally or partly restricted, or closed to foreign investment.  FIPA features include:

  • Simplified procedures, including those for FDI notification and registration;
  • Expanded tax incentives for high-technology investments;
  • Reduced rental fees and lengthened lease durations for government land (including local government land);
  • Increased central government support for local FDI incentives;
  • Establishment of “Invest KOREA,” a one-stop investment promotion center within the Korea Trade-Investment Promotion Agency (KOTRA) to assist foreign investors; and
  • Establishment of a Foreign Investment Ombudsman to assist foreign investors.

The ROK National Assembly website provides a list of laws pertaining to foreigners, including FIPA, in English (http://korea.assembly.go.kr/res/low_03_list.jsp?boardid=1000000037  ).

The Korea Trade Investment Promotion Agency (KOTRA) actively facilitates foreign investment through its Invest Korea office (on the web at http://m.investkorea.org/m/index.do ).  For investments exceeding 100 million won (about USD 88,000), KOTRA assists in establishing a domestically-incorporated foreign-invested company. KOTRA and the Ministry of Trade, Industry, and Energy (MOTIE) organize a yearly Foreign Investment Week to attract investment to South Korea.  KOTRA also recruits FDI by participating in overseas events such as the March 2019 “South by Southwest Festival” in Austin, Texas, to attract U.S. startups and investors. The ROK’s key official responsible for FDI promotion and retention is the Foreign Investment Ombudsman. The position is commissioned by the President and heads a grievance resolution body that: collects and analyzes information concerning problems foreign firms experience; requests cooperation from and recommends implementation of reforms to relevant administrative agencies; proposes new policies to improve the foreign investment promotion system; and carries out other necessary tasks to assist investor companies.  More information on the Ombudsman can be found at http://ombudsman.kotra.or.kr/eng/index.do  .

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private entities can establish and own business enterprises and engage in almost all forms of remunerative activity.  The number of industrial sectors open to foreign investors is well above the Organization for Economic Cooperation and Development (OECD) average, according to MOTIE.  However, restrictions on foreign ownership remain for 30 industrial sectors, including three that are closed to foreign investment (see below). Under the KORUS FTA, South Korea treats U.S. companies like domestic entities in select sectors, including broadcasting and telecommunications.  Relevant ministries must approve investments in conditionally or partially restricted sectors. Most applications are processed within five days; cases that require consultation with more than one ministry can take 25 days or longer. The ROK’s procurement processes comply with the World Trade Organization (WTO) Government Procurement Agreement, but some implementation problems remain.

The following is a list of restricted sectors for foreign investment.  Figures in parentheses generally denote the Korean Industrial Classification Code, while those for the air transport industries are based on the Civil Aeronautics Laws:

Completely Closed

  •  Nuclear power generation (35111)
  •  Radio broadcasting (60100)
  •  Television broadcasting (60210)

Restricted Sectors (no more than 25 percent foreign equity)

  •  News agency activities (63910)

Restricted Sectors (less than 30 percent foreign equity)

  • Publishing of daily newspapers (58121)  (Note: Other newspapers with the same industry code 58121 are restricted to less than 50 percent foreign equity)

Restricted Sectors (no more than 30 percent foreign equity)

  • Hydroelectric power generation (35112)
  • Thermal power generation (35113)
  • Solar power generation (35114)
  • Other power generation (35119)

Restricted Sectors (no more than 49 percent foreign equity)

  • Program distribution (60221)
  • Cable networks (60222)
  • Satellite and other broadcasting (60229)
  • Wired telephone and other telecommunications (61210)
  • Mobile telephone and other telecommunications (61220)
  • Other telecommunications (61299)

Restricted Sectors (no more than 50 percent foreign equity)

  • Farming of beef cattle (01212)
  • Transmission/distribution of electricity (35120)
  • Wholesale of meat (46313)
  • Coastal water passenger transport (50121)
  • Coastal water freight transport (50122)
  • International air transport (51)
  • Domestic air transport (51)
  • Small air transport (51)
  • Publishing of magazines and periodicals (58122)

Open but Regulated under Relevant Laws

  • Growing of cereal crops and other food crops, except rice and barley (01110)
  • Other inorganic chemistry production, except fuel for nuclear power generation (20129)
  • Other nonferrous metals refining, smelting, and alloying (24219)
  • Domestic commercial banking, except special banking area (64121)
  • Radioactive waste collection, transportation, and disposal, except radioactive waste management (38240)

Other Investment Policy Reviews

The WTO conducted its seventh Trade Policy Review of the ROK in October 2016.  The Review does not contain any explicit policy recommendations. It can be found at https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S009-DP.aspx?language=E&CatalogueIdList=233680,233681,230967,230984,94925,
104614,89233,66927,82162,84639&CurrentCatalogueIdIndex=1&FullText
Hash=&HasEnglishRecord=True&HasFrenchRecord=True&HasSpanishRecord=True
 
.  The ROK has not undergone investment policy reviews or received policy recommendations from the OECD or United Nations Conference on Trade and Development (UNCTAD) within the past three years.

Business Facilitation

Registering a business remains a complex process that varies according to the type of business being established and requires interaction with KOTRA, court registries, and tax offices.  Foreign corporations can enter the market by establishing a local corporation, local branch, or liaison office. The establishment of local corporations by a foreign individual or corporation is regulated by FIPA and the Commercial Act; the latter recognizes five types of companies, of which stock companies with multiple shareholders are the most common.  Although registration can be filed online, there is no centralized online location to complete the process. For small- and medium-sized enterprises (SMEs) and micro-enterprises, the online business registration process takes approximately three to four days and is completed through Korean language websites. Registrations can be completed via the Smart Biz website, https://www.startbiz.go.kr/The UN’s Global Enterprise Registration (GER) rated Smart Biz a low 2.5 on its 10-point evaluation scale and suggested improvements to provide clear and complete instructions for registering a limited liability company.  The GER rated the InvestKorea information portal even lower at 2.0/10. The Korea Commission for Corporate Partnership (http://www.winwingrowth.or.kr/  ) and the Ministry of Gender Equality and Family (http://www.mogef.go.kr/)seek to create a better business environment for minorities and women but do not offer any direct support program for those groups.  Some local governments provide guaranteed bank loans for women or disabled people, but a lack of data on those programs makes it difficult to measure their impact.

