Australia
Changes in New South Wales (NSW) payroll tax rate and threshold, retrospectively from July 1, 2020
Recently, NSW Government has made an announcement regarding the reduction in the payroll tax rate and increase in the payroll tax threshold. As per the announcement there will be:
Temporary reduction in the payroll tax rate from 5.45% to 4.85% for financial year 2020-21 and 2021-22.
and
Permanent increase in the payroll tax threshold from AUD 900,000 to AUD 1,200,000 for 2020-21 and subsequent financial years.
Above changes will be applicable retrospectively from July 1, 2020.
Implication:
The reduced rate and increased threshold of payroll tax will lead to reduction in the payroll tax burden on employers and many small businesses will be get out of the scope of payroll tax.
Introduction of JobMaker Hiring Credit – an incentive for employers to hire young job seekers
The JobMaker Hiring Credit scheme is an incentive for businesses to employ additional young job seekers aged 16–35 years. Eligible employers can access the JobMaker Hiring Credit for each eligible additional employee they hire between October 7, 2020 and October 6, 2021.
To be eligible for JobMaker Hiring Credit payments, employer must meet all of the following conditions. The employer –
has registered for the JobMaker Hiring Credit scheme
operates business in Australia
holds an Australian Business Number (ABN)
is registered for the pay as you go (PAYG) withholding
has not claimed JobKeeper payments for a fortnight that started during the JobMaker period
is up to date with income tax and GST returns for the 2 years up to the end of the JobMaker period for which they are claiming
satisfies the payroll increase and the headcount increase conditions
An increase in headcount means the number of employees employed at the end of each JobMaker period* is higher than the number of employees in baseline headcount i.e. September 30, 2020.
Payroll expenses must have increased in the JobMaker period when compared to the baseline period i.e., 3 months up to and including October 6, 2020 (a 92-day period)
satisfies reporting requirements, including up to date Single Touch Payroll (STP) reporting
does not belong to one of the ineligible employer categories
*There are 8 JobMaker period and each period is of 3 months starting from October 7, 2020 – January 6, 2021 till July 7, 2022 – October 6, 2022.
Employees are eligible if they
are an employee of the entity during the JobMaker period
are aged 16–35 years old when they started employment
started employment on or after October 7, 2020 and before October 7, 2021
worked or have been paid for an average of at least 20 hours per week they were employed in the JobMaker period
have completed a JobMaker Hiring Credit employee notice for the employer
have not already provided a JobMaker Hiring Credit employee notice to another current employer
received one of these payments (JobSeeker payment, parenting payment, Youth allowance) for at least 28 consecutive days in the 84 days prior to starting employment
Eligible employers will receive payments of up to
AUD 200 a week – for each eligible employee aged 16 to 29 years’ old
AUD 100 a week – for each eligible employee aged 30 to 35 years’ old
The amount of JobMaker Hiring Credit claimed cannot exceed the amount that the business’s payroll increases for the reporting period. Claims can be made every three months from February 1, 2021. Employers cannot receive the JobMaker Hiring Credit and JobKeeper payments at the same time.
Registrations for the JobMaker Hiring Credit are now open.
Implication:
Employers planning to hire in Australia can look to receive the benefit under JobMaker Hiring Credit scheme for each eligible employee they hire.
Changes in Unpaid Parental leave – Access to 12 months of unpaid parental leave for parents impacted by stillbirth or infant death, option to take flexible unpaid parental leave etc.
On November 26, 2020, The Fair Work Amendment (Improving Unpaid Parental Leave for Parents of Stillborn Babies and Other Measures) Act 2020 has amended the Fair Work Act 2009, to improve access to the job protected unpaid parental leave for employees impacted by stillbirth or infant death. The changes include:
Parents/employees who experience a still birth or the death of child during the first 24 months of life may be eligible to take unpaid parental leave for a maximum of 12 months. For taking unpaid parental leave, various notice requirements must be followed by employees.
Parents entitled to unpaid parental leave can now take up to 30 days (6 weeks) of their maximum 12-month unpaid parental leave period on a flexible basis. Flexible unpaid parental leave may be taken as a single continuous period of 1 or more days or separate periods of 1 or more days each.
Parents who experience a stillbirth or death of a child may be entitled to take compassionate leave while on unpaid parental leave.
These changes are effective November 27, 2020.
Implication:
Employers need to update and adopt new changes in their employment policies and handbook relating to parental leaves.
Brazil
Minimum Wage raised from BRL 1,045 to BRL 1,100 effective from January 01, 2021 and changes to employee social security (INSS) threshold for 1st bracket
Effective from January 1, 2021, Brazil has raised its minimum wage to BRL 1,100 from BRL 1,045 via Provisional Measure (PM) No. 1021 dated December 30, 2020. With the change in minimum wage, the employee social security contribution (INSS) threshold for 1st bracket (7.5%) will need to be adjusted to BRL 1,100.
Implication:
Businesses in Brazil need to consider the latest minimum wage level while withholding employee social security contributions.
Revenue threshold limits set for 2021 under simplified tax regime (Simples Nacional) for tax payment under ICMS and ISS
Brazil’s Ministry of Economy has published an Ordinance No. 30 dated November 18, 2020 for setting the revenue limits in 2021 for the purpose of paying the ‘Tax on Operations Relating to the Circulation of Goods and on Services Rendered of Interstate and Intermunicipal Transport and Communication (ICMS)’ and the ‘Tax on Services of Any Nature (ISS)’ under Special Unified Collection System of Taxes and Contributions owed by the Micro and Small Companies (Simples Nacional), located in their respective territories. The accumulated gross revenue limits applicable in 2021 are as under:
For the state of Amapá, it is BRL 1.8 million and
For other states and Federal District (Brasilia), it is BRL 3.6 million
Companies cannot opt for Simples Nacional (Simplified Tax Regime) for ICMS and ISS if revenue limits are exceeded.
Canada
Canada announces Commercial Emergency Rent Subsidy (CERS) program for rent support for businesses
Canadian businesses who have seen a drop in revenue due to the COVID-19 pandemic may be eligible for a subsidy to cover part of their commercial rent or property expenses, starting on September 27, 2020, through June 2021. This subsidy will provide payments directly to qualifying renters and property owners, without requiring the participation of landlords.
