Argentina
Progressive Corporate Income Tax (“CIT”) Rates were approved
On June 2, 2021, Senate approved the bill for the introduction of new progressive corporate income tax rates. The bill was previously approved by the Chamber of Deputies in May 2021. The Revised rates are as follows:
| Net Taxable Income | Tax Rate |
| Up to ARS 5 Million | 25% |
| From ARS 5 Million to ARS 20 Million | 30% |
| Exceeding ARS 20 Million | 35% |
Note that bracket thresholds will be adjusted after January 1, 2022, based on the consumer price index. The bill also provides for a reduction of the withholding tax rate from 13% to 7% on dividends and branch profit remittance.
Implication:
The bill, after being signed by the president, will get published in the Official Gazette and will apply retroactively starting January 1, 2021. This will be a significant change, as the companies will need to consider the revised income tax rates and calculate the advance tax liability accordingly.
Australia
Employer’s superannuation contribution rate increased to 10% (effective July 1, 2021)
Starting July 1, 2021, the employer’s superannuation contribution rate will be increased from 9.5% to 10%. The rate will further increase by 0.5% per year until it reaches 12% by 2025.
Implication:
Employers need to check employment contracts to verify if the increase has an impact on the payroll cost depending upon whether the total remuneration agreed is inclusive or exclusive of superannuation contribution. Further, they are required to make changes in their payroll calculations to reflect new contribution rates.
Australia further extends deadline for avoiding lockdown tax hit
The Australian Taxation Office (“ATO”) has amended its Taxation Ruling TR 2002/5, which relates to the constitution of Permanent Establishments (“PE”) in Australia.
Generally, a foreign resident entity will not be subject to Australian income tax unless it carries on its business “at or through an Australian PE.” For establishing an Australian PE, two criteria are applied: the geographical and the temporal permanence in the business activities, which are carried out by the company’s local employees. If business is operating “at or through a place” continuously for six months or more, then that place is treated as temporarily permanent.
The updated Taxation Ruling (TR 2002/5) has formally recognized the COVID-19 pandemic situation as an “extraordinary circumstance” and has earlier clarified that the extended presence of employees in Australia for more than six months due to the pandemic may be considered as “temporary” to satisfy the temporal permanence requirement for foreign entities to have a PE in Australia. The clarification was applicable until June 30, 2021. ATO has now extended its applicability to December 31, 2021.
Implication:
Due to the COVID-19 pandemic, foreign companies will not be treated as Australian PE merely due to the extended presence of their local employees in Australia until December 31, 2021. It will ensure no additional tax liability for such foreign entities.
National Minimum Wage increased to AUD 20.33 per hour starting July 1, 2021
With effect from July 1, 2021, the national minimum wage in Australia will rise as under:
| Effective date | Rate Per Hour (before tax) | Rate Per week (before tax) |
| Up to June 30,2021 | AUD 19.84 | AUD 753.80 |
| From July 1, 2021 | AUD 20.33 | AUD 772.60 |
Employees who already are paid more than the new minimum wage will not be affected by such an increase.
Implication:
Employers shall comply with the new minimum payment obligations for all their employees to avoid any risk of underpayment and liability for legal obligations.
Australia: Reportable Tax Position (“RTP”) Schedule expanded to large private companies
The Reportable Tax Position (“RTP”) schedule forms part of the company income tax return. The RTP schedule requires disclosure of information regarding high-risk arrangements and transactions. The RTP schedule is required to be lodged only if certain criteria are met.
With effect from July 1, 2021, large private companies are required to self-assess their lodgement requirement. Companies will have to lodge the RTP schedule if their total business income for the 2021-22 income year is:
· AUD 250 million or more, or
· AUD 25 million or more and the company is part of an economic group that has a turnover of more than AUD 250 million.
Implication:
Eligible companies need to check the applicability of the reportable tax position (“RTP”) schedule and related disclosures to be made, if applicable.
