Argentina

Argentina: Minimum and maximum basis for employee social security contributions increased to a monthly salary of ARS 16,881.84 and ARS 548,651.90 respectively from December 1, 2022

With effect from December 1, 2022, the minimum basis for employee’s social security contributions is increased to a monthly salary of ARS 16,881.84 from ARS 14,601.14 and maximum basis is increased to a monthly salary of ARS 548,651.90 from ARS 474,530.27. These bases are used for computation of employees’ portion of social security contributions.

Argentina: Monthly minimum wages increased from December 1, 2022

In accordance with Resolution 15/2022 dated November 25, 2022, the monthly minimum wages in Argentina are increased as follows: 

• From December 1, 2022 – ARS 61,953 (previously ARS 57,900 till November 30, 2022)
• From January 1, 2023 – ARS 65,427
• From February 1, 2023 – ARS 67,743
• From March 1, 2023 – ARS 69,500

The monthly minimum wages apply to workers / employees covered under Labour Contract Regime.

Argentina: New requirement for foreign individuals and legal entities processing personal data of Argentine data subjects to register themselves with the authorities.

Personal Data Protection Law No. 25.326 of 2000, governs the processing of personal data in Argentina. As per the provisions of the law, ‘persons responsible for databases’ (viz. persons holding databases and issuing reports, both) are required to register themselves with the National Registry of Databases (Registry). However, the existing system/template did not consider scenarios in which the ‘persons responsible for databases’ were foreigners.

On November 29, 2022, the Agency for Access to Public Information (“AAIP”) introduced a new web-based/online form which facilitates registration of foreign individuals and legal entities that are ‘persons responsible for databases. Now, with the availability of new form, foreign companies/ individuals with no local presence, responsible for processing personal data of Argentine data subjects can register themselves with the Registry.

Implication:

Individuals and legal entities not established in Argentina and processing personal data of Argentine data subjects can now register themselves with the Registry. By this, the Registry enabled Argentine data subjects to exercise their rights (i.e., right of access, rectification, or deletion of their personal data) before the foreign data controllers.

Australia

Australia: Increased penalties under the Australia’s Data Privacy Act and expansion of extraterritorial application of the Act

With effect from December 12, 2022, the Privacy Legislation Amendment (Enforcement and Other Measures) Act 2022, has introduced following amendments to the Australia’s Privacy Act 1988 (“Privacy Act”):

• Organisations contravening the Privacy Act will now have to pay financial penalties upto maximum of:

• AUD 50 million, or
• 3 times the value of the benefit received by the organisation (or any related organisation), whether directly or indirectly, due to any contravention by the misuse of information (i.e., where the Court can determine the value of such benefit, which is reasonably attributable to the contravention), or 
• 30% of the adjusted turnover of the organisation during the continued period of contravention/breach (i.e., where the Court cannot determine the value of such benefit received).
• Expanded the scope of extraterritorial application of the Privacy Act by removing the requirement for foreign organisations to collect or hold personal information in Australia, which was previously required for the application of the Privacy Act. Accordingly, the Australia’s Privacy Act now applies to foreign entities that carry on business in Australia, regardless of whether they collect or hold personal information in Australia. The term ‘Carrying on business’ is not defined under the Privacy Act and hence, same needs to be examined based on the activity in Australia. 

Implication:

The foreign companies operating in Australia should consider the changes and assess the applicability of the Privacy Act based on their operations in Australia.

Brazil

Brazil: Minimum monthly wages increased to BRL 1,302 from BRL 1,212 with effect from January 1, 2023

Through Provisional Measure 1143 published in official gazette dated December 12, 2022, the Brazilian Government increased the minimum monthly wages to BRL 1,302 from BRL 1,212 with effect from January 1, 2023.

Bulgaria

Bulgaria: Increases Intrastat reporting thresholds for arrivals to BGN 700,000 from BGN 520,000 and dispatches to BGN 1 million from BGN 780,000, effective from January 1, 2023

In Bulgaria, statistical reports viz. ‘Intrastat returns’ are required to be submitted in respect of the movement of goods across the national borders to or from other EU countries. Intrastat returns list down the goods sent out of Bulgaria i.e., ‘dispatches’, and goods brought into Bulgaria i.e., ‘arrivals. Intrastat returns are required to be submitted only when the reporting thresholds are exceeded, which are set at BGN 700,000 for arrivals and BGN 1 million for dispatches, effective from January 1, 2023. Prior to 2023, the thresholds were BGN 520,000 for arrivals BGN 780,000 for dispatches. 

Implication:

The businesses will need to follow revised thresholds for applicability and submission of Intrastat returns.

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Bulgaria: Increases VAT registration threshold from BGN 50,000 to BGN 100,000 effective from January 1, 2023

Bulgaria increased VAT registration threshold to BGN 100,000 from BGN 50,000 per annum, effective from January 1, 2023. When the taxable turnover crosses the threshold, the company needs to apply for VAT registration within 14 days from the end of the month in which the threshold was crossed. 

Bulgaria has also approved further increase in the VAT threshold to BGN 166,000 per annum from January 1, 2024.

Implication: 

The businesses need to consider the increased thresholds for VAT registration. 

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Canada

Canada: Canada and Quebec’s social security contribution rates and maximums for 2023 announced. (i.e., January 1, 2023, to December 31, 2023) 

The employers are required to contribute towards mandatory social security contributions, which includes contribution to the Pension Plan and Employment Insurance (EI) premiums. The Government has confirmed rates and maximum bases for pension plan contribution and EI premium for the year 2023 which are as follows:

Social Security Contributions	For the Year 2023 (January 1, 2023, to December 31, 2023)	For the Year 2022 (January 1, 2022, to December 31, 2022)
Maximum annual earnings	Contribution (in %)	Maximum annual earnings	Contribution (in %)
(In CAD)	Employer	Employee	(In CAD)	Employer	Employee
Canada Pension Plan	66,600	5.95%	5.95%	64,900	5.70%	5.70%
Quebec Pension Plan (QPP)	66,600	6.40%	6.40%	64,900	6.15%	6.15%
Canada Employment Insurance (EI)	61,500	2.282%	1.63%	60,300	2.212%	1.58%
Quebec Employment Insurance (EI)	61,500	1.778%	1.27%	60,300	1.68%	1.20%

Implication:

Employer should take note of changes in the social security contributions rates and maximum bases while processing the payroll for 2023.

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Chile

Chile: Minimum monthly wages increased to CLP 410,000 from CLP 400,000 with effect from January 1, 2023.

Through Law 21.456 – ‘The Law on the adjustment of minimum wage and other benefits’ dated May 26, 2022, the Chilean government has raised the minimum monthly wages from CLP 400,000 to CLP 410,000 for workers aged between 18-65 with effect from January 1, 2023.

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China

Revised law on the “Protection of Women’s Rights and Interests” is effective from January 1, 2023

The Standing Committee of National People’s Congress of China on October 30, 2022, passed the amended “Law of the People’s Republic of China on the Protection of Women’s Rights and Interests” (amended law), in order to enhance the protection of women’s rights at workplaces. The new provisions are effective from January 1, 2023. The highlights of the amended provisions are outlined below: –

• Provisions for prevention of sexual harassment at workplaces

Previously, sexual harassment at workplaces was not allowed as per the provisions of the Civil Code through Article 1010, which stated that employers must take reasonable steps to prevent sexual harassment and provided appropriate guidelines to address complaints and reports.

Now, the amended law (“Article 23”) prohibits sexual harassment through acts of speech, written text, images, and physical behaviours against the will of women. The amended law provides that the victimized women can complain about sexual harassment to the relevant authorities, who shall deal with the complaint in a timely manner.

Further, “Article 25” of the amended law introduces the following new obligations on employers to prevent sexual harassment:

• Formulate rules and regulations to prohibit sexual harassment;
• Designate a responsible person or institution to handle the matters;
• Provide education and training to prevent sexual harassment;
• Take necessary security measures;
• Set up compliant telephones, mailboxes, etc., and unblock complaint channels;
• Make employees aware about the procedure for filing complaints;
• Establish proper investigation and handling channels for timely managing the dispute and protecting the privacy of personal information;
• Provide psychological counselling to aggrieved women and assist in enforcing their legal rights;
• Other reasonable measures to prevent sexual harassment.
• Provisions for the elimination of gender discrimination in the hiring process

Article 43 of the amended law prohibits the employer’s undertaking the following activities: – 

• Promoting a job offer that restricts to men or prioritizes men; 
• Enquiring about the marital and maternal status of the female candidates;
• Requiring pregnancy testing as part of the hiring process;
• Restricting marriage or maternity as a recruitment condition;
• Refusing to hire women on the grounds of their gender.

The amended law also requires gender equality in processes relating to promotion, performance review training and termination of employees.

• Mandatory provisions in employment contracts

The amended law states that while hiring female employees, provisions prohibiting marriage and childbirth shall not form a part of the employment contract. The amended law requires that the following provisions shall be added in the employment contract and collective agreements for the protection of women:

• special provisions for the protection of female employees;
• provisions related to equality between men and women and protecting the rights and interests of female employees.
• Extending employment contracts for pregnant female employees including employees on maternity leave

The amendments provide that if a female employee’s employment contract expires while she is pregnant or on maternity leave, the employment contract will be extended to the end of the maternity leave.

• Regular medical check-ups for female employees

Through Article 31, employers shall make regular arrangements for health check-ups for female employees and other health checks for women’s special needs.

• Penal Provision

The amended law imposed a fine ranging from RMB 10,000 to RMB 50,000 for violating the provisions of the amended laws.

Implication:

Employers should make necessary changes to their employment policies, employment contracts and employee handbook as per the amendments in the law related to the protection of women’s rights and interests.

China: VAT exemption and reductions for small-scale taxpayers for the year 2023

The State Administration of Taxation, vide announcement No. 1 of 2023 dated January 9, 2023, unveiled the rules for VAT reduction and exemption for small-scale taxpayers (those with annual VAT taxable sales of less than RMB 5 million) for the year 2023 as follows: –

• Small-scale taxpayers with monthly and quarterly sales less than RMB 100,000 and RMB 300,000, respectively, are exempted from the VAT payment requirements for the period of January 1, 2023, to December 31, 2023.
• Small taxpayers who are subject to a VAT rate of 3% would be subject to tax rate (including prepayment) of 1% from January 1, 2023, to December 31, 2023.
• VAT additional deduction policy will be implemented from January 1, 2023, to December 31, 2023, whereby:

• Taxpayers in the production-oriented services industry will be allowed to claim deduction from their VAT liability up to 5% of deductible input VAT. Taxpayers in the productive services industry refer to taxpayers whose sales from the provision of postal services, telecommunications services, modern services and lifestyle services account for more than 50% of total sales.
• Taxpayers in the lifestyle services industry can deduct 10% of the deductible input tax for the current period to offset the tax payable. Taxpayers in the life service industry refer to taxpayers whose sales from the provision of life services account for more than 50% of their total sales.

Implication:

Taxpayers should evaluate their eligibility for various reductions and exemptions and take advantage of them. 

Croatia 

Croatia: Increases the minimum monthly gross and net wages effective from January 1, 2023

Effective from January 1, 2023, Croatian government has raised the minimum monthly gross wages (“bruto wages”) from HRK 4,687.50 to HRK 5,274.15 and the minimum monthly net wages (“neto wages”) from HRK 3,750 to HRK 4,219.32.

The ‘bruto wage’ is the gross amount of salary before any deduction of tax, insurance or social security contribution. The ‘neto wage’ is the net salary that the employee receives in hand at end of each month.

Colombia

Colombia: Tax Value Unit (“UVT”) increased to COP 42,412 from COP 38,004 for the year 2023.

The Colombian Tax authority (“DIAN”) through a resolution No. 1264 dated November 18, 2022, has increased the Tax Value Unit (“UVT”) to COP 42,412 from COP 38,004 for the year 2023 (i.e., from January 1, 2023, to December 31, 2023).

