— July 2023: Global Updates

Argentina

Argentina: Minimum and maximum basis for employee social security contributions increased to a monthly salary of ARS 23,891.99 and ARS 776,478.32 respectively from June 1, 2023

With effect from June 1, 2023, the minimum basis for an employee’s social security contributions is increased to a monthly salary of ARS 23,891.99 from ARS 19,758.51, and maximum basis is increased to a monthly salary of ARS 776,478.32 from ARS 642,142.18. These bases are used for the computation of employees’ portion of social security contributions.

Australia

Australia: The fixed rate for claiming home office deductions increased from 52 cents to 67 cents per hour effective from July 1, 2022.

The Australian Taxation Office (“ATO”) released the Practical Compliance Guide 2023/1 on February 16, 2023, for taxpayers claiming home office expenses. Home office deductions can be claimed in two ways– through the fixed rate method or the actual cost method.

Effective July 1, 2022, taxpayers using the fixed rate method can deduct home office expenses at 67 cents per hour (previously 52 cents per hour) for each hour worked from home during the tax year.

Implication:

Taxpayers filing home office deductions under the fixed rate method can deduct an updated 67 cents per hour.

Australia Budget Highlights-2023

Dr. Jim Chalmers, the Treasurer, presented the 2023-24 Federal Budget on May 9, 2023. Although no significant tax changes have been made, revisions focused ons health, support payments, and the creation of affordable housing.

Changes in the Medicare levy thresholds for 2022-23

In the absence of social security taxes, a 2% Medicare levy applies to all taxpayers whose income exceeds specified thresholds.

Effective July 1, 2022, Medicare levy thresholds have increased for singles, families, seniors, and pensioners (see table). For each dependent child, the family income threshold increased by AUD 3,760.

Category	2022-2023 (in AUD)	2021-22 (in AUD)
Singles	24,276	23,365
Families	40,939	39,402
Single seniors and pensioners	38,365	36,925
Family seniors and pensioners	53,406	51,401

Instant write-off of eligible assets below AUD 20,000 for small businesses with turnover less than AUD 10 million

Small businesses with an aggregated turnover of less than AUD 10 million can deduct the full cost of eligible assets valued below AUD 20,000 that are first used or installed ready for use between July 1, 2023, till June 30, 2024. The deduction applies on a per asset basis, allowing small businesses to avail immediate write-offs for multiple assets.

Implementation of Global Minimum Tax and Domestic Minimum Tax effective from January 1, 2024

Australia has announced the implementation of global minimum tax and domestic minimum tax effective from January 1, 2024, which are based on the OECD Global Anti-Base Erosion Model Rules. These measures will apply to large multinational corporations with annual global revenue of EUR 750 million or more. The measures are as below:

A global minimum tax of 15% will apply to income years starting on or after January 1, 2024. This will ensure that large multinationals pay an effective minimum level of tax on the income arising in each jurisdiction where they operate.
A domestic minimum tax of 15% will apply to income years starting on or after January 1, 2024. This will allow Australia’s first claim to apply a top-up tax on any low-taxed domestic income.

Implications:

Employers need to take note of the revised medicare levy thresholds.
Companies should take the benefit of immediate write off of eligible assets.
Companies should monitor the developments related to the global minimum tax.

Belgium

Belgium: Notice period for termination of employees hired prior to January 1, 2014 not to exceed 13 weeks

With the Act of March 20, 2023 (“the 2023 Act”), Belgium amended the Unified Status Act (the Act which unified the status of blue and white-collar jobs) r to resolve the dispute regarding maximum notice period for employee termination and to remove the distinction in notice periods applicable to white collared job based on salary.

Previously, for employees who were hired prior to January 1, 2014, the notice period was determined in two parts, based on the number of years of service prior to January 1, 2014, and service rendered after that date. The amended provisions established the maximum notice period for resignation by such employees cannot exceed 13 weeks.

Further, the 2023 Act deletes sections 3 and 4 of Article 68 of the Employment Agreements Act which required a maximum notice period of 4.5 months for white-collared employees earning more than EUR 32,254 as on December 31, 2013, and 6 months for employees earning EUR 64,508 as on December 31, 2013. The abolition of these rules reinstates earlier rules which allowed flexibility in determining notice periods for such employees based on mutual agreement or through court decisions.

These amendments would be effective on October 28, 2023, and will apply to resignation notices submitted after that date.

Implication:

Employers should consider these changed provisions when determining the notice period for employee termination.

Belgium: Record retention period under VAT increased to 10 years effective January 1, 2023

Effective from January 1, 2023, the Belgium tax authorities issued the Circular No. 2023/C/58 which makes the following amendments:

Extension of the retention period for VAT invoices, books, and related documents from 7 years to 10 years to align it with the limitation period for fraud cases.
Extension of the limitation period for submitting declaration and payment of VAT:

If a taxpayer fails to submit or submits late a monthly or quarterly return, the limitation period for tax assessment and collection will be extended. The extended period ends on December 31 of the fourth year (previously 3rd year) following the year in which the VAT became due and payable.

Implication:

Businesses should take note of changes in retention period and adjust their systems accordingly.

Brazil

Brazil: Racial or ethnic information of employees is to be recorded in employee records and documents

Law No 14,552/2023 effective from April 24, 2023, amends the Brazilian Statute of Racial Equality (Law No 12,288/2010) by mandating companies to obtain racial or ethnic identity information throughout the recruitment process.

The companies will have to incorporate these changes or insert necessary fields in the employee administrative records.

Other administrative records such as forms relating to recruitment and dismissal of employees, work accident-related forms, employees’ social security registration documents etc. need to be amended to include the employee-related race/ethnicity information.

Implication:

Companies must amend their internal employee records and documents to include race/ethnicity information and ensure this information is collected in the hiring process.

Brazil: New Transfer Pricing Law effective from January 1, 2024

Brazil has enacted a new transfer pricing law (Law No 14,596/2023) on June 14, 2023. The law will be mandatory for all taxpayers from January 1, 2024, but can be adopted early in 2023. The law brings substantive changes in the transfer pricing system asBrazil adopted the Organization for Economic Co-operation and Development (“OECD”) Transfer Pricing Guidelines.

Brazilian companies can choose to adopt the new transfer pricing system from January 1, 2023, by letting the tax authorities (“RFB”) know between September 1 to 30, 2023.
The new transfer pricing system applies to all cross-border, intercompany transactions – including transactions involving intangibles, business restructuring transactions, etc.
Arm’s length principle is introduced, establishing new methods for calculating the arm’s length price: comparable uncontrolled price method, resale price method, cost plus method, net transaction margin method, profit split method, etc.
The concept of related parties is broadened.
As long as they are consistent with the arm’s length principle, royalties paid to related parties in jurisdictions with low taxes are now deductible.

The Revenue Authority may invite public comments on the new law.

Implication:

Companies should keep a watch on further developments related to the new transfer pricing law and take necessary steps to implement the provisions of the new law.

Canada

Ontario increases minimum wage rates to CAD 16.55 per hour from CAD 15.50 per hour effective from October 1, 2023

Effective from October 1, 2023, Ontario has raised the general minimum wage to CAD 16.55 per hour from CAD 15.50 per hour.

British Columbia increases the minimum wage to CAD 16.75 per hour from CAD 15.65 per hour, effective from June 1, 2023

Effective from June 1, 2023, British Columbia has increased the minimum wage to CAD 16.75 per hour from CAD 15.65 per hour.

Quebec increases minimum wages per hour to CAD 15.25 from CAD 14.25 per hour effective from May 1, 2023

Effective from May 1, 2023, Quebec has increased the minimum wage to CAD 15.25 per hour from CAD 14.25 per hour.

British Columbia’s Pay Transparency Act enters into force from May 11, 2023; Introduces new obligations for employers.

The Pay Transparency Act (“the Act”) received royal assent and came into effect in British Columbia on May 11, 2023.

The Pay Transparency Act is a new legislation in British Columbia that creates certain obligations for employers regarding the collection, disclosure, and reporting of pay-related data of employees. The act aims to promote pay transparency at the workplace.

As per the Act, the employers need to undertake the following:

Disclosure Requirements: Disclose the pay range while publicly advertising any job opportunities.
Reporting Requirements: Generate an annual pay transparency report containing employee pay data and diversity characteristics, like gender. By 2026, all public, private, and non-profit sector employers in British Columbia, with 50 or more employees, will have to publicly report their gender pay data. The contents of the transparency reports are yet to be determined, but they are expected to include information such as gender and pay differences among employees.
Reprisal Protections: Employers are prohibited to retaliate against employees for discussing or disclosing their pay or inquiring about their pay.
Pay History Protection: Employers are also prohibited from seeking pay history from the job applicants unless such information is publicly available.