Brazil
Employers need to pay full salary to pregnant women employees working from home during COVID-19 Emergency
The Brazilian government published a new law on May 12, 2021 (Law No. 14,151/2021) introducing protective guidelines and measures in light of the COVID-19 pandemic.
The new law mandates that pregnant employees will remain away from on-site work, without any loss to their remuneration during the COVID-19 emergency period. They should remain available for work from home, through telework, remote work, or any other form of work at a distance.
Implication:
Employers must allow pregnant employees to work from home and make payment of full remuneration.
Brazil Tax Reform: Gradual Reduction in Corporate Income Tax (IRPJ) proposed from current 15% to 10% from the year 2023
The Government of Brazil on June 25, 2021, proposed the second phase of a comprehensive tax reform, which includes a reduction in corporate income tax (“CIT”) rates. If approved, the income tax reform will go into effect on January 1, 2022. The following reforms are proposed:
· Progressive reduction in the corporate income tax rate (“Imposto de Renda da Pessoa Jurídica – IRPJ”) from 15% to 12.5% in the year 2022 and 10% in the year 2023;
· New withholding tax at flat 20% rate on distributed profit and dividends. In case of dividend income, if the beneficiary is located in a low-tax jurisdiction or subject to a privileged tax regime or if there is hidden/constructive dividend, this rate would increase to 30%; and
· Imposition of capital gains tax of indirect disposal of Brazilian shares where fair market value concerning the disposal of interest abroad is derived from assets located in Brazil.
Implication:
Once approved, companies would get the benefit of lower taxes on corporate income. However, dividend and distributed profits would be subject to tax withholding.
Canada
Canada extends relief for Registered Pension Plans (“RPPs”) and Deferred Salary Leave Plans (“DSLP”)
On May 20, 2021, in response to the COVID-19 pandemic, Department of Finance Canada extended the temporary relief measures for employers that sponsor deferred salary leave plans (“DSLPs”) or registered pension plans (“RPPs”) for an additional year to manage and maintain benefits for their employees.
The temporary relief measures include:
· Temporary “stop-the-clock” measures from March 15, 2020, to April 30, 2022; so that an employee’s DSLP does not need to be terminated if the employee suspends a leave of absence to return to work or chooses to delay a paid leave-of-absence.
· Relief measures for RPP to avail loan facility by removing restrictions that prohibit RPP administrators from borrowing money;
· Permitting retroactive contributions to RPPs before April 30, 2022, towards remaining required contributions that were not made in 2020 or 2021; and
· In cases of wages roll back periods, permitting the employer to provide pension contribution at 100% of the wages before roll back.
The temporary relief measures also broaden the definition of “eligible period of reduced pay” so that all employees, including new employees, who are experiencing a period of reduced work and pay during COVID-19 receive unreduced pension coverage for both 2020 and 2021.
Implication:
Eligible employers in Canada may avail of benefits out of RPPs and DSLPs within an extended period.
Ontario: Changes made to the filing process for corporate information returns effective May 15, 2021
Effective from May 15, 2021, the Canada Revenue Agency (“CRA”) announced the following changes regarding the Corporations Information Act’s annual return filing process:
· From May 7, 2021, the annual return forms will no longer be available for download from the Canada.ca. Website;
· From May 15, 2021, the annual return will no longer be filed with the Canada Revenue Agency (“CRA”); and
· Until further notice, corporations are temporarily exempted from the annual return filing requirement, if the return is due during this period.
The change will apply to the following forms:
· Schedule 546, Corporations Information Act Annual Return for Ontario Corporations;
· Schedule 548, Corporations Information Act Annual Return for Foreign Business Corporations; and
· Form RC232, Corporations Information Act Annual Return for Ontario Not-for-Profit Corporations.
The CRA will continue to process Corporation T2 income tax returns and T3010 Registered Charity Information Returns.