The UVT is generally required in various tax related calculations. It is used in computing tax penalties and determining income tax brackets for individuals. It is also used in computing thresholds for transfer pricing related documentation, Local file, Master file, and CBCR. It is adjusted yearly based on the accumulated variation in the retail price index.

Implication:

Companies will need to take into consideration the revised UVT for various tax calculations for the year 2023.

Colombia: Timeline extended to submit ultimate beneficial owners’ information.

The Colombian tax authority (“DIAN”) introduced the regulations for reporting of ultimate beneficial ownership information in December 2021. In January 2022, DIAN published rules for identifying ultimate beneficial owners (“UBOs”) of legal entities or structures without legal status (e.g., funds, trusts, collaboration agreements, etc.), and information that must be reported to the Single Registry of Final Beneficiaries (“RUB”).

Resolution 1240 dated September 28, 2022, extended the timelines for submission of initial UBO information to RUB, which are as under:

Incorporation date of legal entities / creation date of structures without legal status	Timeline for submission of UBO information
Before May 31, 2023 (previously, September 30, 2022)	Up to July 31, 2023 (previously December 31, 2022)
On or after June 1, 2023 (previously, September 30, 2022)	Within two months from their registration with relevant authorities (previously one month).

Implication:

The legal entities are required to submit initial UBO information in accordance with the revised timelines.

Czech Republic

Czech Republic: Increases VAT registration threshold from CZK 1 million to CZK 2 million effective from January 1, 2023

The Czech government vide Regulation 366/2022, dated December 2, 2022, amended the Act No. 235/2004, and thereby increased the VAT (Daň z Přidané Hodnoty – “DPH”) registration threshold from CZK 1 million per annum to CZK 2 million per annum, effective from January 1, 2023. The VAT registration threshold is calculated as, the total turnover of the entity for 12 consecutive months in the previous calendar year.

Every entity is required to apply for VAT registration by the 15th day of the calendar month following the month in which the threshold exceeds. 

Implication: 

The businesses should note the VAT registration thresholds and obtain registration, if applicable. 

Czech Republic: Increases the monthly and hourly minimum wages, effective from January 1, 2023

In Czech Republic, there are eight levels of minimum wages paid according to the level of difficulty, skill and responsibility. Out of the eight levels, two levels viz. the lowest and highest, are increased effective from January 1, 2023, which are as follows:

Minimum wage levels	2023 (Amounts in CZK)	2022 (Amounts in CZK)
Lowest level	17,300 per month	16,200 per month
	103.80 per hour	96.40 per hour
Highest level	34,600 per month	32,400 per month
	207.60 per hour	192.80 per hour

Czech Republic: Increases maximum annual income bases for payment of social security contribution from CZK 1,867,728 to CZK 1,935,552, effective from January 1, 2023

Effective from January 1, 2023, the Czech government has increased maximum annual income bases for social security contribution from CZK 1,867,728 to CZK 1,935,552. The maximum annual income base for calculation of social security contributions is 48 times the average monthly wage per year. This cap applies to both employees and employers.

Denmark 

Denmark: Driving and transport allowance for 2023 announced.

The Danish Tax Council has released the updated mileage deduction and transportation allowance rates for 2023 considering the rising cost of fuel and maintenance. The Council had considered the price of petrol at DKK 15.87 per litre and additional maintenance cost while determining the rates for 2023. These include costs for servicing, replacement of worn parts, tyre balance, additional rust treatment, insurance, etc. Details of mileage allowance for 2023 are given below:

Mileage Deduction: 

Year	Rate for driving between 25-120 km. (Amount per kilometre)	Rate for driving over 120 km. (Amount per kilometre)
2022	DKK 2.16	DKK 1.08
2023	DKK 2.19	DKK 1.10

Deduction is not available for the first 24 kilometres of distance between home and work. There will be no rate decrease for commuters who fall within the specific guidelines for increased mileage allowances in outlying municipalities for travel longer than 120 km.

Tax-free transport allowance or reimbursement for driving your own car:

Year	For the First 2000 km  (Amount per kilometre)	Over 2000 km  (Amount per kilometre)
up to April 2022	DKK 3.51	DKK 1.98
From May to December 2022	DKK 3.70	DKK 2.17
From 2023	DKK 3.73	DKK 2.19

The tax-free allowance rate for using one’s own bicycle, moped, 45-moped, scooter, or electric scooter for work-related travel is projected to be DKK 0.61.

Implication:

Employers should consider the revised rates of deduction and modify the employee policies accordingly.

Denmark: Employment and job allowance rates and limits published for the year 2023.

The Danish Tax Administration has revised the employment and job allowance (deduction) rates and caps for 2023 as under: –

• Employment deduction percentage stands at 10.65% and maximum allowance is DKK 45,600 in 2023 (formerly, 10.65% and DKK 43,500 in 2022). This is deductible from taxable salary.
• Job deduction allowable at 4.50% of income above DKK 208,700 with the maximum deduction being DKK 2,700 in 2023 (as against 4.50%, DKK 202,700 and DKK 2,700 in 2022). This deduction is allowable from taxable salary.

Implication:

Employers shall consider new rates and adjust their payroll tax and other calculations accordingly.

European Union

European Union: Draft Adequacy Decision on proposed EU-US Data Privacy Framework for cross-border data transfers published.

On December 13, 2022, the European Commission (“EC”) issued a draft adequacy decision to allow EU-US data transfers to businesses under the proposed EU-US Data Privacy Framework viz. ‘Transatlantic Data Privacy Framework’ (“TADPF”). This is as a result of concerns raised by the Court of Justice of the European Union (“CJEU”) in its Schrems II  judgment issued on July 16, 2020 on the earlier ‘EU-US data privacy shield’ used as a basis for data transfers between EU-US. 

Under the provisions of General Data Protection Regulation (Regulation (EU) 2016/679) (“GDPR”), a transfer of personal data from EU country to a third country (non-EU country) is allowed if the ‘European Commission (“EC”)’ has decided that the third country ensures an adequate level of protection for such data known as ‘adequacy decision. The data transfers from EU to the EC approved list of third countries, that are considered to have such adequacy decision, are permissible. The data transfers are also permissible under other approved measures which are generally followed in case of other countries (i.e., not EC approved countries and not having adequacy decision), such as Binding Corporate Rules (“BCR”), Standard Contractual Clauses (“SCC”), etc.  BCRs are code of conduct rules to ensure that all data transfers within a corporate group are safe.  The EC has issued SCC for data transfers from EU to third countries and these standard/model clauses must be included in contracts for the transfer of data between countries.

Since the US is not in the list of EC approved countries, the data transfers from EU to US were under the ‘EU-US privacy shield’ that was allowed under EC adequacy decision. The ‘EU-US privacy shield’ was a framework agreed upon by US and EU for self-certification by the US organizations about protection of data transfers by EU to US, which was considered adequate. However, the said adequacy decision was invalidated by CJEU in Scherms II judgement, thereby significantly impacting EU-US data transfers. Thus, post Scherms II judgement, the EU-US data transfers currently rely on other approved measures such as BCR and SCC or other principles laid down in GDPR.

The draft adequacy decision is the next step following the ‘Executive Order’ proposed by US President Biden on October 7, 2022, for implementing the EU-US TADPF replacing the invalidated Privacy Shield.

The draft adequacy decision has now been transmitted to the European Data Protection Board (“EDPB”) which will perform its own assessment and will undergo its adoption procedure.

Implication: 

Once the adequacy decision is approved, it will allow US companies to self-certify their compliance with a set of agreed privacy principles to the Authorities for undertaking cross-border data transfers from EU. It will bring certainty for EU-US data transfers.

Finland

Finland: Increases Intrastat reporting thresholds to EUR 800,000 from EUR 700,000, effective from January 1, 2023

In Finland, the statistical reports viz. ‘Intrastat returns’ are required to be submitted in respect of the movement of goods across the national borders to or from other EU countries.  Intrastat returns list down the goods sent out of Finland i.e., ‘dispatches’, and goods brought into Finland i.e., ‘arrivals. Intrastat returns are required to be submitted only when the reporting threshold is exceeded, which is currently set at EUR 800,000 per annum for arrivals and dispatches, effective from January 1, 2023. Prior to 2023, the threshold was EUR 700,000 per annum. 

Implication:

The businesses will need to consider and follow revised thresholds for applicability and submission of Intrastat returns. 

France

France: Social security ceilings for 2023 

The French Government has published the social security ceilings for the year 2023 by way of a decree in the Official Journal on December 16, 2022. Earlier, no changes were made in the ceiling amounts between the year 2020 to 2022. The following are the revised social ceilings rates (in EUR) for the year 2023:

Frequency	2023 Amount in EUR	2022 Amount in EUR
Annual	43,992	41,136
Quarterly	3,666	3,428
Daily	202	189
Hourly	27	26

Implication:

The social security ceilings are relevant for calculating maximum amount for certain social benefits like sickness allowance, maternity, paternity allowance, employer contribution for various social security benefits. Employer should consider the revised rates for payroll calculations.

France publishes reporting frequencies and other rules under e-invoicing and e-reporting Scheme.

The French Government has published Decree No. 1299 of 2022 and Ministerial Order of October 7, 2022, prescribing certain rules for electronic invoicing, which is set to be effective from July 1, 2024, for large companies, January 1, 2025, for mid-sized companies meeting certain thresholds and January 1, 2026, for SMEs and very small enterprises. 

New rules list out mandatory fields of e-invoice, data to be transmitted for transactions with non-taxable persons such as SIREN no, period to which transmission relates, categories of transaction such as delivery of goods or provision of services or both, total amount, VAT amount, etc., and also the reporting frequencies under the e-invoicing and e-reporting scheme. Under e-invoicing, billing data which is derived directly from e-invoices is to be reported while under e-reporting, transactions and payment data is to be reported for non-domestic transactions and B2C transactions which are not subject to e-invoicing.

Partner Dematerialization Platforms (“PDPs”) will have to report e-invoicing data within 24 hours of filing e-invoice on the platform.

For e-reporting, the following timelines will apply for transactions data for various regimes:

• Real normal monthly plan with transmission frequency of at least 3 transmissions per month

• Details of transactions from 1to 10months – By the 10 of the month
• Details of transactions from 11 to 20 months – By the 20 of the month
• Details of transactions carried out after the 21 of the month – By the last day of the month.
• Quarterly normal real regime with transmission frequency of at least one transmission per month:
• 10 days following the last day of the month subject to the transmission.
• Simplified real tax regime with at least one transmission per month:
• Between the 25 and 30 of the month following the month being transmitted.
• Where taxpayer is subject to basic exemption regime or a flat rate refund scheme at least one transmission every 2 months.
• Between the 25 and 30of the months following the two months subject to the transmission.

For e-reporting, the following timelines will apply for payments data:

• For monthly and quarterly normal real time regime, there should be at least 1 transmission per month within 10 days of the end of the relevant month.
• For simplified regime, there should be at least one transmission per month between 25 to 30 of the months.
• For taxpayers subject to basic exemption scheme or flat rate refund scheme, there should be at least one transmission every 2 months between 25 and 30 day of the month following the two-month period to which it relates. 

Implication:

Companies should evaluate their systems to check their readiness for e-invoicing and reporting obligations in light of the new regulations.

France: Finance Bill 2023 approved. 

The French Parliament adopted the Finance Bill 2023 on December 17, 2023. The Finance Act, 2023 has been published in the official gazette on December 30, 2022, post decision from the Constitutional Court (Conseil Constitutional). 

The following are some significant provisions/amendments introduced in the Finance Bill 2023. 