Outward Investment

The ROK does not have any restrictions on outward investment.  While Korea’s globally competitive firms complete their investment procedures in-house, the ROK has several offices to assist small business and middle-market firms.

  • KOTRA has an Outbound Investment Support Office that provides counseling to ROK firms and holds regular investment information sessions.
  • The ASEAN-Korea Centre, which is primarily ROKG-funded, provides counseling and matchmaking support to Korean SMEs interested in investing in the Association of Southeast Asian Nations (ASEAN) region.
  • The Defense Acquisition Program Administration in 2019 opened an office to advise Korean SME defense firms on exporting unrestricted defense articles.

Netherlands

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The Netherlands is the sixteenth-largest economy in the world and the fifth largest in the European Monetary Union (the eurozone), with a gross domestic product (GDP) of over USD 900 billion (773 billion euros).  According to the International Monetary Fund (IMF), the Netherlands is consistently among the three largest source and recipient economies for foreign direct investment (FDI) in the world, although the Netherlands is not the ultimate destination for the majority of this investment.  The government of the Netherlands maintains liberal policies toward FDI, has established itself as a platform for third-country investment with some 145 investment agreements in force, and adheres to the Organization for Economic Cooperation and Development (OECD) Codes of Liberalization and Declaration on International Investment, including a National Treatment commitment and adherence to relevant guidelines.

The Netherlands is the recipient of eight percent of all FDI inflow into the EU.  Of all EU member states, it is the top recipient of U.S. FDI, at over 16 percent of all U.S. FDI abroad as of 2017.  The Netherlands has become a key export platform and pan-regional distribution hub for U.S. firms. Roughly 60 percent of total U.S. foreign-affiliate sales in the Netherlands are exports, with the bulk of them going to other EU members.

In 2014, foreign-owned companies made inward direct investment worth USD 15.8 billion (14.2 billion euros) – just over 30 percent of total corporate investment in durable goods in the Netherlands.  Foreign investors provide 19 percent of Dutch employment in the private sector (860,200 jobs). U.S. firms contribute the most among foreign firms to employment, responsible for 214,000 jobs. In its 2017 investment report, the UN Conference on Trade and Development (UNCTAD) identified the Netherlands as the world’s fifth largest destination of global FDI inflows and the third largest source of FDI outflows.

Although policy makers fear that a Brexit will be detrimental for the Dutch economy, so far the Netherlands is benefitting from companies exiting the United Kingdom in anticipation of Brexit.  According to the Netherlands Foreign Investment Agency (NFIA), the number of companies interested in moving to the Netherlands because of Brexit increased from 80 in 2017 to 150 in 2018 to 250 in 2019.  The companies are coming mainly from the health, creative industry, financial services, and logistics sectors.  The Dutch Authority for the Financial Markets (AFM) has predicted Amsterdam will emerge as a main post-Brexit financial trading center in Europe for automated trading platforms and other ‘fintech’ firms, allowing these companies to keep their European trading within the confines of the EU after Brexit.

Dutch tax authorities provide a high degree of customer service to foreign investors, seeking to provide transparent, precise tax guidance that makes long-term tax obligations more predictable.  Advance Tax Rulings (ATR) and Advance Pricing Agreements (APA) are guarantees given by local tax inspectors regarding long-term tax commitments for a particular acquisition or Greenfield investment.  Dutch tax policy continues to evolve as the EU seeks to harmonize tax measures across members states. A more detailed description of Dutch tax policy for foreign investors can be found at http://investinholland.com/incentives-and-taxes/   and http://investinholland.com/incentives-and-taxes/fiscal-climate/  .

Dutch corporations and branches of foreign corporations are currently subject to a corporate tax rate of 25 percent on taxable profits, which puts the Netherlands in the middle third among EU countries’ corporate tax rates and below the tax rates of its larger neighbors.  Profits up to USD 240,000 (200,000 euros) are taxed at a rate of 19 percent.  In October 2018, the Dutch government announced it would lower its corporate tax rate to 20.5 percent in 2021, with profits up to USD 240,000 taxed at a 15 percent rate from 2021 onwards.

Dutch corporate taxation generally allows for exemption of dividends and capital gains derived from a foreign subsidiary.  Surveys of the corporate tax structure of EU member states note that both the corporate tax rate and the effective corporate tax rate in the Netherlands are around the EU average.  Nevertheless, the Dutch corporate tax structure ranks among the most competitive in Europe considering other beneficial measures such as ATAs and/or APAs. The Netherlands also has no branch profit tax and does not levy a withholding tax on interest and royalties.

Maintaining an investment-friendly reputation is a high priority for the Dutch government, which provides public information and institutional assistance to prospective investors through the Netherlands Foreign Investment Agency (NFIA) (https://investinholland.com/  ). Historically, over a third of all “Greenfield” FDI projects that NFI attracts to the Netherlands originate from U.S. companies.  Additionally, the Netherlands business gateway at https://business.gov.nl/   – maintained by the Dutch government – provides information on regulations, taxes, and investment incentives that apply to foreign investors in the Netherlands and clear guidance on establishing a business in the Netherlands.