Businesses must meet all of following criteria in order to be eligible to receive rent subsidy:
Businesses had a Canada Revenue Agency (CRA) business number on September 27, 2020 or had a payroll account on March 15, 2020.
Corporations that are not exempt from income tax.
The drop in revenue is calculated by comparing the eligible revenue during the reference period with the eligible revenue from a previous period (baseline revenue). There is no minimum revenue drop required to qualify for the subsidy. The rate of revenue drop will be used to decide amount of subsidy businesses may receive.
To apply for CERS, businesses must have a qualifying property. Properties that do qualify include any “real or immovable property” (buildings or land) in Canada that business or organization owns or rents, and uses in the course of your ordinary activities etc. For each claim period, businesses can claim eligible expenses up to a maximum of CAD 75,000 per business location or CAD 300,000 in total for all locations.
The rent subsidy rate is calculated as follows:
Revenue drop
Applicable rate
Revenue drop of 70% or more
The maximum subsidy rate of 65%
Revenue drop of 50 to 70%
(Your revenue drop – 50%) x 1.25 + 40%
Revenue drop of less than 50%
0.8 x your revenue drop
In addition to the rent subsidy rate, businesses can receive a lockdown support amount for certain locations affected by public health restrictions.
Implication:
Businesses satisfying the eligibility criteria can apply for CRES and take benefit of CRES program.
A new bill, the Digital Charter Implementation Act, 2020, introduced for protection of personal information in the private sector
Canada’s Ministry of Innovation, Science and Industry has introduced a new bill known as Digital Charter Implementation Act, 2020 to strengthen privacy protections for Canadians as they engage in commercial activities.
The Act will create the Consumer Privacy Protection Act (CPPA), which will modernize Canada’s existing private sector privacy law. The CPPA will enhance individuals’ control over their personal information such as requesting its deletion, creating new data mobility rights, new transparency requirements etc. It will also enable administrative monetary penalties for serious contraventions of the law, subject to a maximum penalty of 3% of global revenues.
It will also create the new Personal information and Data Protection Tribunal Act, which will create Tribunal to impose administrative monetary penalties for privacy violations.
The Act will repeal Part 2 of the existing Personal Information Protection and Electronic Documents Act (PIPEDA) and turn it into stand-alone legislation, the Electronic Documents Act.
Implication:
Once passed, every organization in Canada to whom the Digital Charter Implementation Act, 2020 will be made applicable will need to comply with its provisions.
Canada imposes GST on digital or electronic services provided by foreign based vendors (B2C) from July 1, 2021
Currently, foreign based digital businesses can sell goods or services to Canadians without charging the Goods and Services Tax/Harmonized Sales Tax (GST/HST). This puts burden on Canadian consumers to remit GST/HST and gives unfair advantages to foreign based digital businesses.
Therefore, Canada’s Department of Finance has proposed to impose Goods and Service Tax (GST) from July 1, 2021 at 5% on digital or electronic services provided by foreign based vendor to consumers in Canada. Thus, such foreign based vendors selling digital services to consumers in Canada are required to register for GST in Canada, collect and remit GST on such taxable sales. The measure will only apply to B2C sales.
Implication:
Beginning July 1, 2021, the foreign digital service providers like apps, online gaming, e-books, music streaming etc. in Canada will be required to register for GST and collect and remit taxes.
Canada Revenue Agency released guidance for employees for claiming a deduction on home office expenses through Personal Income Tax (PIT) Returns of 2020
The Canada Revenue Agency (CRA) has issued guidance for employees for claiming deduction on home office expenses in their personal income tax return for the year 2020. Two alternative methods are provided for claiming such deduction:
Temporary flat rate method: It provides a deduction of CAD 2 per workday at home in 2020 due to COVID-19 Pandemic subject to maximum of CAD 400.
Detailed method: It is similar to existing deduction for home office expenses except that the eligible expenses category is been expanded for inclusion of home internet access fees. Here, employee can claim the actual amounts paid, supported by documents. In this case, employee must have a completed and signed Form T2200S / Form T2200 (i.e. Declaration of Conditions of Employment) from the employer.
Implication:
It is anticipated that more employees will go for detailed method in order to claim more. Therefore, it is likely that employees will request for Form T2200 from employers in order to claim home office expenses deduction.
Preferential taxation of Employee Stock Option to eligible entities from July 1, 2021
There will be new rules for taxation of employee stock options granted from July 1, 2021. They are as follows:
Imposing annual vesting limit of CAD 200,000 on employee stock options that may qualify for preferential tax treatment i.e. 50% employee stock option deduction
Subject to certain conditions, employer will be eligible for a corporate tax deduction for portion of employee’s stock option employment benefit that does not qualify for abovementioned deduction i.e. gains on options granted exceeding this annual limit.
This stock option limit will not be applicable for any stock options granted by Canadian-controlled private corporations (CCPCs) or non-CCPCs having annual group gross revenue of CAD 500 million or less.
Implication
Eligible employers should consider new rules for granting stock options after June 30, 2021. The new rules will also have impact on corporate tax liabilities of employers.
Ontario government has extended COVID-19 period and Deemed Infectious Disease Emergency Leave (IDEL) Protections till July 3, 2021
The Ontario government has extended the “COVOD-19 Period” till July 3, 2021. The COVID-19 Period and protection offered under the deemed Infectious Disease Emergency Leave (IDEL) was supposed to expire on January 2, 2021.
Due to such extension, any non-unionized employee having a temporary reduction in working hours or wages during the March 1, 2020 and July 3, 2021 will be deemed to have a job protected IDEL. Thus, any reduction in hours or wages will not constitute a lay-off or a constructive dismissal under Ontario’s Employment Standards Act, 2000 (ESA).
From July 4, 2021, regular ESA provisions and regulations will apply to temporary lay-offs and constructive dismissals and any temporary reductions in hours or wages will not be treated as a deemed IDEL.
Quebec: Amendments effective from January 1, 2021 regarding parental leave, paternity and maternity leaves, etc.