Implication:

Employers need to take steps to implement the new provisions aimed to promote pay transparency and ensure that their hiring practices and internal policies comply with the Act.

British Columbia passes legislation to make September 30 a statutory holiday for the province.

Effective March 9, 2023, the government of British Columbia passed the ‘National Day for Truth and Reconciliation Act’ to make September 30 a statutory holiday in the province of British Columbia. Accordingly, the Employment Standards Act stands amended to include the National Day for Truth and Reconciliation, a statutory holiday.

Implication:

Employers in British Columbia need to revise their holiday policy/ schedule to include September 30^th as a statutory holiday.

China

China: R&D super deduction rate increased from 75% to 100% effective from January 1, 2023

In March 2023, the State Council of China increased the super deduction for Research and Development (“R&D”) expenses from 75% to 100%. Vide subsequent announcement through the Bulletin [2023] No.7 made by the Ministry of Finance and the State Taxation Administration, the new super-deduction policy is effective from January 1, 2023, for an indefinite period. Super deduction for R & D expenses is allowable over and above the deduction allowable on actual R&D expenses.

As per the Bulletin No. 7, the allowed pre-tax super deduction rate will apply based on the creation of intangible asset: –

If the R&D expenses incurred do not create any intangible assets and form part of the current period’s profit and loss account, then additional 100% will be deducted from income, resulting in a total deduction of 200%.
If the R&D expenses incurred create any intangible assets, then such capitalized R&D expenses will be further increased by 100% of such costs, which will be amortized as per applicable provisions.

The R&D super deduction benefit is available to resident entities which have a sound accounting system that accurately records R & D expenses and which are subject to audit. Further, such entities should not be operating in one of the industries on the negative list which includes industries like tobacco manufacturing, accommodation and catering, real estate, leasing, entertainment, etc.

The activities eligible for super deduction are elaborated in the Bulletin [2015] No. 119.

Implication:

Eligible businesses should evaluate the availability of super deduction and take advantage of the same.

China: Filing guidelines under standard contractual clauses measures issued by CAC

Under the Personal Information Protection Law (“PIPL”) of China, personal information processors who transfer personal information outside of China, must comply with one of the prescribed data transfer conditions which include a standard contract with the overseas recipient of data as per the requirements of Cyberspace Administration of China (“CAC”). Earlier, on February 24, 2023, the CACissued the measures on standard contracts for the export of personal information, referred to as the SCC Measures, along with the standard contract clauses (“SCC”). These measures have become effective from June 1, 2023. These measures apply to specific types of data transfer and require personal information processors to conduct personal information protection impact assessments before providing personal information overseas.

Eligible companies are required to –

Sign the standard contract with the overseas recipient of personal information within the six-month grace period until December 1, 2023.
File a copy of the signed standard contract, along with the corresponding personal information impact assessment, with the local branch of the CAC within 10 working days from the implementation date of the SCC.

To facilitate this process, the CAC has now released the Filing Guidelines for the standard contract for the export of personal information on May 30, 2023. The guidelines specify that the filing should be completed within 10 working days after the signing of a standard contract. The CAC will review the submitted documents and notify the results to the filing party within 15 days. CAC may ask for supplementary filing which must be completed within 10 working days of receiving notice from CAC.

Personal information protection impact assessment

The Guidelines also lay down the structure of personal information protection impact assessment reports. The information required in the report is quite detailed and covers aspects like details of the overseas information recipient, personal information to be exported overseas, ability of the recipient to protect such information, assessment of impact, etc. Such a report should be prepared during the period not more than 3 months before filing the relevant information to CAC. The Guidelines, however, do not elaborate upon methods and extent of review by CAC.

Implication:

The process of filing and getting the approval for overseas transfer through the SCC route can take a significant amount of time and effort and cause delay in the transfer. The filing process under the guidelines looks similar to another mechanism for data transfer, namely, security assessment. The personal information processor wishing to transfer data overseas through the SCC route should plan well in advance so that the process is completed in time.

China: Minimum Wages raised for Shanghai effective from July 1, 2023, and Beijing effective from September 1, 2023

Shanghai and Beijing have announced increase in minimum wages as under:

Sr. No.	Name of the City	Minimum wages (monthly and per hour) (In CNY)	Effective date
1	Shanghai	CNY 2,690 per month and CNY 24 per hour (previously CNY 2,590 per month and CNY 23 per hour)	July 1, 2023
2	Beijing	CNY 2,420 per month and CNY 26.40 per hour (previously CNY 2,320 per month and CNY 25.30 per hour)	September 1, 2023

China: Shanghai revises salary thresholds for social security contribution effective from July 1, 2023

Shanghai has revised the salary thresholds effective from July 1, 2023, for the contribution to social insurance (basic pension insurance, unemployment insurance, work-related injury insurance, and basic medical insurance including maternity) and to the housing fund.

Name of the City	Upper capped payment base (In CNY)	Lower capped payment base (In CNY)
Shanghai	36,549 (Previously 34,188)	7,310 (Previously 6,520)

Implication:

Companies should consider revised thresholds while computing social security contributions payment.

Costa Rica

Costa Rica: Costa Rica’s Tax authority publishes tax rates and slabs for the tax year 2023.

The Ministry of Treasury has announced the updated income tax rates and income slabs for corporates and individuals applicable with effect from January 1, 2023.

Corporate Income Tax

Corporate tax rate is 30%. However, companies having annual gross income up to CRC 122,145,000 (CRC 112,070,000 in 2022) will be subject to the following corporate tax rates:

2023 Income (in CRC)	2022 Income (in CRC)	2023 & 2022 Tax Rates
Up to 5,761,000	Up to 5,286,000	5%
From 5,761,001 to 8,643,000	From 5,286,001 to 7,930,000	10%
From 8,643,001 to 11,524,000	From 7,930,001 to 10,573,000	15%
From 11,524,001 to 122,145,000	From 10,573,001 to 112,070,000	20%

Employed Individuals

Tax rates and slabs for employed individuals based on monthly salary are as below:

2023 Income (in CRC)	2022 Income (in CRC)	2023 & 2022 Tax Rates
Up to 941,000	Up to 863,000	Nil
From 941,001 to 1,381,000	From 863,001 to 1,267,000	10%
From 1,381,001 to 2,423,000	From 1,267,001 to 2,223,000	15%
From 2,423,001 to 4,845,000	From 2,223,001 to 4,445,000	20%
4,845,001 and above	4,445,001 and above	25%

The income tax slabs and rates are different for self-employed individuals, which are not given above.

Implication:

Employers should take note of the updated income tax slabs while processing the payroll.

Costa Rica: Increase in the minimum wages effective from January 1, 2023

Effective from January 1, 2023, the National Wage Council vide Decree No. 43849-MTSS on October 24, 2022, has increased the minimum wage for all salaried categories by 6.62% (2.09% in 2022) in the private sector.

Cyprus

Cyprus: Increases the social insurance contributions effective from January 1, 2023

Effective from January 1, 2023, the Department of Social Insurance Services of Cyprus, has increased the amount of maximum insurable earnings from Euro 58.080 per annum to Euro 60.060 per annum.

Implication:

Employers should take note of the changes in social insurance contributions and update their payroll processes accordingly.

Denmark

Denmark: European Union (“EU”) Directive on “Public” country by country reporting – transposed into domestic law.

On December 1, 2021, official journal of the European Union (“EU”) published directive 2021/2101 amending earlier directive 2013/34/EU in respect of the disclosure of income tax information by certain undertakings and branches. The new directive introduced “public” Country-by-Country (“CbC”) reporting requirements in the EU.

The new directive entered into force on December 21, 2021, and EU Member States had time until June 22, 2023, to transpose the new directive into domestic legislation.

Accordingly, Denmark passed the law implementing the new directive on June 1, 2023. The law entered into force on June 22, 2023, and the public CbC reporting requirements apply for financial years beginning after June 22, 2024.

The new law requires multinational enterprises with total consolidated revenue exceeding DKK 5.6 billion (approx. EUR 750 million) in each of the last two consecutive financial years to publicly disclose certain income tax information. The information is to be reported for each EU Member State where the group is active and also for each jurisdiction considered as “non-cooperative” by the EU. For all other jurisdictions, information can be reported on an aggregated level.