• Amendment relevant for companies:
  • Business Contribution on Added Value (“CVAE”):

Cotisation sur la Valeur Ajoutée des Entreprises or CVAE (contribution on value added) applies at the progressive rate up to 0.75% on the value added by a company and is calculated based on company’s revenue. France proposes to phase out CVAE by 2024 and accordingly the Finance Bill has halved the applicable rates for the year 2023 as follows:

Turnover (excluding taxes)	Rates for 2023 as per Finance Bill	Rates applicable till 2022
< EUR 500,000	0%	0%
EUR 500,000 ≤ turnover ≤ EUR 3 million	0.125% x ((turnover – EUR 500,000) / EUR 2,500,000)	0.25% x ((turnover – EUR 500,000) / EUR 2,500,000)
EUR 3 million < turnover ≤ EUR 10 million	0.125% + 0.225% x ((turnover -EUR 3,000,000) / EUR 7,000,000	0.25% + 0.45% x ((turnover – EUR 3,000,000) / EUR 7,000,000)
EUR 10 million < turnover ≤ EUR 50 million	0.35% + 0.025% x ((turnover -EUR 10,000,000) / EUR 40,000,000)	0.7% + 0.05% x ((turnover – EUR 10,000,000) / EUR 40,000,000)
> EUR 50 million	0.375%	0.75%

The additional tax at the rate of 6.29% (previously 3.46%) is payable on top of CVAE. The CVAE (and related CVAE additional tax) will be eliminated as of January 1, 2024. 

Changes to the territorial economic contribution (“CET”):

Businesses carrying any industrial and commercial activities are subject to the Contribution Economique Territoriale (“CET”), a local tax levied by departmental and regional governments. The immovable property contribution (“CFE”) and the added value contribution (“CVAE”) are the two taxes that make up the CET. The CET CAP is 2% of value added for an enterprise. This cap is reduced by the finance law to 1.625% for CET due in 2023 and to 1.25% for subsequent years (applicable to the CFE only as the CVAE will be abolished in 2024).

• Changes to Digital Service Tax (“DST”):

The Finance Act 2023 changed the scope of Digital Service Tax. Following amendments are made to the provisions regarding the scope of the DST. 

• The supply of a digital interface will only be exempt from the DST, if user interactions on the interface are solely incidental. Further, when digital content serves as a distinct digital interface within itself and is provided to users, this exclusion will not affect how that content is taxed.
• Taxable services do not include services supplied exclusively within the same group of companies.
• Reporting requirements for Payment Service Providers (“PSPs”):

The Finance Act transposes requirement of EU Directive (“EU”) 2020/284 for reporting data by PSPs, which is applicable from January 1, 2024. PSPs must maintain records pertaining to cross-border payments and beneficiaries in the following situations:

• They either have their head office in France or if their local legislation prevents them from doing so, they have their central administration in France; or
• They offer payment services in France or have a branch or agent there.

PSPs have obligation to report payments by EU payer to a beneficiary outside EU if there are more than 25 payments made to the recipient. The PSPs are required to report the data within one month from the end of relevant quarter to which the data relates. Also, PSPs should maintain records of such data for 3 years.

• Other measures:

Reduced tax rate of 15% was applicable to Small and Medium Enterprises (“SMEs”) up to income of EUR 38,120 which will now apply up to income up to EUR 42,500.

• Personal Income Tax (“PIT”): 
  • Adjustment to tax slabs for resident individuals

Tax slabs for resident individuals adjusted to factor in inflation effect as under:

Tax Rate	Tax Slabs (2023)	Tax Slabs (2022)
0%	Up to EUR 10,777	Up to EUR 10,225
11%	EUR 10,778 to EUR 27,478	EUR 10,226 to EUR 26,070
30%	EUR 27,479 to EUR 78,570	EUR 26,071 to EUR 74,545
41%	EUR 78,571 to EUR 1,68,994	EUR 74,546 to EUR 160,336
45%	Above EUR 168,994	Above EUR 160,336

• Childcare expenses tax credit:

The Childcare expenses tax credit is the benefit a taxpayers can avail for expenses incurred on their children of the age up to 6 years. The threshold of the tax credit is revised to EUR 3,500 per child (previously EUR 2,300).

France increases minimum wage effective from January 1, 2023

Effective from January 1, 2023, the minimum hourly wages (gross) in France have been increased to EUR 11.27 (previously EUR 11.07). Due to the aforesaid increase, the minimum growth wage (“SMIC”) per month (gross) in France stands increased to EUR 1,709.28 (previously EUR 1,678.95).

France: Introduction of temporary scheme to buy back reduced working time (“RTT”) days.

The French Government passed a law (LAW n° 2022-1157) on August 16, 2022, amending the Finance Law of 2022, in order to allow employers to buy back the accrued days of reduced working time (“RTT”) for the period from January 1, 2022, to December 31, 2025. The RTT are the compensatory rest days provided against the unpaid overtime. The scheme applies to all private sector companies regardless of their size. Article 5 of the amending Finance Law 2022 provides for the procedure for such buy-back, subject to the agreement by the employer who can refuse such monetization. The said buy-back of the RTT days by employer will not be subject to any tax or social security implications up to the celling of EUR 7,500.  However, it is subject to Contribution Sociale Generalisee (“CSG”) and the Contribution pour le Remboursement de la Dette Sociale (“CRDS”).

Days or half-days of RTT worked are compensated at the rate of the first hour of overtime, stipulated by the company, which entails a minimum of 10% increase in hourly pay rate. However, the days of RTT that have been redeemed do not count toward the overtime limit.

• Eligible Employees/days:
  • Employees who are entitled to days / half days of rest as a result of a collective agreement or agreement setting up a working time reduction programme (“ATR”)
  • Employees who are entitled to the customary rest days mandated by the French Labour Code
• Non-Eligible Employees/days:
  • Employees who have concluded a contract with salaries based on fixed rate per day.
  • The rest days or half-days deposited in time saving account (“TFSA”). TFSA allows an employee to accumulate leave entitlements or to receive remuneration in return for periods of leave or rest not taken.
  • Equivalent compensatory rest days replacing the payment of overtime.
  • Days or half-days of rest paid for in full.

Implication:

Employers should evaluate the buy-back scheme to understand the applicability and eligibility of their employees and if they wish to provide such scheme to employees, they should set up the procedure for buy-back of such unused RTT days from employees.

Germany 

Germany: Changes in maximum income bases and rates for social security contributions for 2023.

• Social security contribution:

In Germany, contribution to social security includes contributions towards pension insurance, unemployment insurance, health insurance and long-term care insurance, which is shared (generally equally) by employer and employee. Additionally, only employer contributes towards accident insurance, insolvency insurance and certain other insurance covers. 

As per the Ordinance on ‘Social Security Calculation parameters 2023’ approved by the Federal Council on November 25, 2022, certain maximum annual income thresholds and rates are increased effective from January 1, 2023, which are as follows:

Type of contribution	Region	For the Year 2023 (January 1, 2023 – December 31, 2023)	For the Year 2022 (January 1, 2022 – December 31, 2022)
Maximum base for pension and unemployment contribution	Western Federal States (Old States)	EUR 87,600	EUR 84,600
	Eastern Federal States (New States)	EUR 85,200	EUR 81,000
Maximum base for health insurance contribution	All States	EUR 59,850	EUR 58,050
Unemployment insurance contribution rate (contributed equally by employer and employee)	All States	2.6%	2.4%
Insolvency contribution rate (Paid only by the employers)	All States	0.06%	0.09%

• Private health insurance:

As per the Ordinance approved by the Federal Council on November 25, 2022, compulsory insurance limit or income threshold for opting for private insurance is increased to EUR 66,600 per year from EUR 64,350 per year, effective January 1, 2023. 

The income threshold for private health insurance is adjusted annually. The employees earning higher than the income threshold, can select between public or private health insurance. The public insurance premium/contribution is part of statutory social security contributions.

Implication:

The employer needs to consider these revised rates and maximum bases of social security contributions for processing the payroll.

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Germany: Yellow certificate/sick note (physical copy) replaced by electronic sick note for employees covered under public health insurance.

As per the provisions of the law (“EFZG”), yellow certificate/sick note (physical copy) is to be submitted by the employee to the employer if the sickness continues for more than 3 working days. The yellow certificate / sick note is provided by a doctor indicating the incapacity of the employee to work and its duration.

However, effective from January 1, 2023, the yellow certificate/sick note will be replaced by “electronic certificate of incapacity for work (“eAU”)” in case of employees covered under State/Public Health Insurance System. It will be provided by the doctor of the employee to the public health insurer and same will be uploaded in the system. The employer will be able to retrieve from the system, the electronic sick notes uploaded by the public health insurer.

However, employees covered by private health insurance will still need to submit yellow certificates/sick notes to the employer. 

Implication:

Employers should make appropriate adjustment to their payroll processes and ensure that the necessary technical requirements are met for smooth issuance and retrieval of electronic sick notes uploaded by the public health insurer in the system.

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Germany: Income Tax changes for 2023.

• Changes under the Annual Tax Act 2022:

On December 20, 2022, Germany published the Annual Tax Act 2022 in the Official Gazette. The main measures related to personal taxation are as follows:

• Employee allowance: 

The employee allowance is increased from EUR 1,200 to EUR 1,230 effective from January 1, 2023. The employee allowance is a general deduction which is allowed to cover expenses connected with the employment while calculating tax on personal income.

• Home office flat rate allowance:

Effective from January 1, 2023 “home office flat rate” allowance has been increased from EUR 600 to EUR 1,260 per annum. The home office allowance can be given to the employees only when the employee is having a record of number of days they have worked from home.  The allowance is payable at EUR 6 per day, maximum up to EUR 1,260 considering 210 days per year.

• Pension scheme contribution deduction:

Contributions to compulsory state pension insurance systems are fully deductible (i.e., 100%) as special expenses from the year 2023 onwards. The amendment was earlier planned from the year 2025. Generally, contributions to pension schemes are tax deductible up to an overall limit of EUR 25,639 (EUR 51,278 for married taxpayers filing jointly). However, for a transitional period (2005 to 2022) a reduced amount upto maximum 94% of the actual contributions was deductible i.e., 94% of EUR 25,639 (EUR 51,278). However, from the year 2023, it is increased to 100%.

• Changes under the Inflation Compensation Act:

On December 13, 2022, Germany published the Inflation Compensation Act in the Official Gazette. The main measures related to personal taxation are as follows:

• Revised Income tax slabs for the year 2023:

Changes in the income tax slabs (there is no change in the tax rates) are as follows:

Tax Slabs	For the Year 2023 (January 1, 2023, to December 31, 2023)	For the Year 2022 (January 1, 2022, to December 31, 2022)	Tax Rate
I	EUR 10,909 – EUR 15,999	EUR 10,348 – EUR 14,926	14% to 24%
II	EUR 16,000 –EUR62,809	EUR 14,927 –EUR58,596	24% to 42%
III	EUR 62,810 –EUR277,825	EUR 58,597 –EUR277,825	42%
IV	EUR 277,826 and above	EUR 277,826 and above	45%

• Child benefit:

Effective from January 1, 2023, the child benefit is increased from EUR 219 to EUR 250 (per month per child) for first two children, for the third child, the monthly amount will rise from EUR 225 to 250. The child benefit for the fourth child and subsequent children will continue to stand at EUR 250.

The child benefit is a monthly payment given to all parents in Germany, regardless of their income but subject to certain conditions, to ensure that their children’s basic needs are covered. The German child benefit is provided by the Family Benefits Office (Familienkasse) at the Federal Employment Agency.

The parents can also claim child allowance / deduction in the tax return. The tax office calculates the most favourable option between child benefit and child allowance for the taxpayer. The child allowance (including the allowance of EUR 2,928 for care, education, and training needs) is increased to EUR 8,952 per child for the year 2023 and each parent is entitled to half of the said allowance.

• Solidarity surcharge exemption:

The solidarity surcharge exemption is increased for individuals to EUR 17,543 (previously, EUR 16,956) for single taxpayers and to EUR 35,086 (previously, EUR 33,912) for married taxpayers filing jointly for 2023. 

The solidarity surcharge is levied if the income tax exceeds a certain amount / threshold. Hence, solidarity surcharge will not be levied if the income tax payable does not exceed the above thresholds. Further, the solidarity surcharge is being phased out since December 2019, by increasing the surcharge exemption for individuals, as well as adjustments in the deduction tax base for wage payments.

Implication:

The employer needs to take note of the relevant changes, while structuring employee salary, calculating the tax liability of the employees, and processing the payroll. 

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Germany: Voluntary inflation bonus introduced.