Quebec’s National Assembly has enacted a Bill 51 i.e. An Act mainly to improve the flexibility of the parental insurance plan in order to promote family-work balance (the Act). This Act amends various provisions of the Quebec’s Act respecting Labor Standards (ALS) and is in force from January 1, 2021.
Following are the brief changes respecting labor standards:
Parental Leave: Earlier, the parental leave must end no later than 70 weeks from the birth or adoption, as the case may be. After the amendment, for the parent of a child born or adopted on or after January 1, 2021, the said limit will be up to 78 weeks.
Paternity Leave: Earlier, paternity leave must end no later than 52 weeks after the week of child’s birth. After the amendment, this limit will be 78 weeks for a birth occurring on or after January 1, 2021.
Maternity Leave: After the amendment, maternity leave can end up to 20 weeks after the week of delivery for birth occurring on or after January 1, 2021. Earlier limit was 18 weeks.
Special Maternity Leave: After the amendment, special maternity leaves without pay can end up to 20 weeks in the event of termination of pregnancy (occurred in or after 20th week). Earlier limit was 18 weeks.
Implication:
Quebec employers shall conduct a review of its employee handbook and leave policies for ensuring compliance with the amended ALS provisions.
Automobile deduction limits and expense benefit rates announced for 2021
Canada’s Department of Finance has announced the automobile deduction limits and expense benefit rates for businesses that will apply from 2021.
Most of the rate in 2021 are remain unchanged from 2020 except the general rate for determining the taxable benefit of employees relating to the personal portion of automobile expenses paid by their employers. It will be decreased by one cent to 27 cents per kilometer. And in case of those who are employed principally in selling or leasing automobiles, it is will be reduced by one cent to 24 cents per kilometer.
Following 2020 rates will remain same in 2021:
Limit on the deduction of tax-exempt allowances paid by employers to employees in case of use of personal vehicle for business purpose at 59 cents per kilometer for first 5,000 kilometers driven and 53 cents for each additional kilometer. In case of the Northwest Territories, Nunavut and Yukon, it is 4 cents higher i.e. 63 cents and 57 cents, respectively.
Ceiling for capital cost allowances (CCA) for passenger vehicles will be at CAD 30,000 (before tax) for non-zero-emission passenger vehicles and for eligible zero-emission passenger vehicles, it will be at CAD 55,000 (before tax).
For new auto loans, maximum allowable interest deduction is at CAD 300 per month.
The limit on deductible leasing costs will remain at CAD 800 per month (before tax for new leases) and for automobiles valued over CAD 30,000, a separate restriction will continue to prorate deductible lease costs.
Implication:
The Canadian employer may need to make changes in their employee policies and allowances calculations to be in line with new limits.
China
Nationwide introduction of Electronic Special VAT Invoices for newly registered VAT payers
China’s State Taxation Administration (STA) issued Bulletin 22 on December 20, 2020 announcing the list of regions where the newly registered taxpayer may issue electronic VAT special invoices (special VAT e-fapiao). Previously, all VAT special invoices were issued in paper form. However, a pilot program was launched on September 01, 2020 that allowed taxpayers in the regions of Hangzhou, Ningbo, and Shijiazhuang to issue electronic VAT special invoices.
Accordingly, following regions may issue electronic VAT special invoices (special VAT e-fapiao) from:
December 21, 2020 (11 regions) – Anhui, Chongqing, Guangdong, Hebei, Jiangsu, Ningbo, Shanghai, Shenzhen, Sichuan, Tianjin, and Zhejiang
January 21, 2021 (25 regions) – Beijing, Dalian, Fujian, Gansu, Guangxi, Guizhou, Hainan, Heilongjiang, Henan, Hubei, Hunan, Inner Mongolia, Jiangxi, Jilin, Liaoning, Ningxia, Qingdao, Qinghai, Shaanxi, Shandong, Shanxi, Tibet, Xiamen, Xinjiang, and Yunnan
It should also be noted that regional tax authorities may impose additional requirements for newly registered VAT payers to issue electronic VAT special invoices.
Czech Republic
Introduction of individual income tax and other tax changes
Effective from 2021, the Czech Government has made number of legislative changes with respective to income tax and labor code, which will have an impact on employees and employers as well.
Solidarity tax of 7% has been replaced. Thus, following is the new progressive individual tax brackets:
Annual income up to 48 times of average wages – 15%
Annual income over 48 times of average wages – 23%
The Average wages increased to CZK 35,441 from CZK 34,835. Hence, annual ceiling for social security and higher bracket rate has been increased to CZK 1,701,168 (48 times of average income).
The annual allowance increased to CZK 27,840.
The calculation of vacation time will be determined by number of hours instead of days.
The Income tax will be calculated on gross income (excluding social and health insurance) of a person, instead of super gross salary.
Tax rebate has been increased per taxpayer to CZK 34,125 from CZK 24,840.
Threshold of CZK 60,300 for tax bonus of children abolished.
Implication:
The new amendments will have an impact on income tax and other taxes of an employee. The payroll withholdings will need to be recalculated accordingly.
Changes to business law and required actions by corporations in 2021
Effective from January 1, 2021, new amendment to the Corporation Act came into force. The companies are required to change article of association in conformity with amendments. Following are most important fundamental changes provided in amended Act,
Limited Liability Company with registered capital less than CZK 20,000 is no longer require to open special bank account to pay contribution towards registered capital. Cash amount less than CZK 20,000 can be deposited directly with the administrator.
Where legal entity is appointed as member of statutory body of company, then legal entity must appoint a single natural person as authorized representative. Before April 1, 2021, Legal entity must file registration of natural person with the Commercial Register.
For existing legal entities which are members of statutory body are required to register individual person in commercial register within 6 months form the date of enactment of amendment i.e. before 30th June.
Implication:
All companies will be obliged to adapt new regulations in article of association and file to the collection of deeds of Czech Republic Commercial Register at latest by June 30, 2021, unless stated otherwise.
Minimum wages increased to CZK 15,200
Effective from January 1, 2021, minimum monthly wages increased to CZK 15,200 from CZK 14,600. All companies are required to take new minimum wages for all employees including foreign employees.