The NFIA maintains six regional offices in the United States (Washington, DC; Atlanta; Boston; Chicago; New York City; and San Francisco).  The American Chamber of Commerce in the Netherlands (https://www.amcham.nl/  ) also promotes U.S. and Dutch business interests in the Netherlands.

Limits on Foreign Control and Right to Private Ownership and Establishment

With few exceptions, the Netherlands does not discriminate between national and foreign individuals in the establishment and operation of private companies.  The government has divested its complete ownership of many public utilities, but in a number of strategic sectors, private investment – including foreign investment – may be subject to limitations or conditions.  These include transportation, energy, defense and security, finance, postal services, public broadcasting, and the media.

Air transport is governed by EU regulation and subject to the U.S.-EU Air Transport Agreement.  U.S. nationals can invest in Dutch/European carriers as long as the airline remains majority-owned by EU governments or nationals from EU member states.  Additionally, the EU and its member states reserve the right to limit U.S. investment in the voting equity of an EU airline on a reciprocal basis that the United States allows for foreign nationals in U.S. carriers.

In concert with the European Union, the Dutch government is considering how to best protect its economic security but also continue as one of the world’s most open economies.  The Netherlands has no formal foreign investment screening mechanism, but the government has begun discussions about developing targeted investment-screening for certain vital sectors that could represent national security vulnerabilities.  The government is in the process of finalizing legislation that will establish investment screening mechanisms in the first of those vital sectors: telecommunications. The Netherlands has certain limitations on foreign ownership in sectors that are deemed of vital national interest (transportation, energy, defense and security, finance, postal services, public broadcasting, and the media).  There is no requirement for Dutch nationals to have an equity stake in a Dutch registered company.

Other Investment Policy Reviews

The Netherlands has not recently undergone an investment policy review by the OECD, World Trade Organization (WTO), or UNCTAD.

Business Facilitation

All companies must register with the Chamber of Commerce and apply for a fiscal number with the tax administration, which allows expedited registration for small- and medium-sized enterprises (SMEs) with fewer than 50 employees:  https://www.kvk.nl/english/ordering-products-from-the-commercial-register/  .

The World Bank’s 2019 Ease of Doing Business Index ranks the Netherlands as number 22 in starting a business.  The Netherlands ranks better than the OECD average on registration time, the number of procedures, and required minimum capital.

The Netherlands business gateway at https://business.gov.nl/   – maintained by the Dutch government – provides a general checklist for starting a business in the Netherlands: https://business.gov.nl/starting-your-business/checklists-for-starting-a-business/general-checklist-for-starting-a-business-in-the-netherlands/  .  The Dutch American Friendship Treaty (DAFT) from 1956 gives U.S. citizens preferential treatment to operate a business in the Netherlands, providing ease of establishment that most other non-EU nationals do not enjoy.  U.S. entrepreneurs applying under the DAFT do not need to satisfy a strict, points-based test and do not have to meet pre-conditions related to providing an innovative product. U.S. entrepreneurs setting up a sole proprietorship only have to register with the Chamber of Commerce and demonstrate a minimum investment of 4,500 euros.  DAFT entrepreneurs receive a two-year residence permit, with the possibility of renewal for five subsequent years.

Poland

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Poland welcomes foreign investment as a source of capital, growth, and jobs, and as a vehicle for technology transfer, research and development (R&D), and integration into global supply chains.  The government’s Strategy for Responsible Development identifies key goals for attracting investment, including improving the investment climate, a stable macroeconomic and regulatory environment, and high-quality corporate governance, including in state-controlled companies.  By the end of 2017, according to IMF and National Bank of Poland data, Poland attracted around USD 239 billion (cumulative) in foreign direct investment (FDI), principally from Western Europe and the United States. In 2017, reinvested profits dominated the net inflow of FDI to Poland.  The greatest reinvestment of profits occurred in services and manufacturing, reflecting the change of Poland’s economy to a more service-oriented and less capital-intensive structure.

Foreign companies generally enjoy unrestricted access to the Polish market.  However, Polish law limits foreign ownership of companies in selected strategic sectors, and limits acquisition of real estate, especially agricultural and forest land.  Additionally, the current government has expressed a desire to increase the percentage of domestic ownership in some industries such as banking and retail which have large holdings by foreign companies, and has employed sectoral taxes and other measures to advance this aim.  In March 2018, Sunday trading ban legislation went into effect, which is gradually phasing out Sunday retail commerce in Poland, especially for large retailers. In 2019, stores may operate an average of one Sunday a month, and in 2020 a total ban will be in effect (with the exception of seven Sundays).  Polish authorities have publicly favored introducing a digital services tax. Since no draft has been released, the details of such a tax are unknown, but it would affect mainly foreign digital companies.

There is a variety of Polish agencies involved in investment promotion:

  • The Ministry of Entrepreneurship and Technology has two departments involved in investment promotion and facilitation: the Investment Development and the Trade and International Relations Departments.  The Deputy Minister supervising the Investment Development Department was appointed in 2019 to be ombudsman for foreign investors. https://www.gov.pl/web/przedsiebiorczosc-technologia/  
  • The Ministry of Foreign Affairs (MFA) promotes Poland’s foreign relations including economic relations, and along with the Polish Chamber of Commerce (KIG), organizes missions of Polish firms abroad and hosts foreign trade missions to Poland.   https://www.msz.gov.pl/  ; https://kig.pl/  
  • The Polish Investment and Trade Agency (PAIH) is the main institution responsible for promotion and facilitation of foreign investment. The agency is responsible for promoting Polish exports, for inward foreign investment and for Polish investments abroad. The agency operates as part of the Polish Development Fund, which integrates government development agencies.  PAIH coordinates all operational instruments, such as commercial diplomatic missions, commercial fairs and programs dedicated to specific markets and sectors. The Agency has opened offices abroad including in the United States (San Francisco and Washington, D.C, Los Angeles, Chicago, Houston and New York. PAIH’s services are available to all investors. https://www.paih.gov.pl/en  
  • The Polish Chamber of Commerce in the United States (POLCHAM USA), located in Washington, D.C., promotes the strengthening of economic and trade relationships between the United States and Poland.  It is an independent, non-profit organization. https://polchamusa.org/  

