Local Integration
Partnership Action
Legal Frameworks
for Migrant
and Ethnic
Minority Entrepreneurs
This document is available in English,
French and Spanish
lia / elaine
European Centre
for Work & Society (ecws)
Hoogbrugstraat 43,
NL - 6221 CP MAASTRICHT
P.O. box 3073, NL
6202 NB MAASTRICHT
Tel: +31 - (0)43 -
321 6724
Fax: +31 - (0)43 -
325 5712
Email: qualifications@ecws.nl
Introduction
This paper gives a brief summary of the legal contexts for migrant and ethnic minority entrepreneurs, in Denmark, Spain, the United Kingdom, the Netherlands, and Belgium. The aim is to contribute to a better understanding of national, regional and local government policies affecting ethnic entrepreneurs. This overview does not pretend to be exhaustive, but to give a general overview for each country. The present is based on information submitted by the lia cities.
Denmark
Danish legislation does not include special regulations for ethnic entrepreneurs. The general legislation applies equally to foreign entrepreneurs, which implies that every foreigner who has a residence and work permit, is entitled to start up his or her own business, under the same conditions as autochtones.
Legislation exists which stimulates the access to entrepreneurship from the ranks of the unemployed, regardless of their ethnic background. Starting entrepreneurs can receive grants from the government, up to an amount of 100,000 ecu's over a three-year period.[1] The actual amount given depends on the disadvantages that the starting entrepreneur is facing. This can be related to physical disabilities, social background, etc. The rules aim at benefiting would-be entrepreneurs in three main areas:
Starting entrepreneurs who receive unemployment benefits can apply for subsidies to cover part of their expenses on counselling and education (up to 70% of the total costs). The legal basis for this is the Law on Subsidising Entrepreneurs. For funding, applicants should elaborate a business plan that is approved by an appointed business councillor. Starting entrepreneurs are free to seek approval of their business plan within all sectors, except for farming and fishing.
Persons receiving social welfare benefits can receive economic subsidies within the framework of the general Law on Social Welfare. To receive subsidies, it is a condition that the starting entrepreneur suffers from various obstacles, such as lack of education, disability, social problems, integration problems, etc. Furthermore, the applicant has to show that he or she has the necessary vocational and business skills and that the intended business has positive long-term prospects. If this is the case, the starting entrepreneur can receive subsidies for rent, office equipment, means of production, stock or raw materials, starting capital, etc. These subsidies can be provided in the form of grants, loans, or interest-free loans. Economic support is granted for a two-year period. It is the obligation of the municipal departments to follow the development of the subsidised businesses closely, and to assist or to make adjustments if necessary.
Starting entrepreneurs receiving social welfare benefits, but not suffering from social, physical or other handicaps, cannot apply for the above-mentioned subsidies. However, according to the Law on Municipal Activation, they can apply for an amount equal to 50% of the social welfare benefit over a maximum period of two and a half year. If the business is successful, this subsidy will be lowered or stopped, depending on the profits being made.
On the local level there are examples of regulations and projects specifically aimed at encouraging ethnic entrepreneurship, such as the 'Bazar West' project in Århus, which is part of the lia initiative.
Danish laws and regulations concerning entrepreneurship do not make an explicit distinction between autochtones and migrants/ethnic minorities. However, several regulations do exist, enabling and supporting unemployed and disadvantaged would-be entrepreneurs to establish their own business. Since many migrant and ethnic minority entrepreneurs generally encounter more obstacles than others, many are likely to qualify for these regulations. So, the general legal framework also provides room for migrant and ethnic minority entrepreneurs.
Spain
Foreigners who want to set up a business in Spain need a self-employment work permit. The main requirements to obtain a self-employment work permit are the following: possession of a residence or work permit, an enterprise report / business plan, and any other documents that indicate 'positive features', like legally living in the country for 5 years, having some Spanish nationalised family etc.. The more documents one encloses, the higher the chance to obtain a self-employment work permit. As the permit is temporary, the entrepreneur should renew it after a certain period.
The national and regional governments have developed policies to stimulate self-employment and the creation of enterprises among unemployed, but there are no special laws and regulations for foreigners setting up a business. However, migrants and ethnic minorities can apply for these general regulations if they are legally established in the country and are unemployed.
The aim of the government's policies to stimulate self-employment is to create new stable jobs, promote starting businesses, specific types of companies, and self-employment services (entrepreneurs training and counselling). In this context, the following measures have been implemented:
Unemployed people aspiring to start their own business, have the right to a 6 point reduction on the interest rate of loans and for a grant of 500,000 Spanish pesetas. New entrepreneurs can apply for the Local Employment Initiatives Grant, if they fulfil the following requirements: innovative, positive economic evaluations, creation of stable jobs and support for the project by a local self-employment service. The support can amount to 700,000 Spanish pesetas for each stable work contract within the enterprise, a reduction of 6 points in interest on a loan and a maximum 500,000 Spanish pesetas grant to train the enterprise manager.
