Offshoring, Taxation, Business Management, and Legal Frameworks

Posted on Dec 18, 2024 in Economy

Offshoring

Offshoring: The global trend has led to employment having recourse to it. This is not a new phenomenon, but it is already widespread. It is the act of transferring production from industrialized countries to developing countries characterized by having levels below their per capita income and wages of half the population, with the sole purpose of minimizing costs. By minimizing costs, employers manage to produce at a cheaper price than the competition and be competitive, and may sell at lower prices. In the company, offshoring is interested in reducing costs, but must consider other factors such as infrastructure, legislation, the potential growth of the country, etc. We find:

  • Companies that completely close their plants in the originating country.
  • Companies that reduce their production to a representative level, remaining in the country of origin.

In either of the two cases, offshoring has an important effect on the country of origin, increasing unemployment and disinvestment, phenomena that affect the economy of the country. In the recipient country, it has the opposite effect, with more favorable phenomena for its population.

Taxation and Society

Taxes are the main source of state revenue to meet the expenses that are budgeted and are based on the principle of equity, equality, and income redistribution in society. They are mandatory. According to the Constitutional Court, a breach of this social obligation is considered tax fraud. This is committed by a natural or legal person who uses deceptions to partially or totally skip payment or obtain a tax benefit, causing undue prejudice to the Treasury when it is at least 120,000€. Defrauding the IRS is a crime and is regulated by the Criminal Code.

Company Planning

Planning is to set goals, establish strategies, define business policies, and decision criteria to achieve an end. The distinction between goals or aims and objectives is that the objective is the realization of the goals. The goals must be realistic, achievable, involve minimal costs, and always prioritize. There are different types of plans, and according to their temporal dimension, long-term plans (periods longer than 5 years), medium-term plans (planning between 1 and 5 years), and short-term plans (under 1 year) are distinguished.

When making a plan, companies follow different stages:

  1. Analyze the situation.
  2. Set objectives.
  3. Evaluate and develop possible alternatives for action.
  4. Choose an alternative and control its effectiveness.

Organization of the Enterprise

Organization allows setting plans into real ones. The organization’s function is creating a structure that defines the roles of individuals, responsibilities, authority, and relationships between different positions, areas, functions, etc. One of the important elements is the way of communication within the structure. There are two types of communication: vertical (which is between the different hierarchical levels, and at the same time, there are two ways: upwards and downwards) and horizontal (that is between persons of the same hierarchical level).

Throughout history, there have been various theories about the organization of the company:

Maslow based his theory on a humanistic view of the worker. People have needs that produce dissatisfaction when not achieved. Therefore, the push for a person to get a need is called motivation. Maslow divided needs into 5 different types, in a pyramid:

  1. Self-actualization (achieving the goals one is proposed)
  2. Esteem (has to do with the internal assessment)
  3. Social (those that relate to love, friendship, etc.)
  4. Safety (entrench the above, get a permanent job, etc.)
  5. Physiological (food, drink, sleep, etc.)

Company Management

Management is to make people perform the tasks they are entrusted to, achieving the targets. Typically, the management of a company is carried out at different levels of authority (senior, intermediate, and lower level).

Human Resources

The department of human resources is formed by a group of people who are organized in the company to get:

A) Organize and plan for staff.
B) Selection and hiring of staff.
C) Administration of staff.
D) Training of human resources.
E) Relations.
F) Control of staff.
G) Knowledge management.

Duties of the Department

1) Organization and Planning of Staff: Staffing is a function of the company to design the appropriate jobs, define roles and responsibilities, anticipate needs for personnel in the medium and long run, analyze salary systems, promotions, etc.

2) Selection and Recruitment of Staff: Based on the correct choice of people. To make a good selection, these steps should be followed:

  • Determine the exact profile of the right person to fill the vacancy or new position. You can develop a job profile (personal qualities).
  • Recruit candidates. It can be done through an internal selection (offering the job to any employee working in-house) or externally (if you extend the template). To find out about a person, the company uses ads, job boards, INEM, etc.
  • Make a selection process. Study the curriculum, conduct the first personal interview, and so on.
  • Make the ultimate recruitment of the person.

3) Administration of Staff: This is to manage the paperwork and documentation of staff in relation to the company.

  • Selection and training of contracts.
  • Processing of payroll and social security.
  • Control and duties of the worker (holidays, maternity leave, etc.).

A) Selection and Training of Contracts: A work contract is a document where the relationship between the employee and employer is collected. The work contract is individual.

Definition: It is an agreement where the employee wishes to undertake gainful service under the direction of the entrepreneur and access the fruits of what is obtained. It is a relationship on behalf of another.

B) Types of Contracts

  • Indefinite-Term Work Contract (Permanent): This is a contract in which the contracting parties do not set a specific date for the extinction of the employment relationship. The work time is not defined, it is indefinite.

  • Temporary Work Contract: This is a contract in which a specific extension date is set.

  • Training Contract: Allows untrained youth to develop a position or skilled work. There are two types:

    • Internship Contract (for young newly qualified individuals). Its objective is to provide gainful employment that allows the worker to apply and further their knowledge and practices, facilitating the first appropriate level of studies.