France
Amendments to the Finance Bill 2021 on France B2B E-Invoicing
Amendments has been made to the French Finance Bill 2021 to include the measures for introducing e-invoicing from January 1, 2023. The B2B e-reporting obligation will come into force from 2023-2025.
Further, domestic B2C and cross-border sales invoicing data will also have to be reported to the French tax authorities.
Both the requirements will be phased out in following manner:
From 2023 for large companies,
From 2024 for mid-sized companies and
From 2025 for small companies.
Implication:
Considering the schedule released for the implementation of e-invoicing requirements, companies need to prepare themselves for digitalization of the invoicing and reporting system.
French National Assembly Approves Finance Bill 2021
The Finance Bill for the year 2021 (the bill) was tabled before the Senate on November 19, 2020. The French National Assembly passed the bill with several amendments and new provisions on December 17, 2020. The important measures considered in the bill are prescribed below:
Non-resident withholding tax rates for the year 2021:
Rate
Income Bracket (2020)
Income Bracket (2021)
0%
Up to EUR 14,988
Up to EUR 15,018
12%
From EUR 14,988 to EUR 43,477
From EUR 15,018 to 43,563
20%
Above EUR 43,477
Above EUR 43, 563
Reduced corporate income tax rate for SMEs
The threshold of annual turnover set for the applicability of the reduced corporate income tax rate of 15% for SMEs has increased from EUR 7.63 million to EUR 10 million effective from January 1, 2021.
Implication:
The employer shall take into consideration the revised Income bracket for withholding tax for non-residents while computing the tax liability. Further, due to the increase in the threshold for applicability of the reduced corporate income tax rate, more SME’s would have reduced tax rate benefit.
Germany
Child benefit increases from January
Effective from January 1, 2021, child benefit has increased by EUR 15 per child. Revised child benefit for first and second child will be EUR 219 per month and for third child will be EUR 225 per child per month and for fourth and subsequent child will be EUR 250 per month.
VAT rate increased to 19% from 16%
Effective January 1, 2021, the applicable VAT rate increased to 19% for the Goods and services provided and any advance or down payment received on or after effective date.
VAT payers can file quarterly returns from 2021
Effective January 1, 2021, newly registered business can file quarterly VAT returns.
Amendments in annual tax law 2020
Germany introduces Annual Tax Law 2020 includes following measures and amendments in official gazette to different tax laws,
From July 1, 2021, amendments of EU VAT e-commerce package will be enforced, which includes covering the use of VAT MOSS to all cross-border digital services within EU up to EUR 150, also extend the VAT reverse charge to telecommunication services resellers.
From January 1, 2021, a home office lump sum deduction for individual (working from home) will be EUR 5 per day with annual cap of EUR 600 that is in addition to the general lump-sum deduction cap of EUR 1000 for work related expenses.
India
Introduction of quarterly GST returns with monthly payments for small taxpayers, effective from January 1, 2021
Effective from January 1, 2021, the small taxpayers having aggregate annual turnover less than INR 50 million are allowed to file quarterly GST returns (GSTR-1 i.e., Return of outwards supply and GSTR-3B i.e., self-declarations) with monthly payment instead of monthly returns and payments. Such quarterly taxpayers would, for the first two months of the quarter, have an option to pay 35% of the net cash tax liability of the last quarter using an auto generated challan.
Implication:
Eligible taxpayers will be filing reduced number of GST returns resulting in reduced compliance burden.
Salary restructuring may be needed effective from April 1, 2021 (estimated date)
According to the Code on Wages 2019, for calculating the wages, following payments made by employer cannot exceed 50% of the all remuneration.
Any bonus (not forming part of remuneration)
Value of any house-accommodation, or of the supply of light, water, medical attendance or other amenity
Any contribution paid by the employer to any pension or provident fund, and the interest which may have accrued thereon
Any conveyance allowance or the value of any travelling concession
Any sum paid to the employed person to defray special expenses entailed on him by the nature of his employment
House rent allowance
Remuneration payable under any award or settlement between the parties or order of a court or Tribunal
Any overtime allowance
Any commission payable to the employee
Any gratuity payable on the termination of employment
Any retrenchment compensation or other retirement benefit payable to the employee or any ex gratia payment made to him on the termination of employment
If above payments exceed 50%, the amount which exceeds such 50% shall be deemed as remuneration and shall be accordingly added to the salary.
The above mentioned provisions are applicable to all (i.e. for the private sector as well). The Code on Wages 2019 is not yet notified by Government, but it is expected to come into force from April 1, 2021.
Implication:
Once effective, as allowances cannot be more than 50% of total salary, it means the basic pay will have to be 50% or more of total pay. Employers will have to check the salary structure of their employees and if required, they may have to revise their salary structure to keep basic pay as at least 50% as per the provisions mentioned above.
New GST rule of restricting ITC for discharging GST liability to 99% is not applicable for MSMEs
Effective from January 1, 2021, the Central Board of Indirect Taxes and Customs (CBIC) has introduced changes in GST rules i.e., the restriction on the use of input tax credit (ITC) for discharging the tax liability to 99% and the mandatory requirement of 1% cash payment of GST liability.
However, micro, small and medium enterprises (MSMEs) are not required to pay minimum 1% Goods and Services Tax (GST) liabilities in cash as businesses having annual turnover of less than INR 60 million are exempted under this new rule.
The new rule will not be applicable if:
Taxpayers have already deposited more than INR 100,000 as income-tax in last 2 years.
For a registered entity, who have received a refund of more than INR 100,000 in the preceding financial year on account of export.
Implication:
The availability of input tax credit facility for discharging the GST liability is made limited (i.e.99%). Taxpayer need to check and adopt amended rules to avoid any consequences due to non-compliance.
Date for conducting board meeting through Video Conference /Other Audio Visual means (VC/OAVM) extended till June 30, 2021
Ministry of Corporate Affairs (MCA) has granted the extension until June 30, 2021 via its notification dated December 30, 2020 for conducting board meetings via video conferencing/or other audio-visual means (VC/OAVM) for seeking approval for items such as :
The approval of the annual financial statements.