Limits on Foreign Control and Right to Private Ownership and Establishment

Poland allows both foreign and domestic entities to establish and own business enterprises and engage in most forms of remunerative activity per the Entrepreneurs’ Law which went into effect on April 30, 2018.  Forms of business activity are described in the Commercial Companies Code. Poland does place limits on foreign ownership and foreign equity for a limited number of sectors. Polish law limits non-EU citizens to 49 percent ownership of a company’s capital shares in the air transport, radio and television broadcasting, and airport and seaport operations sectors.  Licenses and concessions for defense production and management of seaports are granted on the basis of national treatment for investors from OECD countries.

Pursuant to the Broadcasting Law, a television broadcasting company may only receive a license if the voting share of foreign owners does not exceed 49 percent and if the majority of the members of the management and supervisory boards are Polish citizens and hold permanent residence in Poland.  In January 2017, a team comprised of officials from the Ministry of Culture and National Heritage, the National Broadcasting Council (KRRiT) and the Office of Competition and Consumer Protection (UOKiK) was created in order to review and tighten restrictions on large media, and limit foreign ownership of the media.  While no legislation has been introduced, there is concern that possible future proposals may limit foreign ownership of media sector.

In the insurance sector, at least two management board members, including the chair, must speak Polish.  The Law on Freedom of Economic Activity (LFEA) requires companies to obtain government concessions, licenses, or permits to conduct business in certain sectors, such as broadcasting, aviation, energy, weapons/military equipment, mining, and private security services.  The LFEA also requires a permit from the Ministry of Entrepreneurship and Technology for certain major capital transactions (i.e., to establish a company when a wholly or partially Polish-owned enterprise has contributed in-kind to a company with foreign ownership by incorporating liabilities in equity, contributing assets, receivables, etc.).  A detailed description of business activities that require concessions and licenses can be found here: https://www.paih.gov.pl/publications/how_to_do_business_in_Poland

Polish law restricts foreign investment in certain land and real estate.  Land usage types such as technology and industrial parks, business and logistic centers, transport, housing plots, farmland in special economic zones, household gardens and plots up to two hectares are exempt from agricultural land purchase restrictions.  Since May 2016, foreign citizens from European Economic Area member states, Iceland, Liechtenstein, and Norway, as well as Switzerland, do not need permission to purchase any type of real estate including agricultural land. Investors from outside of the EEA or Switzerland need to obtain a permit from the Ministry of Internal Affairs and Administration (with the consent of the Defense and Agriculture Ministries), pursuant to the Act on Acquisition of Real Estate by Foreigners, prior to the acquisition of real estate or shares which give control of a company holding or leasing real estate.  The permit is valid for two years from the day of issuance, and the ministry can issue a preliminary document valid for one year. Permits may be refused for reasons of social policy or public security. The exceptions to this rule include purchases of an apartment or garage, up to 0.4 hectares of undeveloped urban land, and “other cases provided for by law” (generally: proving a particularly close connection with Poland). Laws to restrict farmland and forest purchases came into force April 30, 2016, and are addressed in more detail in Section 6: Real Property.

Since September 2015 the Act on the Control of Certain Investments has provided for the national security-related screening of acquisitions in high-risk sectors including: energy generation and distribution; petroleum production, processing and distribution; telecommunications; media and mining; and manufacturing and trade of explosives, weapons and ammunition.  Poland maintains a list of strategic companies that can be amended at any time, but is updated at least once a year, usually in January. The national security review mechanism does not appear to constitute a de facto barrier for investment, and does not unduly target U.S. investment.  According to the Act, prior to the acquisition of shares of strategic companies (including the acquisition of proprietary interests in entities and/or their enterprises) the purchaser must notify the controlling government body and receive approval.  The obligation to inform the controlling government body applies to transactions involving the acquisition of a “material stake” in companies subject to special protection. The Act stipulates that failure to notify carries a fine of up to PLN 100,000,000 (approx. USD 25,575,542) or a penalty of imprisonment between six months and five years (or both penalties together) for a person acting on behalf of a legal person or organizational unit that acquires a material stake without prior notification.

The Polish government has drafted an amendment to extend the list of state companies with restrictions on selling shares and to increase the powers of the Prime Minister in the area of state property management.  The companies slated for additional restrictions are pipeline operator PERN, postal service Poczta Polska, aviation group PGL, railway system  PKP and the Special Purpose Vehicle in charge of building Poland’s planned central airport.  The amendment also sanctions possible mergers of such entities.

Other Investment Policy Reviews

The 2018 OECD Economic Survey of Poland can be found here:

http://www.oecd.org/eco/surveys/economic-survey-poland.htm  

Additionally, the OECD Working Group on Bribery has provided recommendations on the implementation of the OECD Anti-Bribery Convention in Poland:  http://www.oecd.org/daf/anti-bribery/poland-oecdanti-briberyconvention.htm  

In March 2018, the OECD published a Rural Policy Review on Poland.  According to this review, Poland has seen impressive growth in recent years, and yet regional disparities in economic and social outcomes remain large by OECD standards.  The review is available at: http://www.oecd.org/poland/oecd-rural-policy-reviews-poland-2018-9789264289925-en.htm  

Business Facilitation

The Polish government has continued to implement reforms aimed at improving the investment climate with a special focus on the SME sector and innovations.  In 2016-18, Poland reformed its R&D tax incentives with new regulations and changes encouraging wider use of the R&D tax breaks. As of January 1, 2019, a new mechanism reducing the tax rate on income derived from intellectual property rights (IP Box) was introduced.  Please see Section 5 of this report for more information.

