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• Export Finance for SMEs

  Posted 07/10/2014

  

  UK Export Finance is the UK’s export credit agency. The organisation is well established in the UK, with a clear remit to support UK exports with a view to benefiting the economy. They do this by providing insurance to exporters and guarantees to banks to share the risks of providing export finance. In addition, they can make loans to overseas buyers of goods and services from the UK.

  What type of insurance might businesses wish to consider?

  Two of the main types are;

  • Insurance for UK exporters against non-payment by overseas buyers, and;
  • Insurance for investors in overseas markets against political risks.

  However, sometimes exporters find that even if they do secure a significant export order, there is little support from the banking sector to enable them to realise the order. Not many SMEs have sufficient financial standing to secure funding from banks and thereby qualify for the insurance on such loans which is available to banks through UK Export Finance.

  Finance may be needed throughout the process of sourcing raw materials and manufacturing until full payment has been received on an order. However, often innovative arrangements for financing different stages of an export deal can be agreed with the customer. A recent example of this in respect of exports to Kazakhstan was where a security company won a £1.4 million order for a project to provide protection to a school (funded by international oil companies). Significant outlay at the manufacturing stage was alleviated by the customer in Kazakhstan agreeing to pay 50% of the unit costs upon delivery.

  Good business relationships are always an advantage

  Clearly, it is to the exporter’s advantage in this regard if a good business relationship has already been established, either directly or through an intermediary. Small business owners often don’t have the time or resources to pursue international sales. However, if there is a demand for their company’s products or services, use of an export intermediary can prove extremely beneficial.

  If you would like to talk to us about the prospects of your SME exporting successfully to Kazakhstan, please get in touch.

  Posted in: Opportunities for SMEs

• Getting to grips with Kazakhstan Withholding Tax

  Posted 29/09/2014

  In the first edition of our Kazakhstan Tax Series, we set out some tax tips for companies who have already registered a business or a branch of their business in Kazakhstan. Getting to grips with tax issues in a foreign country involves careful preparation to make sure your business does not, in the worst case scenario, fall foul of the relevant rules and regulations. Best case scenario is that you are up to date, fully aware and in a position to take advantage of all available tax breaks. Ideally, such work needs to be done well in advance to ensure that your company gets it right from the outset. In this edition, the focus is on with-holding tax (WHT) and non-resident VAT.

  

  Top Tips on WHT and non-resident VAT

  It is essential that you properly account for tax on overseas supplier invoices. Typically these taxes will be with-holding tax and non-resident VAT.

  Why?

  There are good operational reasons for doing so.

  Let’s imagine that one of your Kazakhstan customers has asked you to supply items which you’ll need to import. Perhaps they’re not part of the every-day package of services which you deliver locally on unit rates (e.g. day or project rates). Many clients operating in the oil and gas sector will allow you to mark-up the cost of a product by an agreed percentage to cover your procurement costs and profit. It’s a straightforward way of meeting the customer’s needs, and adding to your profits (although it may well reduce your profit margins if you are used to a higher margin on your day-to-day work).

  What’s the catch?

  If you fail to correctly account for WHT or non-resident VAT you may risk wiping out the profits you should have made. For instance, if you mark-up the invoice without including WHT, you may not receive sufficient income from your supplier to cover the WHT, let alone the procurement costs and profit which you should have covered. In our experience, it’s unlikely that clients will accept retrospective claims for additional costs, and the tax remains payable whether or not you recovered it from your client.

  You may be at particular risk of falling foul of this issue if you have a branch in Kazakhstan, but your head office is paying the supplier’s invoices.

  Check you are correctly accounting for WHT and non-resident VAT BEFORE you mark-up supplier invoices for payment by your client.

  If you are considering setting up a business or are already established in Kazakhstan and could benefit from advice on tax or other business issues, we’d be delighted to help.

   Contact us for further information.

  The above information is for general purposes only and is not intended and should not be construed as legal, accounting or tax advice. The content may not be applicable or suitable for every individual’s particular circumstances and should not be used as a substitute for consultation for professional advice on tax or accounting matters.