The public CbC reporting information is similar to existing standard CbC reporting requirements and covers the following areas for all members of the group:

A brief description of activities
Number of employees
Net turnover (including related-party turnover)
Profit or loss before tax
Tax accrued
Tax paid
The amount of accumulated earnings

It will also include the name of the ultimate parent undertaking or the standalone undertaking, the financial year concerned, the currency used for the presentation of the report and, where applicable, a list of all subsidiary undertakings consolidated in the financial statements of the ultimate parent undertaking, etc.

The companies may omit to disclose certain commercially sensitive information for a maximum period of five years. However, the report should include an explanation for the omission of certain information in the report and such information needs to be disclosed within five years in a later report.

The public CbC report must be submitted in Denmark to the Danish Business Authority and also published on the companies’ websites (should remain accessible for at least five years). Where the ultimate parent is a non – EU, the reporting will generally have to be done by the EU subsidiaries or branches.

Implication:

Multinational groups meeting the qualifying criteria are required to comply with public CbC reporting requirements in Denmark for the financial year commencing on or after June 22, 2024.

European Union

European Union: EU-US Data Privacy Framework adequacy decision adopted on July 10, 2023

On July 10, 2023, the European Commission (“EC”) formally adopted a new adequacy decision on the EU-US Data Privacy Framework (“DPF”). The DPF adequacy decision is a significant development as it confirms that the United States ensures an adequate level of protection for personal data, comparable to that of the European Union under the General Data Protection Regulations (“GDPR”).

Earlier, data transfers to the United States-based organizations that had self-certified to the EU-US privacy shield were permitted under EC’s adequacy decision. However, the said decision was invalidated by the European Court of Justice in the Scherms II case on July 16, 2020 (ECJ C-311/18 – “Schrems II”).

The new adequacy decision again allows personal data to flow freely and securely from the European Union (“EU”) to United States (“US”) companies participating in the framework without the need for additional conditions or authorizations, including transfer impact assessment.

The adequacy decision is based on the following essential principles:

The introduction of new rules and binding safeguards to limit access to data by US intelligence authorities to what is necessary and proportionate to protect national security.
Implementation of a new two-tier redress system to address and resolve complaints from Europeans regarding data access by US intelligence authorities, including the establishment of a Data Protection Review Court.
Imposing strong obligations on companies processing data transferred from the EU, including the requirement to self-certify adherence to the standards through the US Department of Commerce.
Implementation of specific monitoring and review mechanisms.

The key points under the Self-certification mechanism for US companies are as under:

Recipient organizations in the US that want to use the DPF must self-certify their adherence to the DPF Principles. The DPF Principles are an updated and further substantiated version of the principles established under the earlier Privacy Shield framework.
To join the DPF, an eligible organization must develop a conforming privacy policy, identify an independent recourse mechanism, and self-certify through the website provided by the US government, Department of Commerce.
A list of certified companies is also provided on the DPF website, for the EU-based data exporters to easily check whether a US data importer organization benefits from the protections under the DPF adequacy decision.

Implications:

The new adequacy Decision allows the free flow of personal data from EU to self-certified US companies that adhere to the EU-US Data Privacy Framework.
Data importers in the US that would like to benefit from the safeguards of the DPF will need to take steps to self-certify under DPF and comply with the DPF Principles.
Data exporters in the EU, that want to transfer EU personal data under the DPF adequacy decision, need to check, prior to the transfer, on the DPF website, whether the recipient in the US is certified under DPF and whether the relevant data transfers are covered by such certification.

Finland

Finland: Implementation of change security system for employees aged 55 or over

Finland implemented a new ‘change security system’ for employees aged 55 and over on January 1, 2023, and meeting certain conditions. The reform aims to promote re-employment for this age group instead of early retirement. The old “early retirement” system, providing additional days of earnings-related daily allowance, is gradually being phased out. The new system includes a change security allowance, change security training, and extended re-employment leave.

Under the new change security system in Finland, employers have the following obligations:

Informing employees aged 55 and above about their rights relating to change security allowance, which is a one-time compensation equal to their average monthly salary.
Informing them about the option of changing security training to improve their skills and re-employability.
Employers are required to allow employees extended re-employment leave.
In order to fund the change security system, employers would have to pay changed security fees when they dismiss staff covered by the change security system. Small employers, whose total payroll subject to unemployment insurance contribution is below a specified minimum level, are exempt from paying these fees. Further, the other half of the change security funding would be generated by higher unemployment insurance contributions applicable to all employers.

Implication:

Employers should take note of a new change security system for employees aged 55 and over and make necessary arrangements to provide required information to eligible employees as well evaluate the impact on their payroll costs.

Finland: Employer certification system introduced to simplify residence permit process

In order to simplify the residence permit process, Finland has introduced an employer certification system for Finnish companies. To obtain this certification, companies must meet specific requirements mentioned below:

Maintaining positive equity over the past three years
Securing at least 10 work-based residence permits for employees (with a minimum of three extensions),
Fulfilling employer obligations
Ensuring compliance with employment terms and relevant collective agreements.

The employer certification offers benefits such as streamlined application procedures, eliminating the need for repetitive company information in each employee’s application, and exempting employees from filling in employment terms in their individual applications.

Implication:

Finnish Employers expecting to hire a large number of foreigners should evaluate their eligibility for employer certification and applicable benefits.

France

France increases the minimum hourly wage from EUR 11.27 to EUR 11.52 effective from May 1, 2023

Effective from May 1, 2023, the minimum hourly wages (gross) in France have been increased to EUR 11.52 (previously EUR 11.27). Due to the aforesaid increase, the minimum growth wage (“SMIC”) per month (gross) in France stands increased to EUR 1,747.20 (previously EUR 1,709.28).

France: New social regime introduced for benefits associated with termination of employment and retirement effective from September 1, 2023.

Law No. 2023-270 of April 14, 2023, introduces changes to the social security system for retirement benefits/retirement indemnity and contractual termination in France which are effective from September 1, 2023. The retirement indemnity, also referred to as the end-of-career indemnity, which is a monetary payment given to employees when they retire. The amount and terms of payment of this indemnity vary based on factors such as the employee’s seniority, salary, and the conditions under which they leave their employment.

The key points are as follows:

Retirement Indemnity:

The employer’s contribution on the retirement indemnity when an employee retires on the employer’s prerogative, will be reduced from 50% to 30%.
This contribution will only be due on the part of the indemnity that is not part of the base for calculating social security contributions, subject to certain limits.
Previously, the employer’s contribution was 50% and was applied to the entire retirement indemnity.

Contractual Termination:

Social Security system applicability will not differ based on whether or not the employee is entitled to a retirement pension from a mandatory pension system.
The contractual termination indemnity will be excluded from the social security contribution base subject to certain limits, but the employer will be required to contribute to the CNAV (French social security organization) at a rate of 30% on exempted portion.
The social package previously applicable to contractual termination indemnities will be abolished and replaced by the employer’s contribution at a rate of 30%.

Implication:

Employers should evaluate the effect on their costs, of the change in social regime for retirement and contractual termination benefits as above.

France: Legislation to obligate small and mid-size businesses to implement “Profit Sharing Scheme” under consideration

A new “profit-sharing” bill is currently under consideration of the French Parliament. The bill is designed to foster closer collaboration between workers and employers, particularly in small and mid-sized businesses, by linking workers’ compensation to their employers’ economic performance. The key provisions of the bill include:

Mandatory profit-sharing for profitable companies: Starting from January 1, 2025, companies employing between 11 and 49 employees will be required to establish a profit-sharing scheme if they are consistently profitable. Specifically, the net profit before tax must be equal to at least 1% of sales for three consecutive years. However, companies that already have profit-sharing schemes in place will be exempt from this requirement. Such companies can implement a profit sharing formula which derogates from the standard design if agreed with employees or their representatives.
Mandatory collective bargaining for larger companies: Companies with 50 or more employees, along with at least one trade union delegate, will be obligated to engage in collective bargaining in the event of an exceptional increase in profits. Companies that are already subject to profit-sharing obligations at the time of the publication of the law must commence negotiations by June 30, 2024 in this respect.

Implication:

Companies should monitor the developments regarding profit-sharing scheme legislation and review their existing schemes if any.