Starting entrepreneurs have the right to a 75% reduction on local taxes in the first year. For applicants older than 45 years, this reduction may even be 100%. Furthermore, the government assists self-employment services to offer assessment and training to new entrepreneurs. The government supports Co-operations and Anonymous Limited Societies by granting funds for assessments and staff training, discounts in taxes and licenses etc.
On a local level, there are various initiatives, such as an unemployment foundation that, with the support of the local authority, provides interest-free loans to a business project, initiated by unemployed, qualified people. Some banks and local organisations have made agreements to improve credit conditions and to reduce interest rates.
Thus, within the Spanish context, foreign entrepreneurs face more administrative obstacles, since they need a self-employment work permit. However, once they have obtained this permit they can also apply for the various regulations for starting (and unemployed) entrepreneurs.
United Kingdom
In the United Kingdom there is not a specific framework for legal protection or promotion of entrepreneurship that relates to the needs of ethnic minorities. However, there are some national laws and regulations that aim to stimulate entrepreneurship in general.
Under the Urban Programme funding from the central government (which finished in 1993), local authorities were able to fund a whole range of community initiatives, including those in entrepreneurship. Grants were given to ethnic minority applicants to promote their training, entry into business and encourage new start-ups.
There is a general legal framework under the Race Relations Acts (1976),that seeks to protect the rights of migrants and ethnic minorities in different spheres of life, which can also apply to promoting equal opportunities in the area of entrepreneurship. Ethnic entrepreneurs can face direct or indirect discrimination, e.g. with the sale or purchase of premises or licensing laws.
The Race Relations Act makes it possible to set up special provisions for particular racial groups, commonly referred to as Positive Action. In the case of ethnic entrepreneurs this applies only to training. Under certain conditions, the law allows special provisions in training targeted at certain groups, as a means to remove the cumulative disadvantages they face. For instance, business education for particular migrant and ethnic minority groups helps them to enter business. Although the Race Relations Act legally protects ethnic entrepreneurs from discrimination, the application of the legal procedures is extremely difficult, since a racial motive is very hard to prove in case of alleged discrimination.
At the local level, various initiatives exist to promote ethnic entrepreneurship. Often it is possible to apply for specific local authority support when starting a business, such as credit facilities, training or other forms of support. Many local authorities have established Enterprise Centres, in partnership with private businesses. These centres provide sheltered workplace and training facilities for (starting) entrepreneurs. In some cities, specialised agencies have been set up to attract investment resources (grants, bank loans, etc.), which are used to support small ethnic minority enterprises. These agencies are comparable to investment trusts. Other local authorities provide special refurbishment grants for small enterprises to upgrade their premises.
Thus, in the British context there are no specific laws and regulations to promote entrepreneurship among migrants and ethnic minorities on a national level. However, some national programmes exist to promote entrepreneurship in general. Nevertheless, anti-discrimination legislation does also contain clauses to guarantee equal opportunities for ethnic entrepreneurs. Finally, at the local level many initiatives have been developed to specifically support entrepreneurs with a migrant and ethnic minority background.
Netherlands
In the Netherlands there are no specific laws or regulations for migrant and ethnic minority entrepreneurs. This means that a starting ethnic minority entrepreneur has to fulfil the same criteria as other starters. Besides the requirement of having a residence and work permit, he/she has to register his/her business at the Chamber of Commerce, and apply to the Tax Office for a tax code in order to pay a range of taxes. Furthermore, depending on the kind of business activity, additional rules and regulations (e.g. certificates) may be applicable to entrepreneurs.
There are a number of special laws and regulations, aiming to help starting entrepreneurs, regardless of their ethnic origin. One fiscal measure is the so-called Tante Agaath Regeling, which implies that private persons that are lending money to a starting entrepreneur have the right to a tax deduction. In this way, starters get easier access to private credits. According to the Kleine Ondernemersregeling (Regulation on small businesses), small businesses do not have to pay vat (Value added tax), if they earn under a certain minimum income. This minimum has been raised recently.
The Dutch Government is currently considering facilitating the establishment of businesses by unemployed starters, mainly through making legislation and regulations more flexible. At this moment, several ministries are jointly carrying out pilot projects in a number of Dutch cities. The aim is to experiment with financial and procedural measures to encourage entrepreneurship among unemployed people. This means that the unemployed can start their own business, yet still receive unemployment benefit for a 6 to 18 month period. Furthermore, the application procedures have been simplified, and the starting entrepreneur can get support for creating a business plan. It is also easier to get access to state credit, and credit limits have been raised recently.
Finally, the Dutch government is preparing an act which enables local authorities to ease restrictions on entrepreneurship in the so-called empowerment zones. These are designated areas in big cities, characterised by high unemployment. The act aims to attract new businesses and to support starting entrepreneurs. According to this act, starters have to fulfil less requirements (such as specific certificates) to get certain business licences. Under current legislation, these requirements are often an important impediment for would-be entrepreneurs. This act applies to entrepreneurs from all ethnic backgrounds. However, since the empowerment zones are generally characterised by a multicultural population and a high concentration of ethnic entrepreneurs, this act will probably stimulate entrepreneurship among migrants and ethnic minorities in particular.