The approval of the board’s report.
The approval of the prospectus.
The audit committee meetings for consideration of financial statement including consolidated financial statement, if any.
The approval of the matter relating to amalgamation, merger, demerger, acquisition and takeover.
In addition, MCA, by virtue of its Circular 39/2020, has further allowed the Extra Ordinary General Meeting (EGM) to convene via video conferencing till June 30, 2021.
Italy
Issuance of ‘Ristori-bis’ decree to provide relief for both employers and employee during COVID-19 emergency period.
The Italian Government issued ‘Ristori-bis’, a decree to provide relief for both employers and employee during the COVID-19 emergency period. The decree contains some important measures listed below:
Suspension of Social Contributions payments
Eligible employers can be relieved from making social contribution payments for the month of November 2020. Eligible businesses are:
Classified under specific sector that are identified in the prescribed list and
Located at ‘very high’ risk regions.
Salary support scheme
All employees hired prior to November 9, 2020 are eligible for the ‘6 weeks’ period of salary support’ scheme.
Special leave is available for employees who have children
Eligible employees can earn at 50% of their salary for special leave taken. Eligibility criteria for availing the special leave are:
Employees residing in the regions classified as at ‘very high’ risk,
Having children attending middle schools
Employees who cannot perform their working activity from a remote place
Implication:
The eligible employers and employee shall consider the above-mentioned benefits provided by the ‘Ristori-bis’ decree
Mandatory appointment of a fiscal representative for VAT registration for UK entities.
The Italian Tax Authority (ITA) clarified that UK entities will have to appoint a fiscal representative in order to register for VAT purposes in Italy. Earlier, businesses based in the UK were entitled to benefit from direct registration, as UK was part of EU member state. However, from 1 January 2021, the UK will be viewed as a third country in relation to the EU.
It is also noted that trade agreements executed between the UK and EU would permit direct VAT registration of UK businesses. However, the Italian tax authority has yet to give its final decision on this.
Implication:
UK businesses may need to appoint a VAT representative in Italy in the near future.
Transfer Pricing Documentation implementing provisions published
The Italian Revenue Agency has issued provisions regarding transfer pricing documentation requirements to make it in line with the OECD guidelines. The provisions were published on November 23, 2020.
The provisions enumerate the rules for preparation of Master File and Local File. It is also specified that the requirement regarding the documentations may be applicable to permanent establishments in Italy of non-resident enterprises and of permanent establishments abroad of Italian residents.
Small and Medium Enterprises (SME’s) will be entitled to partially relaxed documentation requirements subject to certain conditions. For this purpose, the threshold for the SME identification is turnover or revenue less than EU 50 million in the concerned tax period.
Under the new set of regulations, the requirements for documentation relevant to the provisions are listed below.
Annual Preparation of documentation required
Written in Italian though the master file can be submitted in English.
E- Submission of required documentation within 20 days upon the request of the authorities.
Additional period of 7 days for any additional information required.
New rules will apply from the 2020 tax period
Implication:
The concerned entities shall take into the considerations the requirement related to the documentation required such as language, frequency of preparation, due date for submission and applicability of the new set of rules for smooth and better compliance with the transfer pricing law.
Mexico
Teleworking measures amending the labor law
On December 9, 2020, the congress approved the measure to amend the labor law regarding teleworking. The new provisions of the law define “teleworking” as the performance of paid activities in a place other than the workplace of employer (i.e., no physical presence of worker required at the company’s work place).
The following requirement for teleworkers must be mentioned in the contract:
Working conditions (in writing) – nature and characteristics of the work
Equipment and supplies for occupational health and safety obligations;
Payment by employer for work at home condition;
Work schedule supervision, duration etc.
Implication:
The employer is required to update its employee contracts, handbooks, HR policies and guides to comply with the new provision in the law.
The national minimum wage increased
From January 1, 2021, The National Minimum Wage Commission (CONASAMI) increased General minimum wage to MXN 141.70 per day and for the Free Economic Zone of the Northern Border to MXN 213.39 per day.
Netherlands
Social Security Rates for 2021
Ministry for Social Affairs and Employment, Netherlands has issued regulations changing the social security contribution rates for the year 2021.
The employer-paid social security contributions as per the regulation are as follows:
General unemployment insurance (AWF) – 2.70% for contracted workers with an indefinite term; 7.70% for flex workers and temporary workers,
Occupational disability insurance (WIA) – 7.03%,
Childcare allowance contribution – 0.50%.
The maximum salary basis limit for the employer contributions for 2021 is fixed at EUR 58,311 (yearly).
Implication:
The employer is required to adjust the social security contribution rates as per the latest changes for correct calculations and contributions.
Dutch senate approves a lower rate of corporate tax for small and medium-sized entities.
Effective from January 1, 2021, the low rate corporate tax changed to 15% from 16% for small and medium-sized entities (SMEs) on income up to EUR 245,000 (Previously up to EUR 200,000).
The standard rate for corporate tax will remain at 25% for 2021.
Singapore
The parliament passes “The New Personal Data Protection (Amendment) Bill 2020”
The Personal Data Protection (Amendment) Bill had been tabled for its reading in parliament on October 5, 2020. The parliament has passed the bill on November 2, 2020.
Some of the significant amendments to PDPA include the following:
Individuals and the Personal Data Protection Commission (PDPC) shall be notified on the account of a data breach; maximum time window given for notifying the PDPC is of 3 days from such event.
Expansion of the framework of Deemed Consent in specific circumstances;
Express Consent is not required when the information collect, use and disclose for legitimate interests and business improvements;
The financial penalty has Increased up to 10% of the annual turnover of the organization with an annual turnover exceeding SGD 10 million, or SGD 1 million, whichever is higher;
Individuals have new rights of data portability that will obligate the information controller to transmit the data of the individual.
The Company is obligated for Data Portability, if specifically requested by the Individual.
Introduction of penalties for Individuals in case of mishandling of personal information which is imprisonment of up to 2 years or fine not exceeding SGD 5,000 or both.
Introduction of new consent exceptions for availing consents i.e., legitimate interests exception and business improvement exceptions.