France: European Union (“EU”) Directive on “Public” country by country reporting – transposed into domestic law

On December 1, 2021, official journal of the European Union (“EU”) published directive 2021/2101 amending earlier directive 2013/34/EU in respect of disclosure of income tax information by certain undertakings and branches. The new directive introduced “public” Country-by-Country (“CbC”) reporting requirements in the EU. The new directive entered into force on December 21, 2021, and EU Member States had time until June 22, 2023, to transpose the new directive into domestic legislation.

Accordingly, France enacted Ordinance No. 2023-483 on June 21, 2023, and Decree No. 2023-493 on June 22, 2023. The public CbC reporting requirements apply for financial years beginning after June 22, 2024.

The new law requires multinational enterprises with total consolidated revenue exceeding EUR 750 million in each of the last two consecutive financial years to publicly disclose certain income tax information. French branches of companies with registered offices outside the European Economic Area that meet the criteria are also subject to public CbC reporting if their turnover exceeds EUR 12 million. The information is to be reported for all EEA states where the group is active and also for each jurisdiction considered as “non-cooperative” by the EU.

The public CbC reporting information is similar to the existing standard CbC reporting requirements and covers the following areas for all members of the group:

A brief description of activities
Number of employees
Net turnover (including related-party turnover)
Profit or loss before tax
Tax accrued
Tax paid
The amount of accumulated earnings

Implication:

Multinational groups meeting the qualifying criteria are required to comply with public CbC reporting requirements in France for the financial year commencing on or after June 22, 2024.

Germany

Germany: European Union (“EU”) Directive on “Public” country-by-country reporting – transposed into domestic law.

On December 1, 2021, the Official Journal of the European Union (“EU”) published directive 2021/2101 amending earlier directive 2013/34/EU in respect of the disclosure of income tax information by certain undertakings and branches. The new directive introduced “public” Country-by-Country (“CbC”) reporting requirements in the EU.

The new directive requires multinational enterprises with total consolidated revenue exceeding EUR 750 million in each of the last two consecutive financial years to publicly disclose certain income tax information. The information is to be reported for each EU Member State where the group is active and also for each jurisdiction considered as “non-cooperative” by the EU or in the EU’s “grey” list for a minimum of two years. For all other jurisdictions, information can be reported on an aggregated level.

The public CbC reporting information is similar to existing standard CbC reporting requirements and covers the following areas for all members of the group:

A brief description of activities:

Number of employees
Net turnover (including related-party turnover)
Profit or loss before tax
Tax accrued
Tax paid
The amount of accumulated earnings

The reports are to be published in an EU Member State business register, and also on the companies’ websites (should remain accessible for at least five years). Where the ultimate parent is a non – EU, the reporting will generally have to be done by the EU subsidiaries or branches.

The new directive entered into force on December 21, 2021, and EU Member States had time until June 22, 2023, to transpose the new directive into domestic legislation.

Accordingly, Germany passed the law implementing the new directive on May 11, 2023. The law entered into force on June 22, 2023, and the public CbC reporting requirements apply for financial years beginning after June 21, 2024.

The public CbC report must be submitted in Germany to the business/company register for inclusion in the register within one year after the end of the reporting period. The companies may omit to disclose certain commercially sensitive information (other than information pertaining to non-cooperative tax jurisdictions) if it could potentially harm their business. This information, however, needs to be reported in the income tax information report for the fourth financial year after the reporting period in which such sensitive information was excluded.

Failure to comply with the requirements may result in fines of up to EUR 250,000.

Implication:

Multinational groups meeting the qualifying criteria are required to comply with public CbC reporting requirements in Germany for the financial year commencing on or after June 21, 2024.

Germany: Minimum wage to increase to EUR 12.41 in 2024

The minimum wage in Germany will increase in two stages:

Effective from January 1, 2024, the minimum hourly wage will increase to EUR 12.41 per hour from EUR 12 per hour.
Effective from January 1, 2025, the minimum hourly wage will further increase to EUR 12.82 per hour.

Greece

Greece: Minimum monthly wages increased to EUR 780 from EUR 713 with effect from April 1, 2023

Effective from April 1, 2023, Greece has raised the monthly minimum wage to EUR 780 from EUR 713.

Hong Kong

Hong Kong: Bill passed to give effect to tax proposals in Budget 2023-24

Hong Kong Legislative Council passed the Inland Revenue (Amendment) (Child Allowance and Tax Concessions) Act, 2023 on April 19, 2023, implementing some of the 2023-24 Budget proposals. The amendments are as under:

100% reduction of “salaries tax” and “tax under personal assessment” up to a ceiling of HKD 6,000 for the tax year 2022–23 (a similar reduction was provided earlier with a ceiling of HKD 10,000 for the tax year 2021-22). This will be reflected in the final tax payable for the tax year 2022-23.
Increase in the basic and the additional child allowance for each child born during the tax year 2023–24 from HKD 120,000 to HKD 130,000. Child allowances are deductions from the taxable salary for each child up to the ninth child, which gets doubled in the year of childbirth.

Implication:

Employees should take advantage of the above benefits in their tax calculations.

Hong Kong: Mandatory Provident Fund (“MPF”) offsetting mechanism to be repealed effective from May 1, 2025

The Employment and Retirement Schemes Legislation (Offsetting Arrangement) (Amendment) Bill 2022 which was passed by Legislative Council in 2022, discontinued the offset mechanism whereby the employer can offset the severance payments (“SP”) and long-service payments (“LSP”) against benefits under MPF arising from mandatory contributions made by the employer. Now, the government has announced that the discontinuation of the offset mechanism will be implemented from May 1, 2025.

The Hong Kong Government is also considering a proposal to launch a 25-year subsidy scheme under which the Government will provide partial assistance to employers towards the cost of SP and LSP.

Implication:

Employers should monitor developments with respect to the abolition of the offset against MPF and the proposed subsidiary and assess the impact of the change on their costs.

Hong Kong further extends the deadline for 2022/23 tax returns for certain taxpayers.

Hong Kong Inland Revenue Department (“IRD”), vide circular letter dated June 29, 2023, has further extended the due date for 2022/23 profit tax returns from August 15, 2023, to August 29, 2023, for those taxpayers whose accounting date falls within the period from December 1, 2022, to December 31, 2022. This extension was allowed after considering genuine issues faced by the taxpayers.

Implication:

Eligible taxpayers may take advantage of the extension in the due date for filing tax returns.

India

India: Clarification by the Central Board of Direct Taxes (“CBDT”) over the selection of the tax regime by employees

The Indian Income-tax Act provides for two tax regimes for taxation of individuals – one provides for concessional slabs / rates without allowing certain exemptions /deductions (“tax regime without deductions”) and the other that has higher tax rates, but it allows a number of deductions (“tax regime with deductions”). The Finance Act, 2023, made the tax regime without deductions a default tax regime, while giving an option to taxpayers to opt for other tax regimes i.e., a tax regime with deductions.

The Central Board of Direct Taxes (“CBDT”) has issued a circular No. 4/2023 to provide clarity over the tax regime applicable for tax deduction at source by the employers. The circular states that the employer is required to seek information about the employee’s preferred tax regime before deducting taxes from salary (“TDS”). If an employee fails to inform the employer about their choice, then the employer should assume that the employee falls under the tax regime without deductions and accordingly determine the tax liability for the purpose of withholding.

Implication:

Employers should make arrangements to ask employees for information about their preferred tax regime and adjust their payroll processing to give effect to the applicable tax regime while deducting tax.

India lowers turnover threshold for e-invoicing from August 1, 2023, to INR 50 million

Indian Central Board of Indirect Taxes and Customs (“CBIC”) has lowered the aggregate turnover threshold for applicability of e-invoicing provisions under the Goods and Services Tax (“GST”) for all Business-to-Business (“B2B”) supplies, from INR 100 million to INR 50 million effective from August 1, 2023. The CBIC issued Notification No. 10/2023-Central Tax on May 10, 2023, lowering the threshold.

Accordingly, all businesses (other than those located in Special Economic Zone (“SEZ”), banking companies, financial institutions, certain travel agencies, etc.) whose aggregate turnover in any preceding financial year from 2017-18 onwards is more than INR 50 million, will have to comply with e-invoicing provisions for their B2B supplies to registered persons or for exports, with effect from August 1, 2023. E-invoicing provisions require registered persons to prepare invoices by uploading certain particulars of the invoice (in Form GST INV-01) on the invoice registration portal (“IRP”) and obtaining the invoice reference number (“IRN”).