A package of five laws referred to as the “Business Constitution”—intended to facilitate the operation of small domestic enterprises—was gradually introduced in 2018.  The main principle of the Business Constitution is the presumption of innocence of business owners in dealings with the government.

Poland made enforcing contracts easier by introducing an automated system to assign cases to judges randomly.  Despite these reforms and others, some investors have expressed serious concerns regarding over-regulation, over-burdened courts and prosecutors, and overly-burdensome bureaucratic processes.  The way tax audits are performed has changed considerably. For instance, in many cases the appeal against the findings of an audit now must be lodged with the authority that issued the initial finding rather than a higher authority or third party.

In Poland, business activity may be conducted in forms of a sole proprietor, civil law partnership, as well as commercial partnerships and companies regulated in provisions of the Commercial Partnerships and Companies Code.  Sole proprietor and civil law partnerships are registered in the Central Registration and Information on Business (CEIDG), which is housed by the Ministry of Entrepreneurship and Technology: 

https://prod.ceidg.gov.pl/CEIDG.CMS.ENGINE/?D;f124ce8a-3e72-4588-8380-63e8ad33621f  

Commercial companies are classified as partnerships (registered partnership, professional partnership, limited partnership, and limited joint-stock partnership) and companies (limited liability company and joint-stock company).  A partnership or company is registered in the National Court Register (KRS) and kept by the competent district court for the registered office of the established partnership or company. Local corporate lawyers report that starting a business remains costly in terms of time and money, though KRS registration in the National Court Register averages less than two weeks according to the Ministry of Justice and four weeks according to the World Bank’s 2019 Doing Business Report.  A 2018 law introduced a new type of company—PSA (Prosta Spółka Akcyjna – Simple Joint Stock Company).  PSAs are meant to facilitate start-ups with simpler and cheaper registration procedures. The minimum initial capitalization is 1 PLN (approx. USD 0.26) while other types of registration require 5,000 PLN (approx. USD 1,315) or 50,000 PLN (approx. USD 13,158).  A PSA has a board of directors, which merges the responsibilities of a management board and a supervisory board. The provision for PSA will enter into force in March 2020.

New provisions of the Public Procurement Law (“PPL”) transposing provisions of EU directives coordinating the rules of public procurement came into force on October 18, 2018.  These regulations apply to proceedings concerning contracts with a value equal to or exceeding the EU thresholds.

Polish lawmakers are gradually digitalizing the services of the KRS.   The first change, which entered into force on March 15, 2018, was the obligation to file financial statements with the Repository of Financial Documents via the Ministry of Finance website.  There is also a new requirement for representatives and shareholders of companies to submit statements on their addresses. A requirement to file financial statements exclusively in electronic form entered into force on October 1, 2018, and, beginning in  March 2020, all applications will have to be filed with the commercial register electronically. A certified e-signature may be obtained from one of the commercial e-signature providers listed on the following website: https://www.nccert.pl/  

Agencies that a business will need to file with in order to register in the KRS:

Both registers are available in English and foreign companies may use them.

Poland’s Single Point of Contact site for business registration and information is: https://www.biznes.gov.pl/en/  and an online guide to choose a type of business registration is: https://www.biznes.gov.pl/poradnik/-/scenariusz/REJESTRACJA_DZIALALNOSCI_GOSPODARCZEJ  

Outward Investment

The Polish Agency for Investment and Trade (PAIH) under the umbrella of the Polish Development Fund, plays a key role in promoting Polish investment abroad.  More information on PFR can be found in Section 7 and at its website: https://pfr.pl/  

The Minister of Foreign Affairs and the Minister of Entrepreneurship and Technology have   significantly reformed Poland’s economic diplomacy. The Polish Information and Foreign Investment Agency (PAIiIZ) was reformed in February 2017 to be the Polish Agency for Investment and Trade (PAIH).  Trade and Investment Promotion Sections in embassies and consulates around the world have been replaced by PAIH offices. These 70 offices worldwide constitute a global network and include six in the United States.  

PAIH offices offer a range of services to include: finding potential partners for Polish manufacturers/exporters; providing information on business opportunities; assisting in the organization of business trips and study tours; and assisting in initiating first contacts between interested local importers, distributors or wholesalers and Polish manufacturers or service providers.  The Agency implements pro-export projects such as the Polish Tech Bridges dedicated to expansion of innovative Polish SMEs.  PAIH has a number of investment/export-oriented government programs specially developed to promote Polish companies abroad such as Go China, Go India, Go Africa, Go ASEAN and Go Arctic.  Vietnam and Iran are also priority investment and export destinations for Poland, though trade with Iran has dropped off since the re-imposition of U.S. sanctions. Poland is a founding member of the Asian Infrastructure Investment Bank (AIIB).  Poland co-founded and actively supports the Three Seas Initiative, which seeks to improve north-south connections in road, energy and telecom infrastructure in 12 countries on NATO’s and the EU’s eastern flank. . PAIH is responsible for the promotion of Poland at the EXPO Dubai 2020. 

The national development bank BGK (Bank Gospodarstwa Krajowego) offers support for goods with a Polish component and depending on the credit can be a minimum of 30-40 percent of net contract revenue.  BGK offers a number of short-term credit instruments like documentary letters of credit for post-financing. BGK offers direct credit for importers to purchase investment goods and services. The Export Credit Insurance Corporation KUKE insures the BGK-issued credit, including for companies from countries with higher trade risk.