Sweden
Introduction of ‘Economic Employer Concept’ in Sweden from January 1, 2021
Effective from January 1, 2021 economic employer concept is introduced in Sweden. Earlier, foreign personnel working in Sweden have not been taxed in Sweden if employer paying his salary is not a Swedish company. With the economic employer concept, the employer is considered to be the company for which work is actually performed and not the employer who pays remuneration for employees.
Employees working in Sweden for a maximum of 15 days in a row or 45 days in total during a calendar year will not be affected by this new legislation. Once employees work exceeds the specified days then his / her salary taxability will be determined by the economic employer concept and if his / her economic employer is located in Sweden then it will be taxed in Sweden.
Implication:
Employers sending employees to work in Sweden should analyze the legal requirements of the new legislation. Foreign employers may need to register in Sweden and withhold and remit taxes for an employee that is taxable in Sweden.
Switzerland
Introduction of new provision on paid care leave for employees.
Effective from January 1, 2021, employees are entitled to paid care leave of a maximum of 3 days per incident for care of an impaired family member or spouse but not more than 10 days per year.
Implication:
The employees are entitled to wages for care leave provided the claims are proved, and a medical certificate is not required as proof.
Changes in social security rates
Effective from January 1, 2021, the new social security rate and threshold for employer are as follows:
Old age disability pension AHV/IV/EO contribution has changed to 5.30% from 5.275%.
The occupational pension new limits are as follows:
Entry Threshold: CHF 21,510
Coordination deduction (annual amount): 25,095 CHF
Annual salary ceiling: CHF 86,040
Minimum coordinated salary: CHF 3,585
Maximum coordinated salary: CHF 60,945
Implication:
These changes have an impact on social security calculation thus increasing the employer’s liability because of the increase in total social security contributions.
United Kingdom
EU-UK trade deal receives the royal assent of the Queen; the deal is now officially the UK law
The long-awaited agreement i.e. the EU-UK trade deal between Britain and the European Union (EU) on Brexit has received Queen’s approval in the United Kingdom (UK) just before the deadline on December 31, 2020. The deal is now transposed into British law – “The European Union (Future Relationship) Act 2020”. It has been 4 and a half years since the UK opted for Brexit. It has also received provisional approval of the European Union (EU) for a limited period until February 28, 2021. The EU parliament will ratify the agreement later before the ratification of it into EU law. The agreement is based on international law (not EU law) and it is structured into 7 parts covering various aspects such as trade and other economic aspects, law enforcement, etc. The highlights of the agreement include:
Key points of EU-UK trade deal:
Customs formalities are now required for trade between the two parties from EU and UK. However, there will be zero tariffs/ no restrictive quotas for ‘goods’ traded between the UK-EU; effectively only the compliance is what will increase for movement of goods between the UK and the EU, but by a lot.
From January 1, 2021, UK service suppliers will no longer have an automatic right to provide services in the EU. Suppliers will lose benefit from ‘country-of-origin’ or ‘passporting’ (authorizations issued by one Member State under EU rules enable access throughout the entire EU Single Market) E.g the financial services will not be able to use “passporting” to access the customers in other country.
Free travel will be restricted – Visas will be necessary for any visitors planning on staying more than 90 days in any 180-day period and any person planning any work other than routine business meetings and conferences in the other country.
The transfer of employees (as intra-corporate transferees) for working in an associated company will be considered as temporary migration, the maximum duration of which is capped at 3 years. Short-term entry for certain activities for business visitors not providing services will also be allowed. Under certain conditions, the movement of “contractual service suppliers” or “independent professionals” to supply services will be allowed.
Professional qualifications and licenses will no longer be recognized automatically. There is yet no agreement on automatic recognition for professionals such as engineers, accountants, architects, doctors, etc. Irrespective of where the qualification was acquired, the qualifications will need individual recognition in the respective member state as per the rules applicable for third-country nationals. The agreement clarifies that the EU-UK may agree on improved mechanisms for recognition of professional qualification on a profession-by-profession basis in the future. The lawyers will be allowed to provide legal services relating to the international law and the law of the country where they are authorized.
Cross-border workers and their employers will be made liable to pay social security contributions in one state at a time only, some compliances may be introduced to achieve this. The Social Security Coordination protocol (the protocol) will ensure the protection of social security benefits for individuals who move between the UK and the EU. The UK workers sent for temporary work in an EU Member State (applying the “detached worker” rules) will only pay social security contributions in the UK itself for the period of work in that EU Member State. Similarly, if an EU worker is sent to work temporarily in the UK (from a Member State applying the “detached worker” rules), will remain liable to only pay contributions in that EU Member State.
GDPR compliances will have to be undertaken for data privacy. The UK DPA (Data Protection Act) 2018 will continue to apply after the end of the transition period. The compliance with GDPR provisions will be required by the UK organizations even if EU GDPR will no longer apply directly in the UK. Putting in place SCCs (standard contractual clauses) or other methods for data processing and transfer may be required.
Appointment of VAT representatives in certain EU member states will be necessary.
Implications:
From January 1, 2021 the United Kingdom will lose all the rights and obligations it had as an EU Member State. During the transition period the rights will be governed under the Withdrawal Agreement.
Application for acquiring visas for employees travelling to EU member states by UK nationals and vice-versa will have to be done, except when exemption is possible.
The supply of goods and services will have administrative compliances and the same will have to be set-up (e.g. compliance with customs procedures for goods or appointment of a VAT representative).
Effective January 1, 2021, the organizations in UK processing information of EU residents may require to appoint EU representatives, update contracts to incorporate SCCs (standard contractual clauses) depending on case to case basis, update policies, procedures and documentation, etc.
Proposed increase in statutory leave pay rates from April, 2021
The government has announced proposed rates for statutory maternity, paternity, adoption, parental bereavement and shared parental payments from April 2021. They are as follows:
The weekly rate of statutory sick pay will be GBP 96.35 (up from GBP 95.85).
The weekly rate of statutory maternity pays, maternity allowance, statutory paternity pays, statutory shared parental pay, statutory adoption pay and statutory parental bereavement pay will be GBP 151.97 (up from GBP 151.20).