The e-invoicing provisions were first implemented with effect from January 1, 2020, on a voluntary basis. Later, they were made mandatory for entities having a turnover of INR 5 billion w.e.f. October 1, 2020 and the turnover threshold is being reduced in phases.

Implication:

GST-registered entities whose turnover exceeds INR 50 million (in the financial year 2017-18 or onwards) would be required to comply with e-invoicing provisions w.e.f. August 1, 2023. E-invoicing provisions are applicable to export transactions, but provisions do not apply to units in Special Economic Zones.

India: Increase in the tax exemption limit for Leave Encashment for Salaried Employees to Rs 25 Lakh

In pursuance to the proposals in Budget 2023, the Finance Ministry, vide notification No. 31/2023 dated May 25, 2023, has increased the tax exemption limit for leave encashment for non-government salaried employees from INR 3 lakhs to INR 25 lakhs, effective from April 1, 2023.

Implication:

Employers should consider revised exemption limits for leave encashment while withholding taxes on payments towards leave encashment to employees leaving the organization.

India: Data Protection Bill is expected to be introduced in the parliament in the monsoon session beginning in July 2023.

Indian Union Cabinet of Ministers approved the draft Digital Personal Data Protection (DPDP) Bill, 2022 on July 5, 2023, which is expected to be tabled before the Indian Parliament in its Monson Session which began in July 2023.

In 2019, the Government of India proposed the “Personal Data Protection Bill, 2019″. However, it was withdrawn on August 3, 2022, with the intention to introduce a more comprehensive bill in the future. Subsequently, 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 which was open for public comments until January 2, 2023. More details about the key provisions of the draft Bill which was released in December 2022 can be accessed at – Highlights of the Digital Personal Data Protection (“DPDP”) Bill, 2022.

India: MCA establishes separate centre C-PACE for strike off company name from register

Amendments to facilitate voluntary winding up process

Indian Ministry of Corporate Affairs (“MCA”), vide notification dated April 17, 2023, notified the Companies (Removal of Names of Companies from the Register of Companies) Amendment Rules, 2023. These amended rules authorize the Registrar, the Centre for Processing Accelerated Corporate Exit (“C-PACE”) to exercise functional jurisdiction over the processing and disposal of striking-off applications. This means that the companies who wish to voluntarily strike off their names from the Register of Companies should make the strike-off application in e-Form STK-2 to the C-PACE instead of the respective Registrar of Companies (“ROC”). The amended rules are effective from May 1, 2023.

Earlier, pursuant to the budget announcement, MCA had issued a notification on March 17, 2023, to set up a separate body C-PACE for this purpose. It is expected that the time required for the voluntary winding-up process will be reduced from 2 years to less than 6 months after the implementation of this new measure.

The notification dated April 17, 2023, makes the following amendments to the Companies (Removal of Name of Companies from the Register of Companies) Rules, 2016:

Rule 4 is amended to state that the strike-off application shall be made to Registrar C-PACE in Form STK-2.
New rule 3A is introduced which states that the C-PACE shall be considered as the ROC for the purpose of processing and disposal of striking-off applications as well as for exercising power over all matters related thereto under section 248 of the Companies Act.
Form No. STK 2 (Application by the company to ROC for removing its name from the registrar of companies), Form No. STK 6 (Public Notice) and Form No. STK 7 (Notice of striking off and dissolution) has been revised.

Amendments providing for the filing of pending financial statements and annual returns

MCA, vide notification dated May 10, 2023, published the Companies (Removal of Names of Companies from the Register of Companies) Second Amendment Rules, 2023.

The following are the key amendments made by these rules:

Where a company wants to voluntarily apply for removal of name from the Register of Companies, it must file all the pending financial statements and annual returns up to the financial year in which it discontinued its business operations.
Where a company wants to file form STK-2 upon receiving the Registrar of Companies (“ROC”) notice for removal of its name from the Register of Companies due to non-commencement of business or other reasons specified under section 248(1), it must file pending financial statements and annual return before filing the application.
A company is not allowed to file an application if the ROC has already struck off the company’s name from the register of companies and published a notice to that effect in the official gazette.

Implications:

Companies keen to voluntarily discontinue their Indian operations would benefit from this new process for accelerated exit through C-PACE as it is expected to substantially reduce the time required in processing of strike of applications. Companies wishing to apply for strike off their names from the Register of Companies should take note of the requirement regarding the filing of pending financial statements and returns.

Indonesia

Indonesia: Guidelines on prevention of sexual violence at workplace introduced.

Indonesia’s Ministry of Manpower through Decree 88 of 2023 dated May 29, 2023, issued guidelines on preventing and handling sexual violence at the workplace. These guidelines are to be read along with Law No 12 of 2022 (“the Sexual Violence Law”).

New guidelines provide certain obligations on the employers:

Creation of task force:

The guidelines mandate employers to create a taskforce at the workplace which helps in preventing sexual violence. The task force should comprise a minimum of 3 members (out of which 1 is a chairperson and the other is a secretary) and also includes representatives of management and employees.

Training facility:

The employer should also provide training to its employees regarding what constitutes sexual violence at the workplace and also implement policies and procedures to identify and eliminate sexual violence at the workplace as per the measures established in the Guidelines.

Compensation to victims:

The employers need to take redressal steps and compensate the victims and also ensure to enforce sanctions by way of issuing warning letters, transfers or termination of employment.

Further, the Guidelines have widened the concept of what acts or things done can be treated as sexual violence.

Implication:

Employers need to adhere to the guidelines by forming a task force and implementing policies to prevent and eliminate sexual violence at the workplace and have redressal mechanisms in place. They need to enforce necessary sanctions against the wrongdoers and compensate victims for such acts.

Ireland

Ireland’s Work Life Balance and Miscellaneous Provisions, Act 2023, receives presidential assent, on April 4, 2023; Maternity leave can be availed by transgender men.

Ireland’s Act on Work Life Balance and Miscellaneous Provisions, 2023 (“the Act”), received presidential assent, on April 4, 2023. The Act aims at giving certain rights to employees to support work life balance.

The provisions of the Act, as mentioned below, are effective from July 3, 2023:

Unpaid medical care leave of five days is available to carers and parents who meet certain criteria.
Breastfeeding breaks can be taken by mothers for the first two years.
Maternity leave can be availed by transgender men.

The act also includes the following provisions, for which, no effective date is announced yet:

Flexible working hours can be requested by employees who are parents/carers providing care for children/ dependents requiring significant medical support.
Right to request remote work can be available to employees under certain situations.
Paid leave of five days will be available to victims of domestic violence.

Implications:

Employers will need to review the company’s employee handbooks, and employment contracts and update their policies such as the general leave policy, maternity leave policy, and remote working policy in accordance with the new provisions.

Ireland: European Union (“EU”) Directive on “Public” country-by-country reporting – transposed into domestic law.

On December 1, 2021, the official journal of the European Union (“EU”) published directive 2021/2101 amending earlier directive 2013/34/EU in respect of disclosure of income tax information by certain undertakings and branches. The new directive introduced “public” Country-by-Country (“CbC”) reporting requirements in the EU.

The public CbC reporting information is similar to existing standard CbC reporting requirements and covers the following areas for all members of the group:

A brief description of activities
Number of employees on a full-time equivalent basis
Revenues (including revenue from transactions with related parties)
Profit or loss before tax
Tax accrued
Tax paid
The amount of accumulated earnings

The new directive entered into force on December 21, 2021, and EU Member States had time until June 22, 2023, to transpose the new directive into domestic legislation.

Accordingly, in Ireland, the European Union (Disclosure of income tax information by certain undertakings and branches) Regulations 2023 (Public CbCR Regulations) were signed into law on June 21, 2023, and entered into force on June 22, 2023. Consequently, the public CbC reporting requirements apply for financial years beginning after June 22, 2024.

The public CbC report must be submitted in Ireland to the tax administration within one year after the end of the reporting period. The companies may omit to disclose certain commercially sensitive information (other than information pertaining to non-cooperative tax jurisdictions) if it could potentially harm their business. This information, however, needs to be reported in the income tax information report within five years of excluding such sensitive information.

Failure to comply with the requirements may result in a fine not exceeding EUR 5,000 or imprisonment of up to six months or both.

Directors and members of the administrative, management, and supervisory body are collectively responsible for ensuring that the report on income tax information is prepared, published, and made available to the public. This responsibility also extends to authorized personnel in branches.

