4 Foreign Business Laws You Didn’t See Coming – and What They Can Teach You About International Business
By Saul Howerton, Director, Global Chief of Staff, Advisory Services
If you’ve expanded into a foreign country, you’ve experienced the transition to a whole new set of laws and business regulations. Foreign laws governing business practices are frequently difficult to adjust to and sometimes quite frustrating. But once in a while, foreign business laws can also be downright surreal. Here are four favorites we’ve come across. We think you might learn something even from these head-scratchers.
1. Until 1997, bribery was tax-deductible in Germany. That’s right, bribery of foreign officials could be claimed as a tax deduction not only in Germany, but in several other developed countries, including France. Apparently, though, deductions were frequently denied on account of — wait for it — lack of documentation. The EU eventually banned the practice, instituting a law similar to the US Foreign Corrupt Practices Act.
2. In the Philippines, expect to provide employees with a sack of rice each month. The sack of rice, or failing that, a monthly cash subsidy of the same value, is considered a common fringe benefit there.
3. Oh, and if you’re planning to pay your Filipino employees for 12 months of work each year, you must be looking at a different calendar than the country’s Department of Labor and Employment, because the Philippines mandates that employers provide a 13thmonth of pay to workers at the end of each year.
4. In the UK, you must tell tax inspectors anything you don’t want them to know, but don’t have to tell them things you don’t mind telling them. The bewildering requirement sounds like something from George Orwell’s 1984, though you can commend Parliament for getting right to the heart of the matter. (Across the Channel, legislators are decidedly not admirers of Orwell. In France, it is reportedly illegal to name a pig Napoleon).
Wacky as the laws may seem, each exists – or existed – for a reason.
Until recently, several governments accepted the contention of many in the business community that passing bribes in the certain countries was simply part of doing business — hence the ability to deduct them. The fact that the EU now bans companies from engaging in the practice reflects the relatively recent government enforcement of a new norm, and it should serve as a reminder that just because officials in host countries may still consider bribery a part of doing business, you can now suffer consequences outside their borders for playing along.
The Philippines laws reflect the reality that requirements and social norms about employee benefits vary dramatically between countries. After all, a rice mandate is not so different from a health care mandate, or other types of non-wage and non-salary compensation.
And the UK law about what to tell tax inspectors, though somewhat head-spinning, is also quite logical. It serves as a reminder that if foreign regulators sense or can prove an intent to deceive, consequences for violations can become more serious.
It all goes to show: when you’re expanding internationally, be ready for anything.
Want to learn more? See our post on Amazon.com's Challenges in Germany.