Implication:
Increase in statutory leave pay will lead to a rise in employee compensation and cost for UK entities.
New e-commerce VAT rules are effective from January 01, 2021
Effective from January 1, 2021, UK’s HMRC has introduced changes to VAT on ecommerce and marketplace reforms. They are as follows:
Value Added Tax (VAT) is liable on all goods imported into UK. This will abolish the Low-Value Consignment Stock relief for goods under GBP 15.
If consignment is less than GBP 135 then VAT is due at the point of sale instead of at importation. (Applicable for both B2B and B2C sales)
Off payroll working rules from April 6, 2021
The budget 2020 had proposed the off-payroll working rules (commonly known as IR35). The rules were supposed to be implemented from April 6, 2020 but postponed to April 6, 2021 due to COVID-19 pandemic.
Under these rules, companies employing contractors will now need to decide if they are employees and not contractors and apply National insurance (NIC) and withhold taxes (PAYE) accordingly. In case of small companies this burden to determine if he / she is an employee or contractor shifts on the contractor.
Implications
The need for documentation to prove if a contractor is indeed a contractor not needing NIC / PAYE or is an employee will be critically important.
United States of America
Federal
Mileage rates for 2021
The Internal Revenue Services (IRS) in its Notice 2021-2 declared the standard mileage rates for computation of the deductible costs of operating an automobile for business for the year 2021. The declared rates will be applicable from January 1, 2021. The rate for business travel is below:
56 cents per mile for each business miles driven
If the Taxpayer owns an automobile and uses the same for business, then 26 cents per mile (27 cents per mile for 2020) out of 56 cents per mile would be attributed to depreciation expenses in the year 2021.
Mandatory reporting of Beneficial Ownership of the Company under newly enacted Corporate Transparency Act (CTA) for Private Companies
The newly enacted act “The Corporate Transparency Act (CTA)” is effective beginning January 1, 2021. Under the provisions of the CTA, the applicable company needs to file a report with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) disclosing the details regarding ultimate beneficial ownership of the company. The regulations of the CTA are likely to be adopted by the Secretary of the Treasury by January 1, 2022 (i.e., within one year from the CTA enactment date January 1, 2021). The highlights of the CTA are listed below:
Definition
The Beneficial Owner is defined as any individual who, directly or indirectly, exercises substantial control over the Reporting Company, or owns or controls not less than 25% of the ownership interests of, the reporting company.
Applicability
The Corporation, Limited Liability Company or any similar entity, which has registered itself by submission of required documents to the office of the secretary of state, or any authority possessing such powers by virtue of any laws or regulations.
Information to be disclosed
The company needs to identify and report to FinCen each beneficial owner of the reporting company and individuals responsible for formation or registration of reporting company. The details to be reported to FinCen are listed below:
Name
Date of Birth
Current Residential Address/Business Address
Unique Identifying Number from acceptable identification (Passport or Driving License)
Unique Identifying Number issued by FinCen
Deadline for Submission
The regulations for the application of the CTA requirements are likely to be adopted by the Secretary of the Treasury by January 1, 2022 (i.e., within one year from the CTA enactment date January 1, 2021). The Companies falling under the requirement of reporting and formed/registered prior to the effective date of such regulations shall file the report with FinCen no later than 2 years from the effective date of the regulations. Companies registered after effective date shall file the report at the time of incorporation. Changes in existing information shall be reported within a period of one year from the date of occurrence of the change.
Massachusetts
Employees entitled for Paid Family and Medical Leave (PFML) Benefits from January 1, 2021
Employees working with an Organization in Massachusetts are eligible for Paid Family and Medical Leave Benefits (PFML) from January 1, 2021. The employer shall know the below points in this regard:
Eligibility
W-2 employees
Contractors that receives a 1099-MISC form from a business
Former employees with unemployment period of less than 26 weeks
Benefits
Up to 20 weeks of paid medical leave in case of worker being in serious medical conditions
Up to 12 weeks of paid medical leave for below:
For bonding with a new child,
Taking care of a family member with a serious medical condition (Available from July 01, 2021)
Assisting a family member with a qualifying military exigency
Up to 26 weeks of paid medical leave for taking care of a family member who is an injured service member
The annual ceiling limit for paid leaves is 26 weeks per employee
Paid leave benefits
80% of weekly pay for workers earning up to USD 669 per week.
50% of weekly pay for workers earnings above USD 669 per week
Maximum weekly benefits are set at USD 850.
No benefits will be paid in initial 7 days.
State trust will bear the expenses for paid leaves.
Implication:
The employer needs to make sure that they comply with the provisions of PFML such as sending notice to all current employees and display the PFML poster with updated information. The employee will also have to review the employee handbook policies regarding employee leaves.
Global Updates
Hungary
Reporting Obligation of all invoices in Online Invoice Reporting System
Effective from January 4, 2021, the following changes are applicable:
Reporting of all B2B invoices (domestic and to non-established entities) as well as B2C invoices
Failure to report data will result in penalties after a transitional period of 3-months.
Registered taxable persons will be able to check online invoices issued.
Additional data i.e., order number, contract data, vendor and customer code will be available which simplifies and fastens the invoice process.
The Online Invoice Reporting system will send the electronic invoice as per the request of the customer.
Poland
Mandatory to file New JPK_VAT for VAT return
Effective from October 1, 2020, all companies (large, medium, and small companies and micro-enterprises) required to file JPK_VAT file with the declaration. The new JPK_VAT is filed electronically either monthly (JPK_V7M) or quarterly (JPK_V7K) as applicable to company.
The new JPK_VAT file includes:
Purchases and sales information from the VAT records for a given period,
Items from the current VAT-7 or VAT-7K (previously submitted form) declaration,
Additional data to analyze the accuracy of the settlement
Minimum wages ceiling limit changed
Effective from January 1, 2021, the minimum wages leave is increase to PLN 2,800 per month from PLN 2,600 per month. The minimum wages calculation does not include benefits and allowances.
Malaysia
Malaysia Budget 2021 highlights: Reduction in personal income tax rate, Increase in various tax relief limits, decrease in employee EPF contribution rate etc.