Implication:

Multinational groups meeting the qualifying criteria are required to comply with public CbC reporting requirements in Ireland for the financial year commencing on or after June 22, 2024.

Israel

Israel: New privacy protection regulations announced for data transfers from the EEA

On May 7, 2023, the Department of Justice published the Protection of Privacy Regulations (Provisions Regarding Information Transferred to Israel from the European Economic Area). These regulations were approved by the Israeli Parliament in light of the EU Commission review for renewal of Israel’s adequacy status for the transfer of personal data from EU countries to Israel. The Regulations would apply to databases in Israel having data received from the EEA and will also apply to personal data originating within Israel included in such databases. The regulations aim to protect privacy and align Israel’s data protection standards with those of the European Union.

The key provisions of the regulations are as follows:

Data deletion- Database owners must delete or anonymize data if it is no longer needed for its original purpose or when such request is received from data subjects, subject to certain exceptions.
Data minimization: Mechanisms must be in place to avoid retaining personal data that is no longer necessary.
Data accuracy- Database owners must put in place a mechanism to ensure that the information stored in the database is accurate, complete, clear, and up to date.
Transparency- While receiving personal data from the EEA, database owners are required to provide a privacy notice to the data subjects within one month. The notice should include details such as the owner’s contact information, the purpose of the data transfer, the type of information transferred, and the data subject’s rights.
Expansion of database registration obligation- For registration of databases, the definition of ‘sensitive information’ now includes additional types of information namely, ethnic or racial origin and employee union membership.

The obligations outlined in the Protection of Privacy Regulations will be implemented in three phases:

From August 7, 2023: The obligations will apply to newly transferred data from the European Economic Area (“EEA”) starting from May 3, 2023.
From May 7, 2024: The obligations will apply to data transferred from the EEA prior to May 7, 2023 (referred to as “old” EEA data).
From January 1, 2025: The obligations will apply to non-EEA data, which includes personal data originating within Israel itself.

Implications:

Companies involved in collecting and processing personal data which is transferred from EEA shall take note of the new regulations and update their systems to fulfill the requirements of the newly published regulations.

Israel: Continuous Transaction Controls (“CTC”) system for reporting and submission of e-invoices to be effective from January 1, 2024

Under the 2023/2024 State budget plan, Israeli authorities have announced the adoption of a Continuous Transaction Controls (“CTC”) system. The CTC model will require real-time submission and approval of invoices above NIS 25,000 in B2B transactions. Businesses must obtain allotment allocation numbers from the tax authority without which the input tax deduction will not be allowed.

The implementation of the CTC model is set for January 2024, with the threshold gradually decreasing to NIS 5,000 by 2028.

Implication:

Businesses in Israel should evaluate the applicability of the CTC system to them and arrange to make necessary changes to their systems to meet the new obligation.

Japan

Japan: Amendments to labor laws effective from April 1, 2023, and April 1, 2024

In 2023 (5th year of Reiwa) and 2024 (6th year of Reiwa), Japan would implement certain amendments to personnel and labor laws. The key changes are as follows:

Enforcement in 2023 (Reiwa 5) to be effective from April 1, 2023:

Premium Wage Rate Increase: For Small and medium-sized enterprises (“SMEs”) will have to pay a premium wage rate of 50% to employees with overtime work exceeding 60 hours per month. This provision is aligned with large enterprises.
Digitization of Wages: With worker consent, wages can now be paid digitally to designated bank accounts or through designated funds transfer service providers, including smartphone payment apps.
Obligation to Disclose Childcare Leave: Employers with over 1,000 full-time workers are now required to publicly disclose the status of male employees taking childcare leave, including the “Acquisition Rate of Purpose-Built Leave.” This information is made accessible on the internet and other platforms.

These revisions aim to promote fairness, efficiency, and transparency in labor practices in Japan.

Enforcement in 2023 (Reiwa 6) to be effective from April 1, 2024:

Clarification on working conditions: At the time of entering into or renewing employment contracts, there will be a requirement to provide detailed information about changes in the place of work, nature of work, and the maximum number of contract renewals for fixed-term employees. This information must also be specified when employees have the right to apply for conversion to an open-ended (indefinite-term) contract. Opportunities for indefinite-term conversion and the corresponding working conditions will also be included.
Obligation to explain fixed-term labor contracts: Employers will be obligated to provide explanations for setting or lowering the upper limit of the total contract period or the number of renewals for fixed-term employment contracts. Additionally, explanations regarding the working conditions after converting a fixed-term contract to an indefinite term should also be provided.

These revisions aim to enhance transparency and ensure that employees are well-informed about their working conditions and contract terms.

Implications:

Employers should take note of the above changes and revise their human resource practices accordingly.

Lithuania

Lithuania: European Union (“EU”) Directive on “Public” country-by-country reporting – transposed into domestic law.

On December 1, 2021, the official journal of the European Union (“EU”) published directive 2021/2101 amending earlier directive 2013/34/EU in respect of the disclosure of income tax information by certain undertakings and branches. The new directive introduced “public” Country-by-Country (“CbC”) reporting requirements in the EU.

The public CbC reporting information is similar to existing standard CbC reporting requirements and covers the following areas for all members of the group:

A brief description of activities
Number of full-time employees
Income (including related-party income)
Profit or loss before tax
Tax accrued
Tax paid
The amount of accumulated earnings

The new directive entered into force on December 21, 2021, and EU Member States had time until June 22, 2023, to transpose the new directive into domestic legislation.

Accordingly, Lithuania passed the law implementing the new directive on June 15, 2023. The law entered into force on June 22, 2023, and the public CbC reporting requirements apply for financial years beginning after June 22, 2024.

The public CbC report must be submitted in Lithuania to the tax authorities within one year after the end of the reporting period. The companies may omit to disclose certain commercially sensitive information (other than information pertaining to non-cooperative tax jurisdictions) if it could potentially harm their business and the same is justifiable. This information, however, needs to be reported in the income tax information report within five years of excluding such sensitive information.

Implication:

Multinational groups meeting the qualifying criteria are required to comply with public CbC reporting requirements in Lithuania for the financial year commencing on or after June 22, 2024.

Peru

Peru: Peruvian government approves June 7 as the new national holiday, honoring the Battle of Arica and the Peruvian Flag Day

The Peruvian government by way of Law No. 31788, published in the official gazette on June 15, 2023, approved June 7, as a new national holiday in commemoration of the Battle of Arica and the Peruvian Flag Day. Accordingly, from 2024 Peru will have a total of 15 national holidays.

Implication:

Employers in Peru will have to amend their leave policies to include June 7 as a national holiday in addition to the existing 14 national holidays in Peru.

Malaysia

Malaysia: Mandatory e-invoicing is scheduled to be implemented from June 2024

In March 2023, the Inland Revenue Board of Malaysia (“IRBM”) announced a timeline for the phased implementation of e-Invoicing which is as under:

June 2024: For businesses with annual turnover of more than MYR 100 million
January 2025: For businesses with annual turnover of more than MYR 50 million
January 2026: For businesses with annual turnover of more than MYR 25 million
January 2027: For all remaining businesses.

Implication:

Businesses should note the new obligation and should make their systems ready to meet the requirement.

Malaysia: Revised Transfer Pricing and Advance Pricing Arrangement Rules published.

On May 29, 2023, Malaysia published the Income Tax (Transfer Pricing) Rules, 2023 and Income Tax (Advance Pricing Arrangement) Rules, 2023. These rules replace the earlier rules and apply for the assessment year 2023 onwards. The revised transfer pricing rules take into consideration the OECD guidelines.

The key takeaways of the revised Income Tax (Transfer Pricing) Rules 2023 are given below:

The Revised Rules mandate that the “contemporaneous documentation” shall be prepared annually prior to the due date of furnishing return for the relevant period. Further taxpayers need to submit such documentation to the tax authorities within 14 days of the request made by the authorities.
The scope of documentation is expanded to include comprehensive information about the multinational enterprise group. The requirement is similar to the OECD master file requirement.
The arm’s length range is redefined to be falling between the 37.5th percentile and the 62.5th percentile of the benchmarking data set. However, in certain circumstances regarding the comparability of data, tax authorities are empowered to make adjustments to arm’s length price even when the transaction price is within the range. Further, where the transaction price is outside the range, the median of the data would be taken as an arm’s length price.