Implication:
Eligible corporations/employers in Canada are temporarily exempted from filing annual returns due to this exemption. However, they may be required to file such a return in the future period.
Ontario Business Corporations Act (“OBCA”): Changes to requirement of resident directors, shareholder resolution approval with effect from July 5, 2021
With effect from July 5, 2021, as per the amendments to the Business Corporations Act (Ontario) (“OBCA”) in Bill 213, corporations governed by Ontario’s Business Corporations Act (“OBCA”) are not required to have any “resident Canadian” directors on the Board of Directors.
Earlier, the OBCA required at least 25% of the directors of an OBCA corporation to be resident Canadians. In respect of corporations having fewer than four directors, the requirement was that at least one director be a Canadian resident.
Bill 213 also amends the approval process for ordinary resolutions by way of written resolutions of the shareholders. After the amendment, an ordinary resolution by way of a written resolution can be approved by shareholders holding a majority of the shares entitled to vote (instead of all shareholders). This amendment only covers ordinary resolutions that include basic corporate matters while special resolutions still require unanimous approval.
Implication:
With the removal of Canadian residency requirements, it will be easier for prospective foreign investors to incorporate a corporation in Ontario.
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China
China New Data Security Law effective from September 1, 2021
From September 1, 2021, the Data Security Law (“DSL”) will be effective. It was passed on June 10, 2021, by China’s National People’s Congress Standing Committee. Following are the key highlights of DSL:
· Scope of Application
According to the definition by DSL, “Data” is any record of information in digital form or other forms. “Data Processing” includes but is not limited to the collection, storage, use, processing, transmission, provision, and public disclosure of data.
In cases where the Data is associated with a natural person, it may also be deemed as “Personal Information” and subject to the Chinese personal information protection law.
In relation to the territorial scope, the DSL principally applies to the data processing undertakings in China but also has certain extra-territorial application.
· Special Categories of Data
The DSL has recognized a regulatory regime that provides stricter regulatory measures for special categories of data, namely:
- Important Data
According to the DSL, the Chinese government shall regulate the security level of the data based on the implication and prospective damages caused to the society in case of any data breach and issue the Important Data Catalogue to strengthen the protection of the important data.
- Core State Data
DSL states that the data relating to national security, the lifeline of the national economy, people’s livelihoods, and main public interests shall be considered as “Core State Data” and a more rigorous regulatory system shall be implemented.
· MLPS – Fundamental Data Security System
MLPS is a system under which all the network operators are required to perform security protection obligations to protect the network from interference, destruction or unauthorized access, data leakage etc.
· International Data Transfer
The cross-border transfer of important data by Critical Information Infrastructure Operators (CIIOs) will be as per the provisions of the Cyber Security Law. For other data processors, it will be the responsibility of the cybersecurity authority to work with relevant departments of the State Council to frame relevant regulations on the cross-border transfer of important data.
· Administrative Penalty
The authority may impose a fine of up to RMB 2 million on breach of data security, a fine up to RMB 10 million on violation of regulations on Core State Data, a fine up to RMB 10 million on illegal overseas transfer of Important Data, and a fine up to RMB 5 million on the unauthorised provision of date to overseas law enforcement or judicial authority. DSL may also order the suspension of related business or licenses in specified circumstances.
Implication:
The companies should review their data security system and start making revisions to meet the compliance obligations under the new DSL.
Outbound payments tax filing convenience is strengthened
Since the introduction of the 2013 State Administration of Taxation and the State Administration of Foreign Exchange (SAFE) Announcement No. 40, the tax filing process for outbound payments under China’s service trade projects has been simplified, and the regulatory focus has been transformed into routine tax administration and post-payment review. Recent joint announcement of the two major organs (State Administration of Taxation, State Administration of Foreign Exchange) has canceled within 15 days review and inspection rules on outbound payments against service trade and other items such as royalty, employment fee repayment etc. to eliminate the tax authorities. However, this may imply taxpayers facing the long-term potential continuous review, so taxpayers or withholding agents need to strengthen the outbound payment of tax returns compliance management.