From October 26, 2022, Federal Government has launched inflation compensation premium i.e., a voluntary inflation bonus of EUR 3,000. It can be paid by employer to employees during the period October 26, 2022, to December 31, 2024. The payment can be made in instalments. The same are tax-free and are not entitled to social security contributions. The payments are to be categorised under the head as “inflation bonus” in payslips apart from regular bonuses, if any paid by the employer.

Implication:

The employer may consider the payment of the voluntary inflation bonus while structuring employee salary.

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Germany: Reporting of additional information for fictitious UBO to the transparency register from January 1, 2023.

Germany published the ‘Transparency Register and Financial Information Act’ in the Official Gazette on June 30, 2021, which amended the Germany’s transparency register requirements effective from August 1, 2021. The amendments extended the requirement to submit ultimate beneficial ownership (“UBO”) information to the transparency register to all legal entities in Germany with transitional period upto December 31, 2022. The entities are also required to submit any changes in the UBO information, failing which, the entities may be subject to fines. 

In cases where the companies cannot determine a beneficial owner, the company’s legal representative is reported as the beneficial owner (i.e., fictitious UBO).

Effective from January 1, 2023, companies will also be required to provide the reason as to why they report the fictious UBO. The companies will also need to report the reasons where they are unable to identify any ultimate beneficial owner due to insufficient information or where no such individual fulfils the requirements to be regarded as direct or indirect UBO.

There are no additional obligations for existing legal entities who have already complied with filing of UBO information with the transparency register. The amendment will only apply to the new reports filed with the transparency register.

Implication:

All legal entities filing new UBO reports with the transparency register from January 1, 2023, will have to submit the additional information.

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Germany: Digital transmission of employment related certificates to employees and the German Federal Employment Agency effective from January 1, 2023

To promote digitalization of employment related certificates, the German government has undertaken the following measures:

• Digital transmission of employment related certificates to the German Federal Employment Agency: 

All employers in Germany effective from January 1, 2023, should transmit the following employment related certificates to the German Federal Employment Agency mandatorily in electronic format through, the ‘Accept Certificates Electronically’ procedure (Bescheinigungen Elektronisch Ennehmen – “BEA”):

• Certificate of employment – It is a certificate containing information about employment period of the employee, reasons for termination, amount of wages, etc.
• EU employment certificate – This certificate is applicable if the employee receives social security benefits in any another European union (“EU”) country. 
• Additional Income Certificate – This certificate is applicable if the employee has/had a secondary job and receive social security benefits.
• Digital transmission of ‘certificate of employment’ to the employee:

The employers in Germany are required to provide ‘certificate of employment’ if requested by an employee upon termination of the employment. Effective from January 1, 2023, the ‘certificate of employment’ must be issued in an electronic format, instead of paper format. 

Implication:

All employers must ensure necessary technical requirements for enabling transmission of the abovementioned employment related certificates digitally (through BEA) to the concerned authorities / employees and update the employment handbooks, employment policies, etc. regarding the digitalized transmission of these certificates.

Hungary

Hungary: Parliament approved autumn tax package for the year 2023. 

The Autumn Package containing the tax measures for the year 2023 was passed by the Hungarian Parliament on November 22, 2022, without making any significant changes to the draft presented earlier.  Highlights of the said autumn package are given below. 

• Personal income taxes:
• Individuals under the age of 25 years can claim the Personal Income Tax (“PIT”) allowance of up to the gross national average income. From January 1, 2023, the amount of the tax allowance for eligible individuals will be automatically displayed in draft personal income tax return.
• Corporate taxes:

• A transitory provision allows taxpayers to offset losses up to 50% of the tax base calculated without taking into consideration the interest deduction limitation rules.  The losses considered for set off are losses for the years up to the tax year beginning in 2014. The new provision is applicable for tax year beginning in the year 2022. 
• The amendments also clarify certain provisions regarding group taxation and transfer pricing.  Transfer pricing provisions deal with public disclosure of Country-by-Country Reporting (“CbCR”) and provisions relating to Advance Pricing Agreements (“APAs”)
• When an e-commerce operator chooses the One Stop Shop registration regime to pay and declare value-added tax, the same regime will also apply to intra-community distance sales transactions if transaction takes place in the country in which such operator is established.
• Advertising tax was temporarily cancelled by reducing its tax rate to 0% until December 31, 2022. Such temporary cancellation is extended to December 31, 2023.

Implication:

Businesses should take note of amendments for the year 2023 and comply with them accordingly.

Hungary: Increase in minimum wages effective from January 1, 2023

The Hungarian Government has increased standard minimum monthly wage from HUF 200,000 to HUF 232,000, with effect as of January 1, 2023, vide the Decree No. 573/2022 dated December 23, 2022. The minimum monthly wage for employees in positions requiring at least secondary-level education or vocational training is now HUF 296,400 per month. Previously, it was HUF 260,000 per month.

India

India: Draft Digital Personal Data Protection (“DPDP”) Bill, 2022

On August 3, 2022, the Personal Data Protection Bill, 2019, was withdrawn by the government with an intention to have a more comprehensive bill. On November 18, 2022, the Indian Ministry of Electronics and Information Technology (“MeitY”) released a draft of the Digital Personal Data Protection (DPDP) Bill, 2022, and invited public comments on the bill by December 17, 2022, which was further extended to January 2, 2023. The DPDP bill is likely to be introduced in the upcoming budget session of 2023-24. The highlights of the bill are as follows: –

Highlights of the DPDP Bill, 2022

• The bill applies to the processing of digital personal data collected within the territory of India and in some cases, application is proposed to be extended beyond the territories of India. It includes data collected online or offline and digitized later;
• The bill does not apply to the offline processing of personal data, manual processing of personal data, data processed by an individual for any personal or domestic use and recorded personal data of individuals, which is in existence for at least 100 years;
• The bill recognizes the concept of ‘deemed consent’. It lists out certain situations where consent would be deemed to have been given by the data principal (the individual to whom the personal data relates) such as, (i) when information is provided by him or her voluntarily; or (ii) for compliance with judgment or order issued under law or (iii) for responding to medical emergency; or (iv) when information is required in the public interest such as for preventing or detecting frauds, for network security, credit scoring, etc.; (v) for the performance of any function under the law, for issue of permit or license by State or instrumentality of State, etc.;
• The bill proposes the formation of an authority, namely, the Data Protection Board of India (“DPBI”), which would be notified by the Central Government. DPBI will have the power to determine non-compliance with the provisions of the law and impose penalties provided therein;
• The bill provided that the Central Government will notify countries or territories outside India to which a data fiduciary (persons who determine the purpose of processing individual personal data) would be allowed to transfer personal data. Data fiduciary is similar to the concept of ‘data controller’ in General Data Protection Regulation;
• The bill lists out the obligations of data fiduciary such as obligation to process digital personal data according to the act and rules; obligation to take reasonable safeguards to protect personal data in their possession, obligation to notify the data protection authority in event of data breach, etc;
• The bill also lists out the rights and duties of data principals like right to be provided with the information about the processing of personal data,  right to register the grievance with a data fiduciary, right to correction of inaccurate or misleading data, etc; 
• The bill gives the government, the authority to provide exemptions from certain requirements of the Act where processing is necessary for the interests of India’s sovereignty and integrity, state security, and preserving public order, etc.
• The bill also provides penalties for non-compliance of provisions ranging from INR 10,000 to INR 5 billion.

Implication:

Companies that process personal data should monitor developments on the passing of bill and evaluate their compliance requirements.

Central Board of Direct Tax allows paper filing of Form 10F until March 31, 2023, in eligible cases.

As per the Indian Income Tax Act, 1961, non-residents(“NR”) taxpayers who wish to avail benefits under a Double Taxation Avoidance Agreement (“DTAA”) are required to obtain a Tax Residency Certificate (“TRC”) from the government of the country in which they are resident. Further, NR taxpayers are also required to furnish a self-declaration in Form 10F where TRC does not contain certain details required under income-tax law. Earlier, it was not mandatory to furnish Form 10F electronically, but effective from July 16, 2022, NR taxpayers are mandatorily required to file Form 10F electronically through the income tax portal for the financial year 2021-22 onwards. 

However, for online filing of Form 10F, one needs to login to the Indian Income-tax office web portal for which a Permanent Account Number (“PAN”) is used as a login credential. Thus, for complying with the new requirement, NR taxpayers are required to obtain a PAN.  In light of the practical difficulties faced by NR taxpayers in electronic filing of Form 10F due to the non-availability of a Permanent Account Number (“PAN”), the Central Board of Direct Tax has issued a notification dated December 12, 2022, for granting a partial exemption to NR taxpayers who do not have a PAN and are not required to have a PAN.  Such taxpayers are now allowed to file e Form 10F physically to claim DTAA treaty benefits.

Implication:

Non-residents who do not have PAN and are not required to have PAN are allowed to file physical form 10F until March 31, 2023, to claim DTAA benefits.

India: “work from home” allowable for all eligible employees (i.e., 100%) of Special Economic Zone Units

The Ministry of Commerce and Industry, on December 8, 2022, vide the Special Economic Zones (Fifth Amendment) Rules, 2022, amended Rule 43A of the Special Economic Zones Rules, 2006, which was introduced on July 14, 2022.

Highlights of the amendment are outlined below: –

• The amended Rule 43A provides that all of the eligible employees (i.e., 100%) are allowed to work from home (“WFH”) or from any place outside the special economic zone (“SEZ”) unit, until December 31, 2023. Previously, 50% of the total SEZ unit’s employees were allowed to work from home from the date of receiving approval from the Development Commissioner (“DC”).
• Applicability/Eligibility

There is no change in the categories of employees working in SEZ units who are eligible for WFH and the following categories of employees working in SEZ units are eligible for WFH:-

• Employees working in Information Technology (“IT”) or IT-enabled Services. 
• Employees who are temporarily unable to attend office;
• Employees travelling or working offsite.

• Under the amended rule, SEZ units are merely required to inform the DC through email on or before the date, the facility for WFH or from any place outside the SEZ is permitted. There is no need to seek approval from DC. However, if permission is granted before the amended rule’s effective date, then email must be sent before January 31, 2023. Previously, WFH proposals had to be submitted to DC via email or paper application;
• The SEZ units are not required to submit the lists of employees who are allowed to WFH or from any place outside the SEZ, but they are required to maintain the list of the same;
• The amendment rule states that relaxation is available only if SEZ unit continues to operate from its premises as per the letter of approval granted.

Indonesia

Indonesia: Increase in the minimum wage for the year 2023.

On November 17, 2022, the Minister of Manpower (the “MoM”) of Indonesia, vide Regulation No. 18 of 2022, announced the increase of 10% in minimum monthly wages across the country for the year 2023. Accordingly, effective from January 1, 2023, the monthly minimum wage in Jakarta stands increased from IDR 4,641,854 to IDR 4,901,798.

Ireland

Ireland: Statutory Sick Pay (“SSP”) scheme to commence from January 1, 2023

Irish government has signed the Sick Leave Act, 2022 and corresponding regulations. The new entitlement to paid sick leave from the employer is effective from January 1, 2023. Under the regulations, the new Statutory Sick Pay (“SSP”) is the legal minimum sick pay. The phase-wise implementation of the SSP scheme is effective from January 1, 2023. (Earlier, the Irish Government had announced the implementation of the SSP scheme starting from the year 2022 until 2025.) Before the introduction of the SSP, the payment of sick pay was at the discretion of the employer. 

Under the SSP scheme, the number of sick leaves will increase from 3 days in Year 2023 to 10 days from Year 2026 onwards, as follows:

Year	Sick Leaves (No of Days)
2023	3
2024	5
2025	7
2026	10

Under the SSP scheme, sick leave has to be paid by the employer at 70% of the gross wages of employees, restricted to the threshold of EUR 110 per day. The threshold may change in the future due to inflation and changing incomes.

Implication:

The employer needs to alter the employment policies in line with the new regulations and SSP scheme.

Japan

Japan: Increase in unemployment Insurance premium rates on salaries effective from October 2022 

Effective from October 2022, the unemployment insurance premium rate on salaries stands increased from 0.95% to 1.35%.  The Unemployment Insurance premium is shared between employer and employee. The contribution has risen from 0.65% to 0.85% for employer and from 0.3% to 0.5% for employee.