Separately, Malaysia has also issued revised Income Tax (Advance Pricing Arrangement) Rules 2023. The revised rules deal with revised fees for making advance pricing arrangement (“APA”) applications, the period for which rollback can be requested by authorities, eligible parties who can apply for APA, etc.

Implication:

Companies having intra- group transactions should evaluate the impact of changes on their transfer pricing documentation requirements.

Morocco

Morocco: Berber New Year declared as a Public Holiday

On May 3, 2023, the Moroccan Royal Court announced that Amazigh or Berber New Year which usually falls on January 12 or January 13, would be considered as a paid national holiday.

Implication:

Employers should adjust their leave and holiday policies accordingly.

Netherlands

Netherlands: Increase in minimum wages effective from July 1, 2023

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

Frequency	Effective from July 1, 2023 (“Amount in EUR”)	Effective from January 1, 2023 (“Amount in EUR”)
Per Month	1,995.00	1,934.40
Per Week	460.40	446.40
Per Day	92.08	89.28
Per hour (36 hours a week)	12.79	12.40

Netherlands: Intrastat reporting threshold removed effective from 2023, reporting to apply based on request from authorities

Effective from 2023, the Netherlands has removed the Intrastat reporting threshold. Instead, the customs authorities, known as the Statistics Netherlands (Centraal Bureau voor de Statistiek/CBS) will directly contact taxpayers to inform them if they need to provide a listing of goods moved to and from the Netherlands and other EU member states. The CBS will monitor the monthly intra-Community transactions of Dutch taxable persons through sampling based on their VAT returns. If eligible, taxpayers must file Intrastat declarations by the tenth day of the following month to fulfill their reporting obligations for intra-Community transactions.

Implication:

Businesses should note this development and monitor any notifications from the CBS regarding their filing obligations.

Netherlands: Senate adopts Dutch Pensions Act, transition period begins from July 1, 2023

The Dutch Senate passed the new Dutch Pension Act on May 30, 2023, and it will take effect from July 1, 2023. While the Act will be effective from July 1, 2023, the existing pension schemes would be subject to a transition period that extends until January 1, 2028. This reform impacts all employers with existing pension schemes, requiring them to renew pension arrangements with employees and revise contracts with pension providers.

The new pension regulations entail the following changes:

Transition from Defined Benefit to Defined Contribution: Existing defined benefit schemes must be converted to defined contribution schemes. Further, the contribution would not be based on age but would be a flat rate subject to certain exceptions.
Partner Pension provisions: There will be a uniform definition of partner pension for consistency. In case of death before retirement, pension pay-out will be risk-based and capped at 50% of the pensionable salary, regardless of years of service while in case of death after retirement. Partner pensions pay-out will be capped at 70% of the retirement benefits.
Obligation for Transition Plan: Employers are required to draft a transition plan when amending pension plans in line with the Future on Pensions Act. This plan must consider various factors, including the available options, consequences of the chosen options, and compensation offered. The plan should be presented to the works council, individual employees during the consultation process, and the pension provider.

The transition phase allows for a gradual implementation of the new pension reform, giving employers, employees, and pension providers the necessary time to adapt their schemes and processes in accordance with the new regulations.

Implication:

Employers should evaluate their existing pension plans to identify schemes that would require changes in light of new law and prepare plans for transition.

Poland

Poland: New regulations under Labour Code Act are implemented for parental leave with effect from April 26, 2023.

The legislation implementing the EU Directive No. 2019/1158 on work-life balance for parents and carers was signed on March 23, 2023. The new parental leave provisions are effective from April 26, 2023, which include:

Currently the parental leave is of 32 weeks (34 weeks for multiple births), which is now extended to 41 weeks (43 weeks for multiple births). Out of 41 weeks, a mother, and a father each are entitled to a non-transferrable compensated 9 weeks of parental leave.
Currently, parental leave is paid by the social security institute at 100% of the salary during the first 6 weeks (8 weeks in case of multiple births) and at 60% of the salary (as defined) for the following weeks. Under the new provisions, the entire parental leave will be paid by the social security institute at 70% of the salary (as defined).

Implication:

Employers will need to update their leave policy in accordance with the amended provisions.

Singapore

Singapore: Singapore amends Companies Act to allow conduct of meetings fully virtual or hybrid effective from July 1, 2023.

Singapore has amended the Companies Act 1967, mainly to modernize law enabling the conduct of board and general meetings in fully virtual or a hybrid mode, vide the Companies, Business Trusts, and Other Bodies (Miscellaneous Amendments) Bill. The Bill was passed in the parliament on May 9, 2023, and the amendments are effective from July 1, 2023.

Currently, there is no specific provision in the Act for a company to hold board meetings and general meetings in fully virtual mode or hybrid mode, or any other mode.

A new Section 173J is inserted in the Act which specifies that companies are allowed to conduct their board meetings, including general meetings, in a physical, hybrid, or fully virtual manner, unless it is specifically restricted by its Constitution.

In case of any technical interruptions or outages, meetings shall not be declared to be void. However, shareholders may file an application with the High Court if such technical problems result in significant unfairness.

Implication:

Singapore companies can hold their board and general meetings in fully virtual mode or in a hybrid mode.

Serbia

Serbia: Application for company registration to be filed online effective from May 17, 2023

Effective from May 17, 2023, registration applications for the incorporation of companies including Limited Liability Companies are required to be submitted to the Serbian Business Registers Agency (“SBRA”) exclusively in electronic form.

For making an online application, applicants are required to open an account with the E-Government portal and must obtain a qualified electronic signature (“QES”) issued in Serbia. The applicant shall produce all the necessary documents for submitting an incorporation application in digital form using QES. In addition, the documents are not required to be notarized if they are issued digitally using QES by the lawyer. This is applicable to resident applicants as well as foreign residents wishing to establish their businesses in Serbia.

Application for incorporation of a new company resulting from a change in corporate status such as spin-off, demerger, etc. would continue to be filed offline.

Implication:

Businesses wishing to establish companies in Serbia should take note of this change. This should result in saving in time as well as costs for incorporation.

South Africa

South Africa: Revision in interest rates on outstanding taxes and overpayment

The South African Tax Agency has published the updated interest rates effective from September 1, 2023, as under:

Outstanding Taxes and Specified Tax Refunds – Increased to 11.75% from 11.25%
Provisional Tax Overpayments – Increased to 7.75% from 7.25%.

South Korea

South Korea: National Assembly passes a decree amending Personal Information Protection Act, an amendment effective from September 15, 2023

The South Korean National Assembly passed a Decree making several amendments to the Personal Information Protection Act in February 2023 which will be effective from September 15, 2023. The amendments aim to strengthen data subject rights, enhance safety measures and lead to the growth of South Korea’s digital economy.

The key amendments are as follows:

The amended provisions allow individuals to request the transfer of their data to themselves or any other person. Data controllers are required to execute such requests within a reasonable time and at a reasonable cost.
The amended provisions give data subjects the right to object to or reject fully automated decision-making such as artificial intelligence-based decision-making systems. When such an objection is raised, a data controller must adhere to the requirement and stop using automated decision-making.
Under the old provisions, online service providers and ordinary data controllers were subject to a separate set of rules. However, this distinction has been removed under the amended provisions and consistent provisions would apply to both. Thus, all data controllers need to promptly report any data breach to the data subjects and report significant data breach events to the Personal Information Protection Council or Korean Internet and Security Agency without any delay. On meeting certain thresholds, data controllers must report the data subjects regularly about the use of data and about the provisions of data to third parties. Data controllers who do not have an address or business office are required to appoint local representatives.
The amended provisions decriminalize certain offenses by providing administrative penalties for such violations. However, certain offenses like obstructing the investigation by authorities by fraud, hiding information, etc. would be subject to criminal sanctions. Amended provisions have also introduced administrative penalties for certain violations like failure to obtain consent while processing data of children or for processing sensitive information or data related to a unique identity, etc.
Amended provisions introduce additional grounds for overseas transfer of data such as transfer under a special provision of an international agreement, law or treaty. This includes transfer to an overseas recipient who has obtained certification as required by PIPC or transfer to a country or international organization with adequate security as determined by PIPC. Overseas transfer can also be made for storing or outsourcing subject to data controllers making necessary disclosure in its privacy policy and informing data subjects. Under new provisions, PIPC can suspend transfers that violate the provisions of the law.
The amended provisions prescribe rules for the use and working of image information processing devices.