According to the current No. 40 announcement, if domestic institutions and individuals pay more than 50,000 U.S. dollars abroad for foreign exchange funds, dividends, interest, royalties, remuneration for work, equity transfer income, etc., all need to be recorded and managed by the tax authorities. If bigger amount is reflecting on one contract requires multiple foreign exchange outbound payments, the payer locally needs to go through the tax filing procedures before each payment can be made outbound. The announcement cancelled the requirement for multiple filings, and filing applicant were only required to file a tax record once before making their first outbound payment.
Online processing channels are increased, optional off-site bank payment is also achievable for outbound payment. Domestic individuals can go through the electronic tax bureau online filing application procedures, the taxpayer submit complete information to complete the tax filing procedures, only with the number and verification code of the “filing form” obtained from their online tax bureau, they can go to the bank for foreign exchange outbound payment business.
Implication:
Recommendations to China legal entities who need to make outbound payments on regular basis:
· Because the time limit for the review within 15 days of the tax authorities has been abolished, it means that corporate compliance management needs to be well prepared, as the Tax Office can initiate follow-up management and spot checks at any time in accordance with the level of classified graded risk management.
· Since the promulgation and implementation of the 40th Announcement, due to the need to pre-audit the correctness of the filed information, in practice, there are enterprises to have paid outbound payment in advance, but their documents are not compliant even they haven’t paid withholding taxes ahead i.e. not obtain the correct tax return, and the collection of late fees and even fines are arising. The announcement removes the time limit for post-mortem review by tax authorities, which will pose greater challenges to corporate tax compliance for paying outbound payments.
· Enterprises need special attention to the large amount of outbound payment arrangements (e.g., advance fees, royalties, etc.) and determine its nature then conduct the tax assessment process in advance to judge the tax treatment, tax agreement treatment and other tax incentives applicable, and retain relevant information for reference
· Pay attention to strengthen the authenticity of information and self-examination, strengthen prior communication with tax authorities. Improve compliance level. Although the ease of filing of outbound payments required tax filing is enhanced, and compliance needs constant attention
China E-Fapiao System expanding the pilot program on electronic special value-added tax Fapiao
In China, Fapiao refers to VAT fapiao in particular. It is a business voucher issued and received by all parties involved in the purchase and sale of goods or services. Fapiao in China serve as both the legal receipt and tax invoice as well as serve as accounting document for a taxpayer to support the legitimacy of their activities and stipulates the VAT due and is used by the authorities to track transactions for tax purposes and avoid tax evasion.
The Fapiao is initially remained in paper format. This paper fapiao system has been used for many years. In recent years, the methodology has come under increased strain from high frequency transaction industries such as retail, food and beverage (Starbuck for example) and travel. But with e-commerce booming in China, sellers find it difficult to issue and deliver fapiao in the traditional method due to explosive number of on line requests.
So E-Fapiao becomes reality now. E-Fapiao as suggested by its name, is a type of fapiao in electronic form. It has the same purpose and legal effect as the conventional paper fapiao.
To issue a special VAT e-Fapiao, the enterprise shall receive a free USB “Key” from the local tax bureau which allows it to connect to a dedicated portal developed by the STA for invoicing. The Special VAT e-Fapiao requires a special reader to read and verify. The special VAT e-Fapiao can also be verified through the national VAT invoice verification platform (https://inv-veri.Chinatax.gov.cn).
When a customer pays the bill in a retail store for example, the merchant will typically give him a receipt with a QR code attached. If the customer wants to apply for a fapiao, they can simply scan the QR code to display the relevant information required for issuance of the Fapiao (company name, tax registration number, company address, company bank account etc.) in digital form on their mobile phone. The required info is typically pre-registered within their Wechat or Alipay APP and can be pulled across to instantly populate the relevant fields . Once submitted, the e-Fapiao will be issued immediately and sent to their mobile phone or email box. The whole process takes a matter of seconds probably.