Sweden

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

There are no laws or practices that discriminate or are alleged to discriminate against foreign investors, including and especially U.S. investors, by prohibiting, limiting or conditioning foreign investment in a sector of the economy [either at the pre-establishment (market access) or post-establishment phase of investment].  Until the mid-1980s, Sweden’s approach to direct investment from abroad was quite restrictive and governed by a complex system of laws and regulations. Sweden’s entry into the European Union (EU) in 1995 largely eliminated all restrictions. National security restrictions to investment remain in the defense and other sensitive sectors, as addressed in the next section “Limits on Foreign Control and Right to Private Ownership and Establishment.”

The Swedish Government recognizes the need to further improve the business climate for entrepreneurs, education, and the flow of research from lab to market.  Swedish authorities have implemented a number of reforms to improve the business regulatory environment and to attract more foreign investment.

Limits on Foreign Control and Right to Private Ownership and Establishment

There are very few restrictions on where and how foreign enterprises can invest, and there are no equity caps, mandatory joint-venture requirements, or other measures designed to limit foreign ownership or market access.  However, Sweden does maintain some limitations in a select number of situations:

  • Accountancy:  Investment in the accountancy sector by non-EU-residents cannot exceed 25 percent.
  • Legal services:  Investment in a corporation or partnership carrying out the activities of an “advokat,” or lawyer, cannot be done by non-EU residents.
  • Air transport:  Foreign enterprises may be restricted from access to international air routes unless bilateral intergovernmental agreements provide otherwise.
  • Air transport:  Cabotage is reserved to national airlines.
  • Maritime transport:  Cabotage is reserved to vessels flying the national flag.
  • Defense:  Restrictions apply to foreign ownership of companies involved in the defense industry and other sensitive areas.

Swedish company law provides various ways a business can be organized.  The main difference between these forms is whether the founder must own capital and to what extent the founder is personally liable for the company’s debt.  The Swedish Act (1992:160) on Foreign Branches applies to foreign companies operating through a branch and also to people residing abroad who run a business in Sweden.  A branch must have a president who resides within the European Economic Area (EEA). All business enterprises in Sweden (including branches) are required to register at the Swedish Companies Registration Office, Bolagsverket.  An invention or trademark must be registered in Sweden in order to obtain legal protection. A bank from a non-EEA country needs special permission from the Financial Supervision Authority (Finansinspektionen) to establish a branch in Sweden.

Sweden does not maintain a national security screening mechanism for inbound foreign investment.  However, the government is currently considering how to implement the EU Commission’s recently approved investment screening framework, as well as tightening national investment policies.  Suggested regulations would not likely be in place until 2021 at the earliest. U.S. investors are treated equally relative to other foreign investors in terms of ownership and scrutiny of investments.

Other Investment Policy Reviews

The Organization for Economic Cooperation and Development (OECD) published an economic snapshot for Sweden in March 2019:  https://www.oecd.org/economy/surveys/OECD-economic-survey-Sweden-2019-executive-summary-brochure.pdf 

Business Facilitation

Business Sweden’s Swedish Trade and Investment Council is the investment promotion agency tasked with facilitating business.  The services of the agency are available to all investors.

At http://www.verksamt.se , a collaboration of several Swedish government agencies have posted relevant guides and services pertaining to registering, starting, running, expanding and/or closing a business.  Sweden defines a micro enterprise as one with less than 10 employees, a small enterprise with less than 50 employees, and a medium enterprise with less than 250 employees.  All forms of business enterprise, except for sole traders, must register with the Swedish Companies Registration Office, Bolagsverket, before starting operations. Sole traders may apply for registration in order to be given exclusive rights to the name in the county where they will be operating. Online applications to register an enterprise can be made at http://www.bolagsverket.se/en .  The process of registering an enterprise can take a few days or up to a few weeks, depending on the complexity and form of the business enterprise.  All business enterprises, including sole traders, must also register with the Swedish Tax Agency, Skatteverket, before starting operations. Relevant information and guides can be found at http://www.skatteverket.se .  Depending on the nature of business, companies may also need to register with the Environmental Protection Agency, Naturvårdsverket, or, if real estate is involved, the county authorities.  Non EU/EEA citizens need a residence permit, obtained from the Swedish Board of Migration, Migrationsverket, in order to start up and/or run a business.

Outward Investment

The Government of Sweden has commissioned the Swedish Exports Credit Guarantee Board (EKN) to promote Swedish exports and the internationalization of Swedish companies.  EKN insures exporting companies and banks against non-payment in export transactions, thereby reducing risk and encouraging expanding operations. As part of its export strategy presented in 2015, the Swedish Government has also launched Team Sweden to promote Swedish exports and investment.  Team Sweden is tasked with making export market entry clear and simple for Swedish companies and consists of a common network for all public initiatives to support exports and internationalization.

The Government does not generally restrict domestic investors from investing abroad.  The only exceptions are related to matters of national security and national defense; the Inspectorate of Strategic Products (ISP) is tasked with control and compliance regarding the sale and exports of defense equipment and dual-use products. ISP is also the National Authority for the Chemical Weapons Convention and handles cases concerning targeted sanctions.

