Everything you need to know about trade in services

Everything you need to know about trade in services

Today, as globalization consolidates, it is more and more frequent that more and more companies decide to start with trade in services in order to seek new markets and increase their client portfolio.

However, we usually find ourselves with greater difficulties with regard to the trade of goods, especially in the legal sphere, since it is not possible to export any type of services, as occurs, for example, with health and education, which are services that have a public interest.

In addition, it is necessary to do a suitable investigation of the service market, to better know the target companies and we can offer them better service. Today we will talk about the agreements that govern trade in services.

General Agreement for trade in services

Regarding trade in services, it is necessary to take into account the General Agreement on trade in services (GATS) that regulates it.

Within the services to export, we have several types:

  • Trade-in cross-border services, where the provider and the client operate directly from their countries, without the need for any physical movement.
  • Reverse export, where the customer travels to the supplier’s country and receives the service.
  • Movement of individuals, where the service provider travels to the country of destination, in order to offer the service.
  • Establishment abroad, where the supplier establishes a headquarters in the destination country and from there, offers the service.

Legal aspects for the internationalization of services

Today many companies, both goods, and services, are choosing to internationalize, in order to reach other markets that allow, not only to grow the company but to survive due to issues such as the lack of internal demand, although there is less and less talk of internal and external demand, going on to speak simply of demand. However, this can generate numerous complications on the fly, since the regulations that govern the services offered by the exporting company may differ in some aspects, which should not be overlooked.

These aspects are:

  • The existence of international agreements between trading countries.
  • Whether the service we sell is exportable or not, in accordance with GATS regulations.
  • The political-legal stability of the country, which may hinder or promote the provision of the service in the destination country.
  • The taxation to be applied, since we are talking about operations with a third country, so international double taxation should be avoided. In the case of services to companies, this will imply that, within the legal framework of the EU, the company receiving services will not have to pay VAT, however, they must present an invoice within the period in which the tax prescribes. Likewise, it will also depend on whether or not the service is provided within the fiscal territory. In this case, the VAT levied in the destination territory will be passed on.
  • Administrative aspects. Taking into account that we are going to sell abroad, it is very important to know the administrative regulations of the country of destination, since we may find that some of these services cannot be traded.

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