Implications:
E-Fapiao’s has significantly removed burden from the business of manually issuing the paper Fapiao and is much more convenience for both parties (seller and buyer)
Social Insurance Benchmark salary collection for new year’ payment base ratification
China’s social security system constitutes five different types of social insurance: Pension, Unemployment, Medical Insurance, Worker’ compensation and maternity insurances and contributions to the mandatory housing fund.
· It is generally the employer’s responsibility to correctly calculate and withhold the payments for Employer and Employee’ sharing for contributing the social insurances and housing fund to the management office of mandatory benefits.
· This year commencing from July 01 2021, in order to facilitate employers and simply the processing as well as improve service efficiency, Beijing social insurance and housing provident fund management center have unified entrance and standards for employer to filing their employee’ new benchmark salary for correctly calculating the new year applicable social insurances employer and employee’ sharing.
· To correctly calculate the monthly social security contribution amount, the social insurance benchmark base is a figure that is determined by the employee’ average income in the previous year (that is, January to December), the calculation method is as follows:
Social Insurance new benchmark salary (contribution base) =employee’ previous year’ salary/ 12
· The contribution base is capped at 300 percent of the average local salary. And the minimum contribution base is usually decided either by the local minimum wage or certain percentage of the average local wage. Local governments generally update the average local salary benchmark and minimum wage once per year, which update the social security floor and ceiling in kind. Considering that the timing for the release of these figures varies per city and per year, it is challenging but critical for investors to obtain accurate and up-to-date information for their operations in each region.
Employees benchmark salary report and declaration work shall be reported towards Beijing Municipal Human Resources and Social Security Bureau. After the declaration is completed, the human social security department transmits the relevant data to the tax department, the medical insurance department and the provident fund department. So that the correct payable social insurance and housing fund can be generated from the unified system.
The period for reporting the benchmark salary for employees for 2021 is from June 10, 2021 to July 25, 2021.
Implications:
Failure to complete the reporting of benchmark salary for employees, employer would face with 110% payment against their last month paid social insurance record across the whole social insurance contribution fiscal year (from July to June)
Transitional policy on tax-exempt against fringe benefits for foreign individuals
At present, Foreign employees who are China tax residents may elect to either (from 2019 to 2021):
· Continue to claim the current tax exemption on fringe benefits such as housing expense, education expense for children, language training expense, meal fee, laundry fee and relocation expense; or
· Claim itemized deductions under the new IIT regime.
The above options are only open from Jan 2019 to Dec 2021 and commencing from Jan 2022 the first option for expats enjoying the tax incentives will no longer be available and will be replaced by the additional itemized deductions.
Implications:
This will result in larger tax liability on some higher-earning foreign workers. It is highly advisable that relevant foreign employees and their employers prepare for the possible transition as early as possible. The policy change has sparked concerns among foreign individuals as well as their employers, who may face an increase of tax burdens or labor costs.
Individual Income Tax exemption new standard for Beijing employees’ severance payment
A new population and employment report was just released by Beijing municipal government shows that the average wage of employees in Beijing’s legal entities is RMB151,360 by 2020. Combined with this latest data, after July 2021, the top base for employers in Beijing to calculate economic compensation (severance payment) will be based on the average salary of employees who are working for the legal entities in Beijing (RMB151,360),
i.e. the average monthly wage cap base is 151360/12 X3=RMB37,840
Thus, the calculation basis of the tax exemption cap for the economic compensation (severance payment for termination) in 2021 should also be based on the average annual salary of employees of legal entities which is RMB151,360, i.e. the exemption from the tax ceiling standard is 151,360 X3 = 454,080 (free of tax severance pay standard is USD 69,966)
This new standard will come into effect from 01 July 2021.