    • Contract for Training. Its aim is that the worker acquires the theoretical and practical training that enables them to adequately develop a position or skilled work.

C) The Payroll: It is a receipt that includes all the wage perfections. The payroll consists of the following parts:

  • Base salary.
  • Supplementary payments.

Commercial Law

Commercial Law is the law that governs economic activity, which, through an organization of personal and real items, develops an employer. Economic activity is performed in an enterprise. The object is the typical activity of companies. It deals with issues such as: business, businessman, legal form of business, advertising, accounting, etc.

The Code of Commerce is the main legislative framework for commercial operations in Spain. However, it does not cover all commercial law, but most commercial arrangements are in special laws, as the company and its activity evolve rapidly and are changing. These special laws are many and also undergo changes: Suspension of Payments and Bankruptcy Law, Unfair Competition Law, Advertising Law, Law of Registered Models, Patent and Trademark Law, etc.

Duties and Rights of the Enterprise: Accounting Standards

Collect accounting obligations.

  • The employer must keep proper accounts, appropriate to the activity of the company, that allow for tracing the chronological order of all operations, the regular production of inventory and balance sheets, an inventory book, annual accounts, and a journal.
  • Accounting will be kept by employers or duly authorized persons (it is understood that authorization has been granted if there is no evidence to the contrary).
  • Companies must keep a book/record showing all resolutions passed at general and special meetings and other organs of society, with the expression of the dates regarding the convening and constitution of the organ; a summary of the issues discussed; interventions for which a record has been requested; and the results of voting.

Competition and Advertising

In order to ensure competition in the markets and achieve fairness, laws have been created to defend against unfair competition. The Competition Act punishes behavior that may prevent, restrict, or distort market competition. Some of these behaviors are price fixing outside the law of supply and demand, or market-sharing of supply sources with the objective of dominating the sector. The Act prevents companies from abusing a dominant position.

Unfair Behaviors: Omit or distort facts about the product itself, or acts that disparage competitors’ products. The Advertising Act aims for advertising to be done fairly, without causing harm to people, or violating rights and values recognized in the constitution. The Act prohibits misleading, unfair, and subliminal advertising.

Industrial Property and Consumer Protection

The State has established rules that protect industrial property in order to protect the creators of new inventions and techniques that can be applied to industrial processes, as well as the producer, manufacturer, or dealer, with the creation of special signs (that distinguish the product from others and protect it from exploitation by others).

Modalities of Industrial Property:

  • Inventions, which include patents (models and utility models, and industrial and artistic designs).
  • Distinctive marks, which include the trade name, trademarks, and labels of establishment.

This law allows the industrial use, for a time exclusively, of previously patented inventions and innovations. The patent recognizes the exclusive right of exploitation, for a specific time of your application, to whoever has made a new invention applicable to the industry. This right belongs to the inventor, who can sell, donate, or bequeath it. All patents are published in the Industrial Property Registry. The consumer is also protected by the Law for the Defense of Consumers and Businesses. The law recognizes the right of consumers and users to be compensated for damages demonstrated in the consumption of goods or the use of property, and establishes administrative penalties for companies that fail to comply with consumption rules.

Commercial Registry

A state agency under the Ministry of Justice, through the Directorate General of Registries and Notary, aims at official legal advertising of the substitutions of employers enrolled in it, in addition to other functions assigned by law.

Objects:

  • Add companies upon their constitution.
  • Legalize company books, appoint auditors and experts, and deposit accounts and accounting documents.
  • Add the proxies appointed by the company.

The Commercial Registry is divided into Territorial Registries, one in each province capital, one in Ceuta and Melilla, and a Central Registry that gathers information throughout the state. The publicity provided by the Commercial Registry is purely informative. To obtain certification or a simple note of its content, you must apply to the relevant provincial Commercial Registry.

Tax Law

The City Council arises from the need for state income to cover public expenses, which are reflected in detail in the Budget of the State (including the annual economic and financial plan made by the Government, a detailed list of all economic needs of the State for the year that are approved, the list of expenses, and any revenue to cover them). This is done by the General Tax Law, which establishes the legal framework for the development of the various taxes and tax regulations, defines the main tax concepts, provides the writing and functioning of entities, and establishes the procedure for tax management.

Taxes and Classes

These are the main revenue classes in the State budget. They have a binding character for taxpayers, and their purpose is to obtain the necessary resources to finance spending or control the economic activity of the country (macroeconomic policy).

Rating:

  • Fees: Monetary benefits to a public entity, in exchange for a public service or the embodiment of an activity supplying a benefit directly to the user (enrolled in a public university, admission to a public facility, etc.).

  • Contributions: Taxes are paid to a public entity in a particular part, for a given reason, whose benefit intervened with the money obtained will be for taxpayers (who pay the tax) and the whole community (lighting, urban improvement, etc.).

  • Taxes: Payments required by the public administration for which there is no direct consideration for the taxpayer nor a particular destination for this money (i.e., Social Security tax).