On the regional and local level, especially in big cities, there are various initiatives specifically targeted at ethnic entrepreneurs. One example is the Buitenlands Starters Centrum (Foreign Starters Centre) in Utrecht, that supports starting ethnic entrepreneurs with setting up their business, and which is part of the lia initiative.
In the Netherlands, would-be entrepreneurs have to fulfil a relatively large number of formal criteria. However, for legally residing foreigners these are the same as for autochtones, and ethnic entrepreneurs have the same rights to various general regulations aiming to encourage entrepreneurship. Moreover, the Dutch government is developing legislation to make it easier to establish an enterprise in specific urban areas, generally characterised by high concentrations of migrants and ethnic minorities.
Belgium
There are no special laws and legislation to promote ethnic entrepreneurship in Belgium. In principle, ethnic entrepreneurs have to fulfil the same criteria as autochtonous entrepreneurs. This implies that one should be listed in the commercial register, that one has to apply for a vat number etc. For some sectors, specific professional certificates are required.
In addition, foreigners also need to apply for the so-called beroepskaart (Profession Card) at the local authority. Only eu-citizens and recognised political refugees are exempted from this obligation. This generally involves much money, time and uncertainty. Since application and granting procedures are often inconsistent and arbitrary, many ethnic entrepreneurs experience this regulation as discriminatory. This regulation constitutes an extra bureaucratic impediment to ethnic entrepreneurship. Moreover, the beroepskaart is only granted for a period of five years, and needs to be prolonged. This obviously discourages ethnic entrepreneurs from making long-term investments.
There are a number of rules and regulations that give support as well as financial and fiscal benefits to starting entrepreneurs, regardless of their ethnic background. For example, the Flemish Institute for Independent Entrepreneurship (vizo) gives special advice and support to ethnic entrepreneurs, charging low rates for this. The Flemish Government itself offers free advice to starting entrepreneurs. It also subsidises business counselling with third parties (such as vizo). Furthermore, there are certain Investment Companies, that help to collect the required starting capital.
According to the Expansiewet voor Kleine Ondernemingen of Flanders (Expansion Act for Small Enterprises) starting entrepreneurs can apply for financial and fiscal benefits, if they invest in the Flemish region. The so-called Participation Fund provides credit (under favourable conditions) to starting entrepreneurs. Moreover, small enterprises are exempt from paying vat. Starting entrepreneurs under the age of 35 have the right to certain tax benefits.
On the regional and local level, there are several initiatives specifically aimed at promoting ethnic entrepreneurship, for example in urban areas with high unemployment and concentrations of migrants and ethnic minorities. One example is the 'New Perspectives, New Horizons' projects in Genk.
In Belgium, would-be ethnic entrepreneurs face considerably more obstacles than starters without a migrant and ethnic minority background. However, once they have acquired the beroepskaart, they can make use of the regulations supporting starting and small enterprises.
Conclusion
In the United Kingdom, the Netherlands and Denmark legally residing migrant and ethnic minority entrepreneurs, possessing a work and residence permit, are facing the same laws and regulations as autochtonous people. In Belgium and Spain migrants and ethnic minorities have to apply for special permits, in order to be able to start a business. Since these procedures can be bureaucratic and the permits are temporary, this forms an important impediment to ethnic entrepreneurship.
In all countries special laws and regulations exist which aim to support starting entrepreneurs. This support is commonly provided in the form of credit facilities, tax benefits, business training and counselling. In general, starting entrepreneurs can apply for these provisions regardless of their ethnic background. On national level, legislation and regulations specifically meant to promote entrepreneurship among migrants and ethnic minorities is virtually non existent. However, some general measures may have beneficial side-effects on ethnic entrepreneurs.
Dutch legislation meant to promote entrepreneurship in specific urban areas with high unemployment will probably be particularly beneficial for ethnic entrepreneurs living in these areas. In the United Kingdom, the emphasis is very much on anti-discrimination legislation (Race Relations Act) and the promotion of equal opportunities. These measures also apply to the area of entrepreneurship, where equal opportunities are legally guaranteed. In Denmark, the level of (financial) support provided to starting entrepreneurs receiving unemployment benefits is related to the number of obstacles one is facing. This implies that ethnic entrepreneurs might have a higher chance of receiving support.
Whereas national legislation and regulations aim to provide support to starting entrepreneurs regardless of their ethnic background, many local authorities have developed regulations and/or projects specifically meant for ethnic entrepreneurs.
This paper is based on information provided by various people involved in the lia initiative. Therefore, we would like to thank the following:
Sitla Bonoo Amrit Consultancy - Den Haag
Erwin de Bruyn Gemeente Genk
Xavier Durany Ayuntamiento de Barcelona
Pieter Mosterd Buitenlands Starters Centrum - Utrecht
Gert Philippeth Gemeente Genk
Ana Ros Ayuntamiento de Barcelona
Satish Sachdeva Sheffield City Council
Verner Stein Local authority of Århus