Implication:

Employers should consider the revised contribution rates and align their payroll processes accordingly.

Malaysia  

Malaysia defers the increase in minimum wages for small businesses to July 1, 2023

On December 28, 2022, the Malaysian Government, vide P.U. (A) 400/2022 (legal notification no.), amended the Minimum Wages Order 2022 (“MWO 2022”) and postponed the implementation of the monthly minimum wage of RM 1,500 (increased from RM 1,200) for companies/employers with less than five employees, from January 1, 2023, to July 1, 2023.

Originally, the MWO 2022 which came into effect on May 1, 2022, had raised the monthly minimum wage for employers with five or more employees from RM 1,200 to RM 1,500. However, employers with fewer than five employees were exempted from the implementation of the aforesaid order until January 1, 2023. However, now the implementation of the said order has been deferred to July 1, 2023.

Implication:

Postponement of applicability of minimum wages to employers with less than five employees provides additional time for such employers to effectively plan for the possible increase in payroll cost from July 2023 onwards.

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Malaysia’s new government to present the new budget for the year 2023 on February 24, 2023

Malaysia’s Finance Minister presented the budget for the year 2023 in the Parliament on October 7, 2022.  However, it was not passed, as the former Prime Minister, Mr. Datuk Seri Ismail Sabri Yakoob announced the dissolution of the parliament on October 10, 2022, nine months ahead of its expiration term. Consequently, the newly elected government, led by the Prime Minister and Finance Minister, Mr. Anwar Ibrahim will present the new budget for the year 2023 on February 24, 2023

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Mexico

Mexico: Employees can avail increased vacation leave from January 1, 2023

Mexican Senate approved a decree on December 14, 2022, amending Articles 76 and 78 of Federal Labour Law and thereby extending the vacation leave that can be availed by the employees depending upon their service tenure with the employer. The changes are effective from January 1, 2023. 

Post amendment, an employee can avail a continuous paid vacation leave of 12 days (increased from 6 days) after completion of 1 year of service with the employer.

After Amendment	Before Amendment
Years of work	Vacation leave	Years of work	Vacation leave
1	12	1	6
2	14	2	8
3	16	3	10
4	18	4	12
5	20	From 5 to 9	14
From 6 to 10	22	From 10 to 14	16
From 11 to 15	24	From 15 to 19	18
From 16 to 20	26	From 20 to 24	20

Implication:

Employers will need to review the leave policies ensuring that the employees are entitled to the extended leaves based on their service tenure from the year 2023 (i.e., from January 1, 2023) onwards.

Mexico: Daily minimum wages increased to MXN 207.44 from MXN 172.87 with effect from January 01, 2023

On December 1, 2022, the National Minimum Wage Commission (“CONASAMI”) increased the daily minimum wages to MXN 207.44 from MXN 172.87 with effect from January 01, 2023.

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Morocco 

Morocco: Finance Bill 2023 – Highlights

Morocco’s House of Representatives adopted the Finance Bill for the year 2023 by a great majority at the second reading on December 6, 2022. The highlights are as follows: –

• Changes in Corporate Tax Rates: The new corporate tax rates proposed to be adopted over the period of 4 years starting from year 2023 are as follows: 

Income Level (MAD)	Tax rates (2022)	Tax rates (2023)	Tax rates (2024)	Tax rates (2025)	Tax rates (2026)
0- 300,000	10%	12.5%	15%	17.5%	20%
300,001 to 1,000,000	20%	20%	20%	20%	20%
1000,001 to 99,999,999	31%	28.25%	25.5%	22.75%	20%
100,000,000 or more	31%	32%	33%	34%	35%

• Changes in Corporate Tax Rates for companies with specified status – The tax rates applicable to companies located in industrial acceleration zones and those with the status of Casablanca Finance City are as follows: –

Income Level (MAD)	Tax rates (2022)	Tax rates (2023)	Tax rates (2024)	Tax rates (2025)	Tax rates (2026)
0- 99,999,999	15%	16.25%	17.5%	18.75%	20%
100,000,000 or more	15%	20%	25%	30%	35%

• Changes for companies with Casablanca Finance City status – Before the Finance Law of 2023, all service companies with this status could claim corporate tax exemption for 5 years from the date of obtaining such status irrespective of the date of their incorporation. Now, companies with such status cannot claim corporate tax exemption after competition of 5 years (60 months) from the date of their incorporation. 
• Social Solidarity Contribution Extension – The applicable social solidarity contribution rates for the year 2022 (applicable to companies whose net profit is equal to or greater than MAD 1 million) are further extended till 2025 year as follows:

• 1.5% – if net profit is in the range of MAD 1 million to 5 million.
• 2.5% – if net profit is in the range of MAD 5 million to 10 million.
• 3.5% – if net profit is in the range of MAD 10 million to 40 million; and
• 5% – if the net profit of MAD is 40 million or more.

Implication:

Companies should take note of changes in corporate tax rates and evaluate the impact on their profits.

Netherlands

Netherlands: Increase in minimum wages from January 1, 2023

The Dutch government has approved increase in minimum wages effective from January 1, 2023. Revised minimum wages are as under:

Frequency	Effective from January 1, 2023 (“Amount in EUR”)	Effective from July 1, 2022 (“Amount in EUR”)
Per Month	1,934.40	1,756.20
Per Week	446.50	405.30
Per Day	89.28	81.06

Further, as announced by the Dutch Government, the minimum wages will be fixed on hourly basis instead of monthly basis effective from January 1, 2024, regardless of number of hours worked by the employee in a week or a month. The minimum wages shall be increased to EUR 12.40 per hour (currently EUR 11.26 for employees working 36 hours a week) effective from January 1, 2023.

Netherlands: Higher VAT registration threshold of EUR 25,000 will continue to apply till December 2024 

Earlier, the European Council has permitted the Netherlands to prescribe higher VAT registration threshold at EUR 25,000 for resident businesses effective up to December 31, 2022, vide the Implementing Decision (“EU”) 2018/1904. Now, accepting Netherlands government’s appeal, European Council has extended the permission to continue with the higher VAT registration threshold till December 2024. As per the EU VAT registration threshold equivalency rules (Council Directive (“EU”) 2020/285) effective from January 1, 2025, all member states can maintain the registration threshold of up to EUR 85,000, Thus, there is no need for the Netherlands to obtain a special authorization in order to maintain the higher threshold.

Implication:

Businesses planning to obtain VAT registration in the Netherlands shall take note of registration threshold which is applicable till December 2024.

Netherlands:  Social security contribution rates set for 2023.

The Ministry of Social Affairs and Employment, vide Regulations Nos. 2022-0000231651 and 3442107-1036921-Z published on December 1, 2022, has set the Social Security Contribution rates for the year 2023 as under: 

• The total Social Security Contribution for employee will continue to be 27.65% which includes general old-age social security (“AOW”) at 17.90%, surviving dependent (spouse) social security (“ANW”) at 0.10%, and long-term care (“WLZ”) at 9.65%.
• The Social Security Contribution for employer are set at:

• General unemployment insurance (“AWF”) – 2.64% (previously 2.70%) for workers with an indefinite term; 7.64% (previously 7.70%) for flex workers and temporary workers.
• Occupational disability insurance (“WIA”) – High contribution rate will be 7.11% (previously 7.03% – 7.05%) and low contribution rate is set at 5.82% (previously 5.49%).
• Childcare allowance contribution – 0.50% (no change)

• Health insurance premium under Health Insurance Act is set at 6.68% (previously 6.75%) for the year 2022.
• The maximum salary base for the employer contribution for 2023 is EUR 66,956 per annum (previously EUR 59,706).

Implication:

Employers should take note of changes in social security contribution rates / base and adjust their payroll processing accordingly.

Netherlands: Tax plan 2023 approved by the Dutch Parliament 

The Senate (upper house of parliament) have approved the 2023 tax plan on December 20, 2022. Most of the provisions are effective from January 1, 2023. Following are the major amendments introduced by the tax plan 2023: 

• Personal Income Tax rates for Box 1 income which include employment income and certain other types of income (rates for persons below state pension age):

2023	2022
Brackets	Tax rates	Brackets	Tax rates
Up to EUR 37,149	36.93%*	Up to EUR 35,472	37.07%*
EUR 37,149 – EUR 73,031	36.93%	EUR 35,472 – EUR 69,398	37.07%
Above EUR 73,031	49.50%	Above EUR 69,398	49.50%

* Includes national insurance contribution

• Corporate Income Tax:

Particulars	2023	2022
Basic Rate	19.0% (Up to EUR 200,000)	15.0% (Up to EUR 395,000)
Top Rate	25.8% (Above EUR 200,000)	25.8% (Above EUR 395,000)

• The tax rate for Box 3 income (taxable income from savings and invested assets) is increased to 32% (previously 31%) for 2023. It will further increase to 33% and 34% for the year 2024 and 2025 respectively along with the increase in tax free allowance to EUR 57,000 (previously EUR 50,650).
• Increase in general property transfer tax rate:  The general property transfer tax rate will increase from 8% to 10.4%.  This rate is applicable to acquisition of properties other than residential properties used by acquirer for primary residence.
• Tax Free Travel Allowance: The tax-free travel allowance will increase from EUR 0.19 per kilometre to EUR 0.21 starting from January 1, 2023, and to EUR 0.22 from January 1, 2024.
• Employee Stock Options Gains: With effect from January 1, 2023, employee would have an option to choose the taxable event for stock options which can be exercise of options or date on which shares become tradable.
• Work From Home Allowance: In response to COVID-19, an allowance was introduced in 2022 to cover the extra expenses associated with working remotely. The allowance is increased from EUR 2 to EUR 2.15 per day in 2023.
• Implementation of EU Directive 2021/54 (DAC 7) whereby digital operators are now required to report the income earned by sellers on their platforms.  Such information will be exchanged among EU Member States through automatic exchange of information mechanism.

Implication:

Companies should take note of increase in corporate tax rates and change in tax brackets.  Employers need to adjust payroll and human resource policies in light of changes to personal tax rates and exemptions.

Peru

Peru: Tax Unit Value (“UIT”) increased to PEN 4,950 from PEN 4,600 for the year 2023.

Peruvian Ministry of Economy and Finance through Supreme Decree No. 309-2022-EF dated December 23, 2022, has published tax unit value (“Unidad Impositiva Tributaria – UIT”) for the year 2023 (i.e., From January 1, 2023, to December 31, 2023). The tax unit value is increased to PEN 4,950 from PEN 4,600. 

The tax unit value is used for various tax related purposes, viz. calculating individual income tax deductions, for determining revenue thresholds for transfer pricing local and master files, etc.

Implication:

Companies need to consider latest tax unit value for computation of tax liability of employees and for determining revenue thresholds for Local and Master files.

Peru: Timelines for submission of annual tax returns for the year 2022 declared.

The National Superintendence of Customs and Tax Administration (“SUNAT”) through Superintendence Resolution No. 000288-2022/SUNAT dated December 26, 2022, announced the timelines for submission of Annual Income tax Returns for the year 2022 (i.e., January 1, 2022, to December 31, 2022). In Peru, return submission timelines are declared every year by SUNAT. The timelines vary as per the last digit of Single Taxpayer Registry Number or Tax Identification Number (“RUC”) of the company. 

Last digit of Tax Identification Number (“RUC”)	Due date
0	March 24, 2023
1	March 27, 2023
2	March 28, 2023
3	March 29, 2023
4	March 30, 2023
5	March 31, 2023
6	April 3, 2023
7	April 4, 2023
8	April 5, 2023
9	April 10, 2023

Philippines  

Philippines changes notice to public from “Ask for Receipt” to “Notice to Issue Receipt or Invoice.”

