Doing business in Central and Eastern Europe
Growth sluggish but incentives remain, says new report from Nexia International
Central and Eastern Europe continue to provide attractive inward investment opportunities – even if the region is expected to record the slowest growth among world emerging markets in 2011, says a recent report by Nexia International, a global network of independent accounting, tax and consulting firms.
“Most of Central and Eastern Europe was hit hard by the global financial crisis and recovery has been slow,” says Mike Bishop, regional chairman of Nexia International, EMEA. “Growth is unlikely to be more than 3% this year, excluding commodities-driven markets like Russia.”
Governments across the region have responded to recession with a range of policy moves aimed at foreign investors. The result is that inward incentive packages generally remain intact and, in some cases, there are now improved opportunities for companies to set up and do business in the region.
For example, in Hungary the government is pursuing a policy of economic reform, which includes cutting personal income and corporate tax rates to increase the country’s competitiveness for inward investment. Romania has introduced a tax exemption for reinvested profit, while Russia has established a private equity fund to act as a co-investor to direct foreign investment in industrial projects.
Mike says: “Some countries promote investment in certain sectors more than others. Do your homework and ‘shop around’ to identify those incentive packages that will be of benefit to your business.”
Nexia International’s “Doing Business in Central and Eastern Europe” report identifies a range of issues to consider when doing business in the region, some of which are summarised below.
• Ease and speed of establishing a legal entity.
• Access to credit for foreign investors.
• Availability of tax incentives, e.g. corporate tax relief for newly established or expanding companies, capital gains tax exemptions, tax allowances for SMEs, and tax reliefs for research and development.
• Existence of withholding tax on employment income, dividends, interest payments, royalties, rent or even the sale of property.
• Availability of incentive packages for investments over a certain value or in particular sectors.
• Availability of incentive packages for setting up a business in enterprise zones, industrial or business parks.
• Access to business expertise and support, quality of infrastructure and services to help overseas businesses set up.
• Options to enforce outstanding debts.
• Ease and speed of winding up a legal entity, including the ability for foreign investors to remit profits and investment capital to their home country.
The report also stresses the importance of using local advisers when doing business in the region. Local professionals who speak the language and have experience in the relevant areas of interest are crucial. They can help foreign investors get to grips with the legal, tax and regulatory environment, as well as deal with red tape – increasing their chances of success.
For a free copy of Nexia International’s “Doing Business in Central and Eastern Europe” report, please click here.