Taiwan

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Promoting inward FDI has been an important policy goal for the Taiwan authorities because of Taiwan’s self-imposed public debt ceiling that limits public spending and its low levels of domestic private investment, which grew by 1.46 percent in 2018.  Taiwan has pursued various measures to attract FDI from both foreign companies and Taiwan firms operating overseas. A network of science and industrial parks, export processing zones, and free trade zones aim to expand trade and investment opportunities by granting tax incentives, tariff exemptions, low-interest loans, and other favorable terms.  Incentives tend to be more prevalent for investment in the traditional manufacturing sector. The Ministry of Economic Affairs (MOEA) Department of Investment Services (DOIS) Invest in Taiwan Center serves as Taiwan’s investment promotion agency and provides streamlined procedures for foreign investors, including single-window services and employee recruitment.  For investments of over NTD 500 million (USD 17 million), the authorities will assign a dedicated project manager to the investment process. DOIS services are available to all foreign investors. The Centre’s website contains an online investment aid system (at https://investtaiwan.nat.gov.tw/smartIndexPage?lang=eng) to help investors retrieve all the required applications forms based on various investment criteria and types.  Taiwan also passed the Foreign Talent Retention Act to attract foreign professionals with a relaxed visa and work permit issuance process as well as tax incentives. The proposed amendments to the Statute for Investment by Foreign Nationals, which was under priority consideration by the Legislative Yuan in the first half of 2019, would replace the existing pre-approval investment review process with an ex-post reporting mechanism.  

Taiwan maintains a negative list of industries closed to foreign investment for reasons the authorities assert relate to national security and environmental protection, including public utilities, power distribution, natural gas, postal service, telecommunications, mass media, and air and sea transportation.  These sectors constitute less than one percent of the production value of Taiwan’s manufacturing sector and less than five percent of the services sector. Railway transport, freight transport by small trucks, pesticide manufactures, real estate development, brokerage, leasing, and trading are open to foreign investment.  The negative list of investment sectors, last updated in February 2018, is available at http://www.moeaic.gov.tw/download-file.jsp?do=BP&id=ZYi4SMROrBA= .

To accelerate industrial transformation that would boost both domestic demand and external market expansion, the authorities have been actively promoting the “5+N Innovative Industries” development program targeting industries including smart machinery, biomedicine, Internet of Things (IoT), green energy, and national defense, as well advanced agriculture, circular economy, and semiconductors, among other key industries.  Taiwan authorities also offer subsidies for the research and development expenses for Taiwan-foreign partnership projects. The central authorities take a cautious approach to approving foreign investment in innovative industries that utilize new and potentially disruptive business models, such as in the sharing economy. Investors have reported that investments in the sharing economy have been approved without clear regulatory frameworks in place, generating regulatory and political difficulties and, in some cases, targeted legislation and regulations regarded as highly punitive or restrictive in ways that harm the viability of such business models in Taiwan.

The American Chamber of Commerce in Taipei meets regularly with Taiwan agencies such as the National Development Council (NDC) to promote resolution of concerns highlighted in the Chamber’s annual White Paper.  The authorities also regularly meet with other foreign business groups. Some U.S. investors have expressed concerns about a lack of transparency, consistency, and predictability in the investment review process, particularly with regard to transactions involving private equity investment.  Current guidelines on foreign investment state that private equity investors seeking to acquire companies in “important industries” must provide, for example, a detailed description of the investor’s long-term operational commitment, relisting choices, and the investment’s impact on competition within the sector.  U.S. investors have claimed to experience lengthy review periods for private equity transactions and redundant inquiries from the MOEA Investment Commission and its constituent agencies. Some report that public hearings convened by Taiwan regulatory agencies about specific private equity transactions have appeared designed to advance opposition to private equity rather than foster transparent dialogue.  Private equity transactions and other previously approved investments have, in the past, attracted Legislative Yuan scrutiny, including committee-level resolutions opposing specific transactions.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign entities are entitled to establish and own business enterprises and engage in all forms of remunerative activity as local firms unless otherwise specified in relevant regulations.  Taiwan sets foreign ownership limits in certain industries, such as a 60 percent limit on direct foreign ownership of wireless and fixed line telecommunications firms, and a 49 percent limit on direct foreign investment in that sector.  State-controlled Chunghwa Telecom, which controls 97 percent of the fixed line telecom market, maintains a 49 percent limit on direct foreign investment and a 55 percent limit on indirect foreign investment. There is a 20 percent limit on foreign direct investment in cable television broadcasting services, and foreign ownership of up to 60 percent is allowed through indirect investment via a Taiwan entity, although in practice this kind of investment is subject to heightened regulatory and political scrutiny.  In addition, there is a foreign ownership limit of 49.99 percent for satellite television broadcasting services and piped distribution of natural gas, and a 49 percent limit for high-speed rail services. The foreign ownership cap on airport ground services firms, air-catering companies, aviation transportation businesses (airlines), and general aviation businesses (commercial helicopters and business jet planes) is less than 50 percent, with a separate limit of 25 percent for any single foreign investor. Foreign investment in Taiwan-flagged merchant shipping services is limited to 50 percent for Taiwan shipping companies operating international routes.

Taiwan has gradually eased restrictions on investments from the PRC since 2009.  Taiwan has opened more than two-thirds of its aggregate industrial categories to PRC investors, with 97 percent of manufacturing sub-sectors and 51 percent of construction and services sub-sectors open to PRC capital.  PRC nationals are prohibited from serving as chief executive officer in a Taiwan company, although a PRC board member may retain management control rights. The Taiwan authorities regard PRC investment in media or advanced technology sectors, such as semiconductors, as a national security concern.  The Cross-Strait Agreement on Trade in Services and the Cross-Strait Agreement on Avoidance of Double Taxation and Enhancement of Tax Cooperation were signed in 2013 and 2015, respectively, but have not taken effect. Negotiations on the Agreement on Trade in Goods halted in 2016.