All taxpayers engaged in business or trade are required to issue an official receipt (for sales of services) or sales invoice (for sales of goods) to the person buying them at the time of each transaction. In order to ensure all buyers are aware of their right to ask for an invoice/official receipt and tax on the said sale is properly declared and remitted to the Bureau of Internal Revenue (BIR), the revenue department, vide Regulation No. 7 of 2005, has introduced the concept of “Ask for Receipt”. It is a notice to the public to be displayed at places of business (including branches) to guide and remind customers to ask for a receipt or invoice for their purchases.  

The BIR of the Philippines, further vide Revenue Memorandum Order No. 43-2022 dated September 29, 2022, issued guidelines for the replacement of AFR with the “Notice to Issue Receipt or Invoice” (NIRI). The NIRI is applicable to all new business registrants head offices and branches, online sellers, vloggers social media influencers and online content creators who earn from online platforms and advertising.

The guideline further states that previously issued AFR shall remain valid till June 30, 2023, and the replacement of AFR with NIRI shall be based on the last digit of their registered Taxpayer Identification Number (“TIN”), starting as follows:

TIN Ending	Deadline
1 and 2	Starting October 3, 2022
3 and 4	Starting November 2, 2022
5 and 6	Starting December 1, 2022
7 and 8	Starting January 2, 2023
9 and 0	Starting February 1, 2023

BIR has informed that to replace the old “Ask for Receipt,” registered business taxpayers are required to update their registration information before the issuance of NIRI.

Implication:

Based on the last digit of their TIN, all registered business taxpayers must update their registration information with the BIR for the issuance of NIRI. 

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Philippines: Individual Income tax rates reduces from 2023 onwards.

According to the Tax Reform for Acceleration and Inclusion (“TRAIN”) Act or Republic Act No. 10963 of the Philippines, the income tax rates applicable to various income tax slabs of individual taxpayers will reduce from the year 2023 onward as follows:

Income Tax Slab from January 1, 2023, onwards	Income Tax Slab till 2022
Annual Taxable Income (In PHP)	Income Tax Rate	Annual Taxable Income (In PHP)	Income Tax Rate
Up to 250,000	Nil	Up to 250,000	Nil
250,001 to 400,000	15%	250,001 to 400,000	20%
400,001 to 800,000	20%	400,001 to 800,000	25%
800,001 to 2,000,000	25%	800,001 to 2,000,000	30%
2,000,001 to 8,000,000	30%	2,000,001 to 8,000,000	32%
Above 8,000,000	35%	Above 8,000,000	35%

Implication:

Employers need to consider new income tax rates while calculating employee’s tax liability from January 1, 2023, onwards.

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Poland

Poland: Raises Intrastat reporting thresholds, effective from January 1, 2023

In Poland, statistical reports viz. ‘Intrastat returns’ are required to be submitted in respect of the movement of goods across the national borders to or from other EU countries. Intrastat returns list down the goods sent out of Poland i.e., ‘dispatches’, and goods brought into Poland i.e., ‘arrivals. Intrastat returns are of two types, simplified Intrastat returns and detailed Intrastat returns. Certain additional information is required to be provided in the detailed Intrastat returns upon crossing a higher threshold.

Intrastat returns are required to be submitted only upon exceeding the reporting thresholds:

The threshold for the simplified Intrastat returns to be applied from January 1, 2023, are as follows:

• Arrival threshold: PLN 5,000,000 (previously, PLN 4,000,000).
• Dispatches threshold: PLN 2,700,000 (previously, PLN 2,000,000).

The threshold for the detailed Intrastat returns to be applied from January 1, 2023, are as follows:

• Arrival threshold: PLN 80,000,000 (previously, PLN 65,000,000).
• Dispatches threshold: PLN 128,000,000 (previously, PLN 120,000,000).

Implication:

The businesses will need to follow revised thresholds for applicability and submission of Intrastat returns.

Serbia  

Serbia: Changes to personal income tax and mandatory social security contributions with effect from January 1, 2023

The Serbian Parliament legislated the following amendments to the personal income taxes, law on mandatory social security contributions and the value-added tax law which came into force on January 1, 2023.

Changes in Personal Income Tax Law:

• The non-taxable salary limit increased from RSD 19,300 to RSD 21,712. This limit will be further revised on January 1, 2024;
• Starting with the financial year 2022, the annual income tax will be paid on a self-assessment basis instead of an assessment by the tax authorities. The tax authority will prefill the tax return, and the individual taxpayer can access it electronically through the income tax portal and can modify or supplement the prefilled tax return. Further personal income tax returns are now required to be filed only in electronic form via the tax administration’s portal by May 15. If an individual taxpayer does not submit the return, the draft return prepared by tax authorities would be considered as final.

Changes in social security contributions

• Employers’ contributions rate for pension and disability insurance (social security contribution) has been lowered from 11% to 10%, while the employees’ contributions rate remains the same at 14%.
• For the period from January 1, 2023, to December 31, 2023, the minimum and maximum salary/wage bases used to calculate mandatory social security contribution have increased to RSD 35,025 (from RSD 30,880 in 2022) and RSD 500,360 (from RSD 441,140 in 2022), respectively.

Implication:

Effective from January 1, 2023, employers should consider the revised non-taxable salary limit of employees while deducting the employee’s income tax, the revised salary base for calculating social security contributions, and the reduced pension and disability insurance rate for making contributions.

Singapore

Singapore: Increased financial penalty under the Personal Data Protection Act (“PDPA”), effective from October 1, 2022 

Effective from October 1, 2022, the Singapore government increased the scope of maximum financial penalty that could be levied for violations under the Singapore’s Personal Data Protection Act, 2012 (“PDPA”). The increased penalties are as follows:

• Organisations contravening the PDPA in Singapore will now have to pay maximum of:

• up to 10% of an annual turnover for organizations having annual turnover in Singapore exceeding SGD 10 million; or
• SGD 1 million. 
• Organisations contravening do-not-call provisions will now have to pay maximum penalty of:

• up to 5% of an annual turnover for organizations having annual turnover in Singapore exceeding SGD 20 million; or
• SGD 1 million

Previously the maximum financial penalty for data breaches was only up to SGD 1 million.

Implication:

All organizations that collect, use, or disclose data within Singapore need to ensure compliance of provisions of PDPA to avoid penal consequences. 

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Singapore: Tax authorities announced benefits for the seamless filing of corporate income tax returns from the software from the year 2023

In order to promote adoption of seamless filing of tax returns from the software by the companies, the Inland Revenue Authority of Singapore (“IRAS”) has announced new benefits for companies filing their Corporate Income Tax (“CIT”) returns for the years of assessment 2023 to 2025 by using seamless filing from the software. The year of assessment 2023 will cover the financial year beginning on January 1, 2023 and ending on December 31, 2023.  

The benefits announced by the IRAS are: 

• Extension of due date for filing of CIT return by 15 days, from the current deadline of November 30 to December 15.
• Waiver for the period of 3 years for errors, if any, made in filing the CIT return due to unaccustomed usage of the software.

Implication:

If the companies choose to adopt the new seamless filing initiative, they will be able to avail the benefits announced by the IRAS.

Slovakia

Slovakia: Amendments to child tax bonus are effective from January 1, 2023  

Amendment to Act No. 595/2003 Coll. on ‘Income Tax’, increases the tax bonus for dependent children up to the age of 25. Any taxpayer who is paying income tax upon the attainment of certain conditions can claim the child tax bonus in Slovakia. From January 1, 2023, for a transitional period of 2 year, i.e., until December 31, 2024, the tax bonus amount and age for dependent(s) children living with the taxpayer in the same household have increased as follows:

Dependent Child Age	Monthly Tax Bonus Amount
Between the age of 18 to 25 (increased from age 15 and above)	EUR 50 (increased from EUR 40)
Under the age of 18 (increased from under the age of 15)	EUR 140 (increased from EUR 70)

The amount of the tax bonus allowable is restricted depending upon the taxpayer’s tax base, and number of dependent children. Child tax bonus is reduced from the tax liability. __________________________________________________________________________________

Slovakia: Amendments to the Value Added Tax (“VAT”) Act are effective from January 1, 2023

On December 6, 2022, the Slovak Parliament approved amendments to the VAT Act, which are effective from January 1, 2023. The highlights are as follows:

• If the VAT payers do not pay for the purchased goods or services within 100 days, they are required to correct the deducted VAT to the extent of the unpaid obligation. The correction is required to be made within the tax period in which 100 days have passed from the due date of the tax liability;
• Effective January 1, 2024, domestic payment service providers are required to keep records of payments, including cross-border payments, for every quarter.

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Slovakia amends Labour Code to transpose EU Directives; Increases meal allowance.

On October 4, 2022, the Slovak Parliament adopted an amendment to Act No. 311/2001 Coll. ‘the Labour Code’ that came into effect on November 1, 2022. The amendments mainly aim to transpose the EU Directives on transparent and predictable working conditions. The highlights of the amendments are as follows: –

• Extended working condition information 

Employers are now required to notify employees in writing or electronically of employment and working conditions if they are not included in the employment contract, as follows:

• determination of the place of work or main place of work (if multiple places of work);
• rules on weekly work schedule, organizing work schedule, working time, working days, work breaks, overtime including its pay, etc;
• payment of wage, including pay dates;
• Annual leave provision and entitlement;
• rules for employment termination, length of notice period, etc;
• Scope of trainings if required to be provided by the employer.

The first three of the listed information must be provided within seven days of the start of employment, and the remaining information must be provided within four weeks of the commencement of employment. 

Employees who operate outside of Slovakia are additionally required to be given extended working conditions information such as currency of wages, working conditions in such country, etc. if their average working hour over a four-week period exceeds three hours.

• Paternity Leave

The amendments introduced paternity leave and provided for two weeks (14 days) of paid paternity leave to the fathers, within a period of six weeks from the child’s birth, regardless of the receipt of maternity benefits or parental allowance by the child’s mother. 

• Respond to employee’s request.

If an employee requests in writing that their employment be changed from fixed-term to indefinite-term or from shorter working hours to regular weekly working hours, the employer is required to respond within one month of receiving the written request, or within three months if the employer have more than 50 employees.

• Delivery of document period introduced.

Where employer delivers documents to the employee by registered mail/post then employee is provided with a period of at least 10 days to collect the documents.

• Non-compete clause.

Except for business activities that are competitive with the current employment, the employer cannot prohibit the employee from engaging in any profitable business activity after completing the working hours. 

• Probation Period

In case of fixed employment contract, probation period shall not exceed the half of the duration of the employment contract. 

• Meal deduction

The employer can make deductions from the employee’s monthly wages for any advance payments for meal allowances.

• Revised meal allowance

On December 7, 2022, the Ministry of Labour, Social Affairs and Family published a measure in the Collection of Laws of the Slovak Republic which has revised the meal allowance for domestic business trips from January 1, 2023, onwards, as follows:

• Increased from EUR 6.40 to EUR 6.80, for 5 to 12 hours;
• Increased from EUR 9.60 to EUR 10.10, for 12- 18 hours;
• Increased from EUR 14.50 to EUR 15.30, for more than 18 hours.

From January 1, 2023, onward, employers will have to provide a minimum meal voucher with a value of at least EUR 5.10. Further, employers need to issue only electronic meal vouchers and not paper meal vouchers except when it is not possible for the employee to use the meal voucher in electronic form during the working shift or nearby the workplace.

Implication:

Employers are required to make the necessary changes to their employment policies, employment contracts and employee handbook for the above-mentioned changes.

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Slovenia

Slovenia: Personal tax changes effective from January 1, 2023  

The Slovenian Parliament passed amendments to Income Tax Act on November 28, 2022, which are set be effective from January 1, 2023.  Some of the important measures related to personal taxation are as follows:

• Income Tax – The rate applicable to top income tax bracket increased to 50% (previously 45%). 
• Standard Personal Allowance – Personal allowance amount is set at EUR 5,000 for the year 2023. Further the plan for gradual increase in the amount of allowance to EUR 7,000 in 2025 has been repealed. 
• Maximum Additional Allowance for lower income individuals – The amount of allowance is increased to EUR 16,000 (previously EUR 13,716.33). The formula to determine the amount of allowance has been revised to EUR 18,761.40 – 1.17259 x total income. 
• A special tax relief for young individuals up to the age of 20 years at EUR 1,300 per year. 