Implication:

Data controllers must update their privacy policies and privacy statements to reflect the above changes such as additional rights to data subjects, and new obligations under amended provisions. Data controllers should evaluate their policies to identify any penalty risk and take corrective action.

Spain

Spain: European Union (“EU”) Directive on “Public” country-by-country reporting – transposed into domestic law.

The new directive entered into force on December 21, 2021, and EU Member States had time until June 22, 2023, to transpose the new directive into domestic legislation.

Accordingly, Spain passed the law implementing the new directive on December 22, 2022. The public CbC reporting requirements apply for financial years beginning after June 22, 2024.

The new law requires multinational enterprises with total consolidated revenue exceeding EUR 750 million in each of the last two consecutive financial years to publicly disclose certain income tax information. The information is to be reported for each EU Member State where the group is active and also for each jurisdiction considered as “non-cooperative” by the EU. For all other jurisdictions, information can be reported on an aggregated level.

The public CbC reporting information is similar to existing standard CbC reporting requirements and covers the following areas for all members of the group:

A brief description of activities
Number of employees
Net turnover (including related-party turnover)
Profit or loss before tax
Tax accrued
Tax paid
The number of accumulated earnings

It will also include names of the ultimate parent undertaking or the standalone undertaking, the financial year concerned, the currency used for the presentation of the report and, where applicable, a list of all subsidiary undertakings consolidated in the financial statements of the ultimate parent undertaking, etc.

The companies may omit to disclose certain commercially sensitive information (except related to jurisdictions listed in EU’s non-cooperative list) for a maximum period of five years. However, the public report should include an explanation for the omission of certain commercially sensitive information and such information needs to be disclosed within five years in a later report.

The public CbC report must be submitted in Spain to the Mercantile Registry and also published on the companies’ websites in any one of the official languages of the EU within 6 months from the financial year-end (should remain accessible for at least five years). Where the ultimate parent is a non – EU, the reporting will generally have to be done by the EU subsidiaries or branches.

Implication:

Multinational groups meeting the qualifying criteria are required to comply with public CbC reporting requirements in Spain for the financial year commencing on or after June 22, 2024.

Sweden

Sweden: European Union (“EU”) Directive on “Public” country-by-country reporting – transposed into domestic law.

The new directive entered into force on December 21, 2021, and EU Member States had time until June 22, 2023, to transpose the new directive into domestic legislation.

Accordingly, Sweden published the draft law implementing the new directive on February 9, 2023. The law entered into force on June 22, 2023, and the public CbC reporting requirements apply for financial years beginning after May 31, 2024.

The new law requires multinational enterprises with total consolidated revenue exceeding SEK 8 billion in each of the last two consecutive financial years to publicly disclose certain income tax information. The information is to be reported for each EU Member State where the group is active and also for each jurisdiction considered as “non-cooperative” by the EU. For all other jurisdictions, information can be reported on an aggregated level.

The public CbC reporting information is similar to existing standard CbC reporting requirements and covers the following areas for all members of the group:

A brief description of activities
Number of employees
Net turnover (including related-party turnover)
Profit or loss before tax
Tax accrued
Tax paid
The number of accumulated earnings

The companies may omit to disclose certain commercially sensitive information (except related to jurisdictions listed in EU’s non-cooperative list) for a maximum period of five years. However, the report should include an explanation for the omission of certain information in the report and such information needs to be disclosed within five years in a later report.

The public CbC report must be submitted in Sweden to the Swedish Company Registration Office and also published on the companies’ websites in any one of the official languages of the EU within 12 months from the financial year-end (should remain accessible for at least five years). Where the ultimate parent is a non – EU, the reporting will generally have to be done by the EU subsidiaries or branches.

Implication:

Multinational groups meeting the qualifying criteria are required to comply with public CbC reporting requirements in Sweden for the financial year commencing on or after May 31, 2024.

Taiwan

Taiwan: Personal Data Protection Act amended to increase fines up to a maximum of TWD 15 million in case of severe violations or failure to rectify the default.

The Legislative Yuan, Taiwan (Taiwan parliament) passed amendments to the Personal Data Protection Act (“PDPA”) on May 16, 2023.

The amendment relating to penalties for breach of data security obligations under the PDPA, came into force from the promulgation date, i.e., May 31, 2023.

The key provisions of the amended PDPA are as follows:

Increase in Fines: For violation of provisions of the PDPA relating to collection, processing, and use of personal data, the fines can be levied within a range of TWD 20,000 up to TWD 2 million along with the order for correction of default. Earlier the fines could be levied up to TWD 200,000 in cases only where the defaulter failed to comply with the government order for correction of default.
Fines for severe violations: Fines can be levied in the range of TWD 150,000 to TWD 15 million at the first instance for cases of severe violations that are specified under the PDPA. Fine for failure to rectify the default within the specified period will be subject to additional fines in the range of TWD 150,000 to TWD 15 million.

Further, a new Personal Data Protection Commission as the exclusive competent authority for personal data protection in Taiwan will be set up. It is expected to be established by August 2023; no effective date is yet notified.

Implication:

Organizations need to evaluate their privacy policies to ensure compliance with the PDPA to avoid hefty penalties.

Thailand

Thailand: Reduced Withholding Tax Rates to apply for the period from January 1, 2023, to December 31, 2025, for users of the e-withholding tax system.

Thailand notified Ministerial Regulation No. 389 in March 2023 whereby withholding the tax rate would apply on certain domestic payments for the taxpayers using the e-withholding tax system.

The concessional rate of 1% will apply against the standard rates of 5.0%, 3.0%, or 2.0% on payments of fees for services, royalties, property rentals, etc. The concessional rate will apply from January 1, 2023, to December 31, 2025. The Thai government has brought in this policy in order to promote the use of the e-Withholding Tax System.

Implication:

Companies in Thailand need to consider the availability of concessional rates for using the e-Withholding tax system and take advantage of the concessions.

Turkey

Turkey: New deadlines related to E-Invoicing and QR Code implementation announced

The Turkish Revenue Administration (“TRA”) has recently set new deadlines regarding E-Invoicing, E-Archiving, and QR Code implementation. Turkey had two types of invoices e-Fatura and e- Arşiv – the former is e-invoice for B2B transactions while the latter is an e-invoice used for B2B transactions and B2C transactions with companies not registered with TRA.

Currently, E-Fatura is mandatory in Turkey for businesses with B2B transactions exceeding TRY 5 million. Starting from July 2023, companies that invoiced more than TRY 3 million in 2022 must declare all their invoices (e-invoice/e-archive) on the TRA portal. Additionally, as of September 2023, all invoices, e-invoices, and e-archives are required to include a QR Code.

Implication:

To ensure compliance, businesses in Turkey must adhere to these deadlines.

Turkey: Minimum wages increased effective from July 1, 2023

Effective from July 1, 2023, the Turkish Ministry of Labor and Social Security has raised the monthly gross minimum wage to TRY 13,414 (previously TRY 10,003). This adjustment leads to an increase in the net minimum wage to TRY 11,402 (previously TRY 8,506.80). These changes will remain in effect until December 31, 2023.

United Kingdom

UK revises late payment and repayment interest rates

UK HM Revenue & Customs (“HMRC”) have recently announced the revised interest rates to be applied on late payment and repayment as under:

Particulars	Effective Date	Rate of Interest
Interest rate for late payment of income tax, corporation tax, NI contributions, stamp duty ,etc.	July 11, 2023	7.50%
Repayment Interest rate for the above	July 11, 2023	4%
Corporate Tax quarterly installment payments	July 3, 2023	6%
Overpayment of quarterly instalment and on early payments of Corporation Tax not due by installments	July 3, 2023	4.75%

Implication:

The Companies need to pay their taxes in time to avoid the interest liability.

UK: Announcement of revised tax-free fuel rates effective from June 1, 2023

The Government has announced the revised mileage rates for usage of a company car effective from June 1, 2023.

Below are the revised mileage rates in pence (previous rates given in bracket)

Engine size	Petrol	Diesel	LPG
Petrol 1400cc or less	13p (13p)	–	10p (10p)
Diesel 1600cc or less	–	12p (13p)	–
Petrol 1401 to 2000cc	15p (15p)	–	12p (11p)
Diesel 1601 to 2000cc	–	14p (15p)	–
over 2000cc	23p (23p)	18p (20p)	18p (17p)

Implication:

Employers need to take into consideration revised fuel rates effective from July 1, 2023, for calculations for any allowance given to employees for using company cars.

US Office