   

   

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  Disclaimer: This blog is provided for information purposes only. We accept no responsibility for any losses arising from any action you take or do not take as result of this information. If you require specific advice, please contact us and we will be happy to help.

  Posted in: Tax

• How to begin your Export Success Story

  Posted 15/09/2014

  Often export success stories involving businesses tapping into the huge potential market in Kazakhstan cite the need to take the long term view.  Many large corporates emphasise the importance of taking time to establish local partnerships and relationships.

  Companies who have built up experience within the country place high value not only on partnerships, but also upon another virtue – patience. The volume of government regulation can appear daunting initially, especially for those without local help or experience.

  But how many SMEs can afford the time and expense involved in developing business relationships? And will it all be worth it?

  When you realise that you’re talking about a country which is geographically larger than the whole of Western Europe – a fact which alone commands attention – potential rewards are exciting. Kazakhstan has a population of 17 million people and has been led by President Nazarbayev since becoming independent of the former Soviet Union in 1991. Notwithstanding its own size, the country is dwarfed by its neighbours, China and Russia and yet scored ahead of these superpowers on its borders in a 2014 World Bank survey on the ease of doing business in various countries.

  The fact that several countries, including China, Canada and some from Western Europe continue to eye the country’s potential, attracted perhaps by the wealth of its natural resources, particularly oil and gas, speaks volumes. In addition, the government has begun to implement reforms in the energy sector and simplify regulatory requirements, for example, as to visas, which should make it even easier to do business there.

  As for the business relationships, the easiest way to get around this is to let an agent with the relevant knowledge, experience and contacts represent you, your products or services. This way any burden upon cash flow can be neatly avoided, not to mention a raft of time consuming research and business relationship building. Exports can be directed straight to the right buyer and market and with the additional advantage of accessible advice as to local business practices and procedures, there need be no sleepless nights worrying about business faux pas.

  Makes sense, right? Let us do the talking for you. What have you got to lose?

  If you’re interested in setting up exports to Kazakhstan or getting help with doing business there, get in touch.

   

  Posted in: Opportunities for SMEs, Recent Developments

• Pushing to New Export Markets?

  Posted 28/08/2014

  Successful exporting is often about knowing where and how to tap into demand for your products and services. Choosing the right international market is crucial to your success, whether your company is just starting out in export or already a seasoned exporter.

  So where do you start?

  

  Thorough market research is vital before you launch into doing business in a new country. It’s not only about finding a country where demand for your exports will be high – understanding the market will be just as important if you are to get your market entry strategy right.

  How to assess overseas market risks

  Research into potential export markets should include careful analysis of any:

  • Business risk – how will you avoid the pitfalls of a different business and social culture? Knowledge of local custom and practice will help you to avoid causing offence, misunderstandings and delay.
  • Legal or regulatory risk – what difficulties might arise from doing business under an unfamiliar legal or regulatory framework and dealing with different regulatory bodies?
  • Political risk – how stable is the market politically, economically and socially.

  Not only can the cost of such international research mount up, it also requires significant investment in terms of time – a resource which is often in short supply in the SME sector. How many business owners have time to travel to other countries to find out how local business operates? Not to mention the strain such enquiries could place on cash flow. Whilst government assistance may initially be available through UKTI, more detailed knowledge about an overseas market may be harder to come by without some form of partnership with an agent or company with the right knowledge and experience.

  This is where specialist companies like Kazopp can be invaluable. We can help by guiding your SME to where the potential demand is and working with you to facilitate your route into exports to Kazakhstan. We’ve already done the leg work in country and have built up knowledge, experience and most importantly, the business contacts and relationships which can give SMEs new to the country a head start.

  If you’re interested in starting or expanding your export portfolio, then get in contact with us.

   

  Posted in: Opportunities for SMEs

• Kazakhstan tax return deadlines appoach

  Posted 28/11/2013

  For those companies that are already trading and tax registered in Kazakhstan, please note that the tax year end is now approaching  and for those that have traded better than expected it may be necessary to make an additional advanced Corporate Income Tax (“CIT”) declaration for the tax year ended 31 December 2013. Read More…

  Posted in: Recent Developments