Implication:

Employers should take note of changes in personal income taxes and adjust their payroll accordingly.

Slovenia: Personal Data Protection Act (“ZVOP-2”) adopted.

On December 15, 2022, the National Assembly of the Republic of Slovenia adopted the Personal Data Protection Act (“ZVOP-2”), which transposes General Data Protection Regulation (Regulation (“EU”) 2016/679) (“GDPR”) into Slovenian legislation. Slovenia is the last EU country to adopt GDPR. 

The new law is consistent with the requirements of Article 38 of the Constitution of Republic of Slovenia, and it governs processing of personal data, video surveillance in public places, processing of special categories of data according to the National Assembly.

Implication:

The Companies should reassess their Data Protection Policies to ensure that they are in compliance with the requirement of the new law.

South Korea

South Korea passes amendments to the Income Tax Act; reduces corporate tax rates by 1% effective January 1, 2023

South Korea’s National Assembly in December 2022 introduced several tax reforms for the year 2023 as follows: – 

• The taxable rate for all corporate income bases is reduced by 1%

The tax rate for each corporate tax base for the financial year (“F.Y.”) commencing on or after January 1, 2023, will be reduced by 1% as follows:

Corporate Income Tax base from F.Y. January 1, 2023, onwards	Corporate Income Tax base till F.Y. 2022
Annual Taxable Income  (KRW in million)	Income Tax Rate	Annual Taxable Income (KRW in million)	Income Tax Rate
Up 200	9%	Up 200	10%
200 to 20,000	19%	200 to 20,000	20%
20,001 to 300,000	21%	20,001 to 300,000	22%
300,001 and above	24%	300,001 and above	25%

• Introduction of an integrated employment tax credit

In Korea, employment support is provided through various tax credits, namely tax credits for: i) job assistance; ii) social insurance premiums; iii) career-interrupted women; iv) converting to full-time positions; and v) those returning from parental leave. Each system has different parameters and eligibility conditions and therefore, it was difficult for small businesses to take advantage of them. Now, an integrated employment tax credit has been introduced which will consolidate all the current employment support tax credits available to all companies (except for the consumer service industry) as follows:

• The integrated employment tax credit provides tax credits to small and medium-sized businesses (“SMEs”) and medium companies for hiring one full-time worker as follows: –

Type of Entities	Tax Credit (In KRW)
SMEs (in metropolitan areas)	8.5 million
SMEs (in non- metropolitan areas)	9.5 million
Medium companies	4 million

• The integrated employment tax credit provides a tax credit to SMEs, medium-sized and large companies for hiring employees aged between 15 and 34, seniors at least 60 years old, career-interrupted females, and disabled persons as follows:

Type of Entities	Tax Credit (In KRW)
SMEs (in metropolitan areas)	14.5 million
SMEs (in non- metropolitan areas)	15.5 million
Medium companies	8 million
Large companies	4 million

• The integrated employment tax credit for the conversion of part-time to full-time employees is as follows: –

Type of Entities	Tax Credit (In KRW)
SMEs	13 million
Medium companies	9 million

• The books and records retention period for international transactions increased from 5 years to 7 years (aligned with the international and offshore statute limitation periods);
• The flat rate taxation at 19% applicable to foreign employees working in Korea extended from 5 years to 20 years. Further, the implied condition for availing this benefit that foreign employees must start working in Korea by December 31, 2023, is also done away with;
• Domestic companies will be allowed to set off carried forward losses up to 80% (as against the earlier rate of 60%) of taxable income, while the 100% of taxable income limit remained the same for SMEs.

Implication:

Revised corporate tax rates are beneficial to companies and would result in saving in tax outgo. Businesses should take note of integrated employment credit provisions and take advantage of it as per their eligibility.

Spain    

Spain: Decree 18/2022 (‘Crea y Crece Law’) introduces reduction in minimum share capital requirement and reforms for faster formation of LLCs in Spain

Spain through Royal Decree-Law 18/2022 dated September 28, 2022, brought into force (‘Crea y Crece Law’) ‘Law on the creation and growth of companies’, which was published in official gazette on September 29, 2022, and its provisions are effective from October 19, 2022. The law has introduced various measures for promoting growth and development of companies.

The measures introduced are as follows:

• New minimum capital requirement of EUR 1: Limited liability companies can be incorporated with a minimum capital of EUR 1 (previously EUR 3,000). However, if the share capital is below EUR 3,000, the company must allocate at least 20% of profits to a legal reserve until the sum of the legal reserve and the share capital reaches EUR 3,000.
• Joint and several liability of partners: In cases of liquidation where the assets are insufficient to pay the company obligations, the liability of the partners of the company will be joint and several up to the difference between EUR 3,000 and the amount of subscribed capital.
• More agile and faster incorporation process: The companies can make use of the Information Centre and Business Creation Network (“CIRCE”) platform wherein the incorporation process will be carried out telematically through Single Electronic Document (“DUE”) by using online services of Entrepreneur Service Points (“PAE”). These services help and guide in the formation and registration process of a company through online mode. The existing system (i.e., offline/ physical mode) of company formation also continues, however, it is encouraged to use CIRCE platform for faster process of company incorporation. The foreign language documents, if any, used for incorporation of a company need to be apostilled and legalized and translated in Spanish language, irrespective of the mode of formation of the company (i.e., online, or offline mode).

Implication:

The companies can be incorporated in hassle free fast manner through introduction of CIRCE platform. The entire incorporation process can now be carried out through the one stop shop platform – CIRCE.

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Spain: Maximum monthly social security contribution base increased from EUR 4,139.40 to EUR 4,495.50 effective from January 1, 2023

Spain Government through ‘Law No 31/2022 – General State Budget for 2023’ published in official gazette on December 24, 2022, announced the increase in the monthly maximum social security contribution base from EUR 4,139.40 to EUR 4,495.50 effective from January 1, 2023. Further, an additional contribution of 0.6% will be paid towards non-occupation common contingencies insurance where the employer will contribute to the extent of 0.5% and employee will contribute to the extent of 0.1% from January 1, 2023.

The maximum monthly contribution base is used for calculation of various social security contributions relating to unemployment insurance, common contingencies insurance, vocational training and wage guarantee fund contributions (“FOGASA”) wherein both the employer and employee contribute.

Implication:

The employers will need to take note of the increased social contribution base and the rate for calculating the social security contributions of the employees for 2023.

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Sweden

Sweden: National income tax threshold for individuals increased to SEK 598,500 from SEK 540,700 for the year 2023

Swedish Government through an ordinance dated November 24, 2022, revised the national income tax threshold for individuals to SEK 598,500 from SEK 540,700 for the year 2023.

2023 (i.e., January 1, 2023, to December 31, 2023) (Income slabs)	2022 (i.e., January 1, 2022, to December 31, 2022) (Income slabs)	Tax rate
Upto SEK 598,500	Upto SEK 540,700	0%
SEK 598,501 and above	SEK 540,701 and above	20%

Implication:

Companies should take note of the revised income slabs to calculate the income tax liability of employees.

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Switzerland

Switzerland: General VAT rate increased to 8.1% from 7.7% effective from January 1, 2024

In September 2022, Swiss Parliament approved increase in the general VAT rate to 8.1% from 7.7% with effect from January 1, 2024.

Implication:

Businesses need to consider the revised general VAT rate from January 1, 2024, for calculating their VAT liability.

Taiwan

Taiwan: Revises the monthly minimum wages and minimum hourly income effective from January 1, 2023

Taiwan has increased the minimum monthly wage by 4.56% from existing TWD 25,250 to TWD 26,400, while the minimum hourly income is also increased by 4.56% from TWD 168 to TWD 176, effective from January 1, 2023.

Taiwan: Increases labour insurance rate from 11.5% to 12%, effective from January 1, 2023

Taiwan’s social security contribution includes contribution towards labour insurance, employment insurance, labour pension, and national health insurance. With effect from January 1, 2023, the contribution rate of labour insurance is raised from 11.5% to 12%, which includes 1% towards employment insurance premium. The contribution rates of labour pension and national health insurance remain unchanged at 5.17% and 6% respectively. 

Implication:

The employers are required to consider the increased contribution rate of labour insurance while making the social security contributions.

Thailand

Thailand: Amendments to the Civil and Commercial Code effective from February 16, 2023

The Civil and Commercial Code Amendment Act (No. 23) B.E. 2565 (2022) (the “Act”), which made amendments to the Civil and Commercial Code, was published in the government gazette on November 18, 2022, and shall come into force on February 16, 2023.  The Civil and Commercial Code is applicable to private companies in Thailand.  

The highlights of the amendments to the Code are as follows:

Highlights

• Promoters’ requirement reduced from three to two.

Currently, for the formation of a private limited company in Thailand, three promoters are required. Under the amendment, the required number of promoters is reduced to two, and the same provision shall be applicable to the shareholders of the company. Further, a company can be dissolved by the court if the number of shareholders decreases to one (Section 1097);

• The validity of MOA reduced from ten years to three years.

The amendment imposes an obligation on promoters to register the incorporation of a company within three years from the registration date of its MOA, which is currently ten years. Otherwise, the registered MOA will be declared invalid. (Section 1099);

• The registered company seal (if any) to be affixed on the share certificate.

Currently, every share certificate of the company is required to be signed by at least one director of the company. The amendment requires that if the company has a registered seal, it shall be affixed on the share certificate. In cases where the company seal is not registered, the affixation of the seal is not required. (Section 1128);

• Directors are allowed to attend board meetings virtually.

The amendment allows directors to attend and vote the meeting through electronic means and their attendance would be counted for the purpose of quorum. However, board meetings conducted electronically are required to comply with the applicable rules. (Section 1162);

• Notice in the newspaper not required for shareholders meeting

Under the amendment, the requirement to publish a notice of shareholder’s general meeting in a local newspaper has been done away with except in case of companies who had issued shares with a bearer certificate. Thus, companies will only be required to send the general meeting notice to shareholders via post with a return receipt. (Section 1175);

• Clarity on quorum for shareholders meeting

The amendment provides that the total number of shareholders required to attend the general meeting in person or by proxy shall not be less than two and shall hold not less than 25% of the total share capital of the company. Currently, the number of shareholders is not specified under the code; only the minimum share capital for quorum is specified which is not less than 25% of the total share capital of the company. (Section 1178);

• Clarity on dividend payment deadline

The amendment clarifies that the dividend distribution process shall be started and completed within one month of the date of passing the relevant resolution. Currently, the code merely stipulates that the distribution of dividends shall be made within one month from the date of the shareholders or board of directors’ resolution. (Section 1201);

• New concept of “merger” introduced.

Currently, the code recognises the concept of amalgamation, under which at least two companies merge and subsequently create a new company, while all merging companies are liquidated and dissolved and will no longer exist as legal entities. Under the Amendment, a new concept of “merger” is added to the code under which one of the merging companies remains in existence while the other merging companies will be liquidated and dissolved i.e., no new company will be created or registered.

Implication:

Companies planning to start operations in Thailand should take note of amended provisions relating to number of promoters, registration of memorandum of association, etc. Thailand companies should take note of changes relating meetings, quorum, share certificates, etc. and comply with them.

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Thailand announces a new incentive package for long-standing foreign investors and relocators

Thailand’s Board of Investment (“BOI”) announced a package of incentives on November 4, 2022, to increase investment and boost the country’s economy. The new incentives are effective from January 1, 2023, and are summarised as follows: –

• Incentives for long-standing foreign investor 

Foreign corporate investors who have invested in Thailand in at least three projects with a combined value of investment of not less than THB 10 billion in the previous 15 years and seeking approval for new or expansion project worth THB 500 million will be eligible for three years corporate income tax (“CIT”) exemption or a 50% corporate income tax reduction for five years.

• Incentives for relocators

A tax incentive scheme has been introduced for companies that relocate their regional headquarters, research and development centres, and manufacturing facilities to Thailand. Companies that relocate all three of their activities to Thailand will be exempt from CIT for five years; companies that relocate their regional headquarters and manufacturing facilities will be exempt from CIT for three years; and companies that relocate their research and development centres and manufacturing facilities will be exempt from CIT for one to five years, depending on the industry.