On November 6, 2020, Malaysia’s Minister of Finance announced National Budget 2021. Following are the key highlights of the budget:
Personal Income Tax
For tax resident individuals, reduction in personal income tax rate by 1 percentage point i.e. from 14% to 13% for income bracket RM 50,001 to RM 70,000.
Tax relief limit for medical expenses for serious diseases for self, spouse or child increased from RM 6,000 (including RM500 for full medical check-up) to RM 8,000 (including RM 1,000 for full medical check-up).
Tax relief limit for medical expenses for parents increased from RM 5,000 to RM 8,000.
Tax relief limit for lifestyle increased from RM 2,500 to RM 3,000, where the additional of RM 500 be allocated for the cost of purchasing sports equipment, entry / rental fees for sports facilities and participation fees in sports competitions.
Compensation for loss of employment increased from RM 10,000 to RM 20,000 per year of completed service.
Social Security:
For calendar year 2021, employee’s contribution rate to Employee Provident Fund (EPF) is reduced from 11% to 9%.
Transitional Period for Reporting of Beneficial Ownership Extended
On February 27, 2020, the Guideline for the Reporting Framework for Beneficial Ownership of Legal Persons were issued by the Companies Commission of Malaysia (‘CCM’). The guidelines include:
Transitional period from March 1, 2020 to December 31, 2020 is given to the affected entity to obtain, establish, verify, maintain, and update the information prescribed in the Guideline on its beneficial owners.
From January 1, 2021, each affected entity will be needed to submit information on its beneficial owners to the registrar within the applicable time frames mentioned in the Guideline; and
An affected entity is required to keep the information on its beneficial owners updated.
Recently, CCM announced that the transitional period stated in the ‘Guidelines for the Reporting Framework for Beneficial Ownership of Legal Persons’ ending on 31 December 2020 has been extended to a later date to be determined by the Registrar to coincide with the enforcement date of the proposed Companies (Amendment) Bill and Limited Liability Partnerships (Amendment) Bill.
Implication:
Businesses in Malaysia are required to comply with Guidelines for Beneficial Ownership of Legal Persons which will increase the compliances. Identifying and documenting the UBO details can be a complex task.
Philippines
Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill passed by the Philippines Senate – Proposed reduction in corporate tax rate
The Senate has approved the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Bill which aims to reduce corporate income tax rates. The same is yet to be approved by House of Representatives and to be signed by the President. The key measures of the bill are as follows:
Reduction in corporate tax rate from 30% to 25% from July 1, 2020, retroactively with further 1% reduction per year starting from 2023 to 2027 until corporate tax rate reaches 20%.
Immediate reduction in corporate tax rate to 20% for MSMEs including domestic corporations with total assets, excluding land, of not more than PHP 100 million and net taxable income of PHP 5 million or less.
Implication:
Once passed, there will be reduction in corporate tax liability for businesses.
Philippines’s Social Security Commission (SSC) revised contribution rates from January, 2021
Effective from January 2021, social security contribution rate is increased from 12% to 13%. The additional 1% will be divided equally between employer and employee. Effective rate will be 8.5% for employer and 4.5% for employees.
Also, the minimum monthly salary credit (MSC) has been increased from P 2,000 to P 3,000 and maximum monthly salary credit is increased from P 20,000 and P 25,000.
Implication:
The employer needs to adjust their payroll with new contribution rate. This will also lead to additional cost to employer.
UAE
UAE amends company law allowing 100% foreign ownership in the onshore companies+
The United Arab Emirates (“UAE”) has issued a new decree (Federal Decree-Law No. 26 of 2020) introducing significant amendments to the federal company law (UAE Commercial Companies Law No. 2 of 2015) which regulates legal entities outside the free zone areas i.e. the entities established “onshore” in the UAE. The amendments overhaul rules relating to foreign ownership of companies in the UAE. The president of UAE signed the decree on November 23, 2020.
Effective date
Most of the amendments will be effective from December 1, 2020. However, certain changes will be implemented at a later date.
Companies will have a year to comply with the amendments from the effective date.
What has changed?
The following are some of the key amendments affecting the onshore legal entities in UAE:
100% foreign ownership
The decree removes the requirement, mandating the “onshore” companies to have 51% shares held by a UAE shareholder. This requirement is still in place for those entities carrying activities with a “strategic impact”.
Directors Nationality
The requirement for the chairman and a majority of the Board of Directors of private and public joint-stock companies to be an Emirati is also removed.
Local service agent
As per the amendment, for the branch office/ representative office of a foreign entity, the requirement to appoint a UAE national as the local service agent has been removed.
Foreign Direct Investment Law
This law repeals Decree-Law No. 19 of 2018 on Foreign Direct Investment (“FDI”) (issued to promote FDI in UAE) as there is no longer the requirement for 51% ownership by UAE nationals under the company law.
Single shareholder companies
Now foreign investors can form a single shareholder company, subject to it not undertaking strategic impact activities.
Changes relating to the general meeting
Earlier the notice calling the general meeting was required to be of a minimum of 15 days which is now increased to 21 days;
E voting is now allowed at a general meeting;
The quorum for a general meeting of an LLC is now decreased to 50% from earlier 75%, subject to higher threshold requirement in the memorandum of association;
Any shareholder/s holding 5% of the share capital (as against earlier 10%) can request items to be added to the agenda for discussion at the general meeting of the company;
Any shareholder/s holding 10% of the share capital (as against earlier 25%) will be able to call a general assembly meeting.
Amendments pertaining to the ownership and operation of public joint-stock companies, increasing or decreasing public company share capital, issuing in-kind shares, etc. have also been introduced.
Implications:
An onshore company can be established in UAE with no local shareholder;
The branch or representative office of a foreign company can be established without a local service agent.
Due to the repealing of Decree-Law No. 19 of 2018 on FDI all current applications for foreign ownership, licenses have now been suspended by the Department of Economic Development (“DED”).
Previously only LLCs with local shareholders were allowed to open one-person companies but now foreign investors can also incorporate LLC (without the restriction of having local shareholders).
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