The Investment Commission screens applications for FDI, mergers, and acquisitions.  Taiwan authorities claim that 95 percent of investments not subject to the negative list and with capital less than New Taiwan Dollars (NTD) 500 million (USD 17 million) obtain approval at the Investment Commission staff-level within two to four days.  Investments between NTD 500 million (USD 17 million) and NTD 1.5 billion (USD 51 million) in capital take three to five days to screen, and the approval authority rests with the Investment Commission’s executive secretary. For investment in restricted industries, in cases where the investment amount or capital increase exceeds NTD 1.5 billion, or for mergers, acquisitions, and spin-offs, screening takes 10 to 20 days and includes review by relevant supervisory ministries and final approval from the Investment Commission’s executive secretary.  Screening for foreign investments involving cross-border mergers and acquisitions or other special situations takes 20-30 days, as these transactions require interagency review and deliberation at the Investment Commission’s monthly meeting.

The screening process provides Taiwan’s regulatory agencies opportunities to attach conditions to investments in order to mitigate concerns about ownership, structure, or other factors.  Screening may also include an assessment of the impact of proposed investments on a sector’s competitive landscape and protection of the rights of local shareholders and employees. Screening is also used to detect investments with unclear funding sources, especially PRC-sourced capital.  To ensure monitoring of PRC-sourced investment in line with Taiwan law and public sentiment, Taiwan’s National Security Bureau has participated in every investment review meeting since April 2014, regardless of the size of the investment. Blocked deals in recent years have reflected the authorities’ increased focus on national security concerns beyond the negative-list industries.  The proposed revisions to the main investment statute would, if passed, allow the authorities to apply political, social, and cultural sensitivity considerations in their investment review process.

Foreign investors must submit an application form containing the funding plan, business operation plan, entity registration, and documents certifying the inward remittance of investment funds.  Applicants and their agents must provide a signed declaration certifying that any PRC investors in a proposed transaction do not hold more than a 30 percent ownership stake and do not retain managerial control of the company.  When an investment fails review, an investor may re-apply when the reason for the denial no longer exists. Foreign investors may also petition the regulatory agency that denied approval, or may appeal to the Administrative Court.

Other Investment Policy Reviews

Taiwan has been a member of the World Trade Organization (WTO) since 2002.  In September 2018, the WTO conducted the fourth review of the trade policies and practices of Taiwan.  Related reports and documents are available at: https://www.wto.org/english/tratop_e/tpr_e/tp402_e.htm.  

The Organization for Economic Cooperation and Development (OECD) and United Nations Conference on Trade and Development (UNCTAD) have not conducted investment policy reviews of Taiwan.  

Business Facilitation

MOEA has taken steps to improve the business registration process and has been finalizing amendments to the Company Act to make business registration more efficient.  Since 2014, the company registration application review period has been shortened to two days, while applications for a taxpayer identification number, labor insurance (for companies with five or more employees), national health insurance, and pension plans can be processed at the same time and granted decisions within five to seven business days.  Since January 1, 2017, foreign investors’ company registration applications are processed by the MOEA’s Central Region Office.

In recent years, the Taiwan authorities revised rules to improve the business climate for startups.  With the goal of developing Taiwan into a startup hub in Asia, Taiwan launched an entrepreneur visa program allowing foreign entrepreneurs to remain in Taiwan if they raise at least NTD 2 million (USD 66,000) in funding.  Taiwan has initiated rules to enable IP rights (IPR) holders to use intellectual property (IP) as collateral in obtaining bank loans, and this and other rules apply to foreign investors.

Further details about business registration process can be found in Invest Taiwan Center’s website at http://onestop.nat.gov.tw/oss/web/Show/engWorkFlow.do  

The Investment Commission website lists the rules, regulations, and required forms for seeking foreign investment approval: http://www.moeaic.gov.tw/  .

Approval from the Investment Commission is required before proceeding with business registration.  After receiving an approval letter from the Investment Commission, an investor can apply for capital verification and may then file an application for a corporate name and proceed with business registration.  The new company must register with the Bureau of Labor Insurance and the Bureau of National Health Insurance before it may start recruiting and hiring employees.

For the manufacturing, construction, and mining industries, the MOEA defines small and medium-sized enterprises (SMEs) as companies with less than NTD 80 million (USD 2.5 million) of paid-in capital and fewer than 200 employees.  For all other industries, SMEs are defined as having less than NTD 100 million (USD 3.1 million) of paid-in capital and fewer than 100 employees. Taiwan runs a Small and Medium Enterprise Credit Guarantee Fund to help SMEs obtain financing from local banks.  Foreign firms may pay a fee to obtain a guarantee from the Fund. Taiwan’s National Development Fund has set aside NTD 10 billion (USD 330 million) to invest in SMEs.

Outward Investment

The PRC used to be the top destination for Taiwan companies’ overseas investment given the low cost of factors of production there, such as wages and land.  In recent years, however, the authorities have begun assisting Taiwan firms in relocating to lower-cost markets, including in Southeast Asia. Taiwan’s financial regulators have urged Taiwan banks to expand their presence in Southeast Asian economies either by setting up branches or by acquiring subsidiaries.  The administration of President Tsai Ing-wen launched the New Southbound Policy to enhance Taiwan’s economic connection with 18 countries in Southeast Asia, South Asia, and the Pacific. The Taiwan authorities seek investment agreements with these countries to incentivize Taiwan firms’ investment in those markets.  Invest Taiwan Center provides consultation and loan guarantee services to Taiwan firms operating overseas.

According to the Act Governing Relations between the People of the Taiwan Area and the Mainland Area, all Taiwan individuals, juridical persons, organizations, or other institutions must obtain approval from the Investment Commission in order to invest in or have any technology-oriented cooperation with the PRC.  The authorities maintain a negative list for Taiwan firms’ investment in the PRC. The central authorities, Taiwan companies, and foreign investors in Taiwan are increasingly vigilant about the threat of IP theft in key strategic industries, such as the semiconductor industry.

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