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United Arab Emirates

UAE: Amendments to VAT law effective from January 1, 2023 

The UAE issued a federal decree Law No. 18 of 2022 making several important changes to the VAT law as under

•  Tax Audit

In UAE tax audit limitation period is five years after the end of the relevant tax period. However, as per the amendments, where a notice has been issued for initiation of tax audit within the period of five years, the actual audit can be completed within the period of next four years from the receipt of such notice. Further where a taxpayer makes a voluntary disclosure in the 5^th year following the relevant tax period to which it relates, the Federal Tax Authority (FTA) will get an additional year to complete the tax audit. Tax audits in cases of tax evasion can be carried out within 15 years of the end of the tax period in which the evasion occurred.

Further, if the authorities find out that despite being required to register, a business has not taken A VAT registration, they can conduct audit within 15 years of from the data on which the business was due for registration.

• Exemption for VAT Registration:

With effect from January 1, 2023, businesses that are 100% engaged in exports and are zero-rated supplies under VAT may request an exemption from registration. 

• Input credit on import of service and goods:

 The input VAT on import transactions be recovered, only when the taxpayer keeps both the supplier invoice (for goods and services) and the import documents (for goods).

• Deemed supplies to related parties.

In case of deemed supply to related parties, value of supply would be determined based on market value. 

Implication:

Businesses need to take into consideration the recent changes to VAT law and amend the policies and practices accordingly to avoid non-compliances.

UAE: Ministry of Finance releases corporate tax law introducing corporate tax regime. 

The Ministry of Finance of UAE has released Federal Decree-Law No. 47 of 2022 on December 9, 2022, to introduce corporate tax regime in UAE.  The corporate tax (“UAE CT”) regime would be effective for financial years starting on or after June 1, 2023. 

The Key features of the proposed UAE CT are summarized below: 

• Scope and applicability:
• UAE CT will be effective for financial years starting on or after June 1, 2023. For Example:

• A business that follows financial year of July to June, will be subject to UAE CT from July 1, 2023 (which is the beginning of the first financial year that starts on or after June 1, 2023)
• A business that follows calendar year as its financial year, will become subject to UAE CT from January 1, 2024 (which is the beginning of the first financial year that starts on or after June 1, 2023).

• The UAE CT is a federal tax and will therefore apply across all Emirates.
• UAE CT will apply to following:
• Resident person: 

A resident person is any of the following persons:

• A juridical person incorporated in the UAE, including a Free Zone person;
• A juridical person incorporated in a foreign jurisdiction that is effectively managed and controlled in the UAE;
• A natural person who conducts a business (Business) or business activity (Business Activity) in the UAE as may be specifically specified by a Cabinet Decision.
• Non-resident person:

A non-resident person is the one who either:

• has a permanent establishment (“PE”) in the UAE;
• has UAE sourced income;
• has a nexus in the UAE (to be specified in a Cabinet Decision).

A Non-resident would be considered to have a PE if it has a fixed place of business in UAE or it operates through a dependent agent.  The concept of PE is similar to OECD Model and certain other types of PE may get covered through a ministerial decision.

Certain entities like Government entities or Government controlled entities, those engaged in extraction of natural resources, charities etc. are exempt from UAE CT.

• Applicability to businesses in Free Zones:
• The Corporate Tax Law introduces the concept of a “Qualifying Free Zone Person” (“QFZP”), which is broadly defined as a company or branch registered in a free zone that:

• Maintains adequate substance in the UAE.
• Derives qualifying income (to be specified through a Ministerial Decision).
• Satisfies transfer pricing requirements.
• Meets any other conditions to be prescribed through a Ministerial Decision.

• If QFZP fails to meet the conditions as above during any tax period, then it will cease to be a QFZP from the beginning of that period subject to any ministerial decision in this respect. 
• The CT will still apply to a QFZP, but it will be subject to 0% rate on its qualified income and 9% rate on its non-qualifying income. If a QFZP opts to forgo exemption, the ordinary CT rate will apply instead of the favourable regime.
• Taxable income – scope and computation:

• The worldwide income of UAE business would be subject to tax.
• Taxable income will be the accounting net profit after making certain adjustments. Certain non-deductible expenses would have to be added back for arriving at taxable income such as donation, administrative penalties, etc.;
• Income from dividends, capital gains from qualifying shareholding and qualifying intra-group transactions and reorganizations, will be exempt from taxation, subject to satisfaction of certain conditions such as ownership threshold and a minimum holding period;
• Losses for period after UAE CT regime becomes effective can be set off up to 75% of the taxable profits of future year. Carry forward of losses is allowed for indefinite period.

• Tax rates:

• The applicable CT rate is 9%.  0% rate will apply up to a certain threshold which is expected to be AED 375,000 in view of FAQs issued by UAE Ministry of Finance. 
• As indicated earlier, a different tax rate will apply in case of large multinationals that meet specific criteria set with reference to ‘OECD Base Erosion Profit Shifting project’ (i.e. having consolidated group revenue exceeding EUR 750 million). However, the Corporate Tax law does not cover this aspect though FAQ states that such rules would be introduced in due course. 
• There will be no withholding taxes on payments to non-residents unless income is attributable to UAE branch or a PE. Further foreign CT paid on UAE taxable income would be allowed as tax credit against UAE CT liability.

• Tax registration number and filing of tax return and payment:

• UAE business are mandated to register and obtain a Tax Registration Number.  The registration application would be required to be filed before corporate tax regime becomes effective. Guidance in this respect would be released in future.
• UAE businesses including QFZPs will be required to file CT return electronically and pay taxes within 9 months from the end of the year. the taxpayers may have to submit financial statements to tax authorities and maintain audited or certified financial statements.
• Introduction of transfer pricing regulations:

• The CT Regime also includes several TP clauses that are similar to Organisation for Economic Co-operation and Development (“OECD”) guidelines. The arm’s-length principle should be followed in all agreements and transactions involving connected parties and related parties. 
• The law requires businesses to maintain TP documentation which include local and master file subject to conditions which will be prescribed in future. If tax authorities request, the documentation would be required to be submitted within 30 days of such request. Businesses may have to submit a disclosure form with CT return. 
• Businesses can be eligible to apply for advance pricing agreements.

Implication:

The introduction of the CT regime will have a significant impact on taxation of UAE businesses. Though businesses in Free Zones will continue to enjoy tax exemption/incentives on qualifying income, subject to meeting prescribed conditions, there would be an increase in the compliance burden as they would need to register and file CT returns. CT regime also include transfer pricing provisions requiring businesses to maintain TP documentation. Companies should monitor further developments and announcements in future.

United Kingdom

UK autumn statement – Key highlights

On November 17, 2022, UK Chancellor of Exchequer Mr. Jeremy Hunt presented the Autumn Statement before the UK Parliament. The aim of the proposals is economic stability and fiscal sustainability. Earlier in September, the Former Chancellor of Exchequer Kwasi Kwarteng had presented the growth Plan, 2022 but subsequently, due to the significant backlash from general public and markets over unfunded tax cuts, the former Chancellor and the former Prime Minister Liz Truss were forced to resign. In subsequent developments, many of the proposals from the Growth Plan were rolled back and it was announced that the detailed fiscal plan would be announced in the Autumn Statement. The following are the key proposals in the Autumn Statement: 

• Measures relevant for individuals and employers:
• The threshold for applying the additional rate of Income tax of 45% will be reduced to GBP 125,140 from GBP 150,000 effective April 2023. The additional tax rate of 45% will be payable on all non-savings and savings income above GBP 125,140.

Tax brackets and rates applicable to employees in England and Northern Island are as under:

Tax Rate	Threshold (2022-23) *	Threshold (2023-24) *
Basic rate – 20%	Up to GBP 37,700	Up to GBP 37,700
High rate – 40%	From GBP 37,700 to GBP 150,000	From GBP 37,700 to GBP 125,140
Additional Rate 45%	Above GBP 150,000	Above GBP 125,140

*Threshold mentioned here are applicable to taxable income after reducing personal allowance which can be up to GBP 12,570. Personal allowance can be more than GBP 12,570 if a person opts for marriage allowance or blind person allowance, and it will be less if income is more than GBP 100,000.

• The Government has decided to freeze the thresholds set for the Income Tax and National Insurance Contribution (“NIC”) Tax up to April 2028.
• National insurance employment allowance at GBP 5,000 and the secondary threshold at GBP 9,100 will also be maintained until 31 March 2028.
• Dividend allowance will be reduced from GBP 2,000 to GBP 1,000 from April 2023 and then to GBP 500 from April 2024. Dividend allowance represent the amount taxpayer can earn as tax free dividend. The tax-free capital gains annual exemption Capital Gains Annual Exemption will be reduced from GBP 12,300 to GBP 6,000 and then to GBP 3,000 respectively from April 2023 and April 2024. This amount represents the capital gains income limit beyond which taxpayer is liable to pay capital gains tax.
• Effective from April 2023, the National Living Wage (“NLW”) will be increased to GBP 10.42 from GBP 9.50 per hour to tackle inflation.
• Stamp Duty Land Tax cuts – Government has earlier announced certain cuts in Stamp Duty Land Tax Rates. However, as per Autumn Statement, this measure will be temporary and thus will be effective only up to March 31, 2025.
• From April 2023, the government will adjust the Energy Price Guarantee Scheme in such a way that a typical household in Great Britain will pay GBP 3,000 per annum (up from the current GBP 2,500 per annum) from April 2023 to April 2024.
• Measures relevant for businesses: 

• As per earlier announcements, corporation tax for companies having profits above GBP 250,000 will rise to 25% from April 2023 with lower small profit tax rate applicable to companies having lesser profits. The Autumn statement has further announced that the rate of diverted profit tax will increase from 25% to 31% effective from April 2023. The rate of Bank Corporate Tax Surcharge will be 3% from April 2023.  
• Effective from April 2023, large multinational groups (with turnover above EUR 750 million) need to maintain the transfer pricing documentations in the form of Master and Local File as per OECD guidelines. This will be legislated in Spring Finance Bill 2023.
• Annual Investment Allowance (“AIA”) will be allowable up to GBP 1 million on permanent basis from April 1, 2023. This will allow businesses to claim allowance in respect of cost of qualifying plant and machinery acquired during the year up to GBP 1 million.
• Reforms are proposed to Research and Development (“R&D”) tax relief whereby the following changes will be effective from April 1, 2023. This relief is available for companies which work on innovative projects in science and technology.

• Research and Development Expenditure Credit (“RDEC”) rate will be increased to 20% from 13%.
• Small and Medium-sized Enterprises (“SME”) additional deduction will be decreased from 130% to 86%.
• SME credit rate will be decreased to 10% from 14.5%.

• The new rules related to the Global Minimum Corporate Tax of 15% proposed under OECD Base Erosion Profit Shifting (“BEPS”) project will be implemented effective from the accounting period beginning on or after December 31, 2023. It will require large UK headquartered MNE groups to pay a top-up tax where their foreign operations have an effective tax rate below 15%. Further there would be a supplementary Qualified Domestic Minimum Top-up (“QDMTT”) whereby large group having operations exclusively in UK will need to pay a top-up tax where their UK operations have an effective tax rate of less than 15%.
• Electric vehicles will start paying excise duty from 2025.
• VAT Registration and De-Registration thresholds will be maintained at GBP 85,000 and GBP 83,000 until April 2026.
• Business rates on properties – From April 1, 2023, business rates bills in England will be updated to reflect current property valuation. Further a package of targeted support for next 5 years will be provided for businesses. Further business rate multiplier which is used to calculate business rates based on property valuation will be freezed at current level. Support for eligible retail, hospitality and leisure business would be extended till 2023-24.

Implication:

Employers should note changes in personal income-tax slabs and adjust their payroll policies. Multinational entities having operations in UK should note applicability of Master File and local file documentation requirement from 2023 and monitor developments in this respect. Businesses should take note of change in R&D tax relief, investment allowance availability, changes in business rates and also evaluate eligibility for business rate support package.

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