Implications
For calculating severance payment in Beijing, the employer should take into consideration the average salary of employee and make the necessary calculations
Social insurance and housing fund contribution rates applicable from July 2021 in Beijing and Shanghai
For Beijing
| No | Item | Capped PAYMENT BASE | CONTRIBUTION | |||
| EMPLOYER | EMPLOYEE | |||||
| Rate | Contribution | Rate | Contribution | |||
| 1 | Pension | 28,221.00 | 16.0% | 4,515.36 | 8.0% | 2,257.68 |
| 2 | Unemployment | 28,221.00 | 0.5% | 141.11 | 0.5% | 141.11 |
| 3 | Work-related Injury | 28,221.00 | 0.40% | 112.88 | 0.0% | 0.00 |
| 4 | Basic Medical | 28,221.00 | 9.0% | 2,539.89 | 2.0% | 567.42 |
| 5 | Maternity | 28,221.00 | 0.8% | 225.77 | 0.0% | 0.00 |
| 6 | Housing Fund | 28,221.00 | 12.0% | 3,387.00 | 12.0% | 3,387.00 |
| Subtotal | 38.7% | 10,922.01 | 20.50% | 6,353.21 | ||
For Shanghai
| No | Item | Capped PAYMENT BASE | CONTRIBUTION | |||
| EMPLOYER | EMPLOYEE | |||||
| Rate | Contribution | Rate | Contribution | |||
| 1 | Pension | 31,014.00 | 16.0% | 4,962.24 | 8.0% | 2,481.12 |
| 2 | Unemployment | 31,014.00 | 0.5% | 155.07 | 0.5% | 155.07 |
| 3 | Work-related Injury | 31,014.00 | 0.30% | 93.04 | 0.0% | 0.00 |
| 4 | Basic Medical | 31,014.00 | 9.5% | 2,946.33 | 2.0% | 623.28 |
| 5 | Maternity | 31,014.00 | 1.0% | 310.14 | 0.0% | 0.00 |
| 6 | Housing Fund | 31,014.00 | 7.0% | 2,171.00 | 7.0% | 2,171.00 |
| Subtotal | 34.3% | 10,637.82 | 17.50% | 5,430.47 | ||
Implications:
Employer should take into consideration the above changes and make the necessary changes in employee’s withholding and payroll calculations accordingly
Czech Republic
Czech Republic increases the “minimum salary for EU Blue Card holders” from ‘CZK 51,188 to CZK 53,417’
Czech Republic increases the Minimum salary for EU Blue Card holders by 4.4% i.e. from CZK 51,188 to CZK 53,417’ starting May 1, 2021. The national minimum wage was increased by 4.1% i.e. from CKZ 14,600 to CKZ 15,200 on January 1, 2021.
Implication:
Employers need to verify employment contracts and make changes where necessary.
Employers can now provide “cash contributions for meals” to employees besides tax-advantaged meal vouchers
As of January 2021, employers may provide employees cash contributions for meals. Earlier, only the non-monetary contributions i.e. the tax-advantaged meal voucher benefit or subsidized meals were allowed to be provided for tax purposes.
For employees, the cash contributions for meals are considered as income exempt from the salary withholding. On the other hand, for employers, it is a tax-deductible expense.
The conditions for tax-favored meal vouchers and meal allowance schemes are as follows:
| Tax benefit | Meal vouchers | Meal allowance |
| Exemption of income (for the employee) | No limit for – meal voucher value. | Maximum up to CZK 75.60 (2021) per shift *if the conditions are not met or exceed CZK 75.60, the non-exempt contribution is ‘taxable and subject to compulsory contributions. |
| Tax deductibility of expenses (for the employer) | Up to 55% – meal voucher value up to CZK 75.60 (2021). *If present at work during the shift according to the Labor Code for at least 3 hours. | No limit – if the presence at work during the shift is at least 3 hours. |
Implications:
· As of January 2021, employers are allowed to provide cash allowance for meals, which may affect the salary structuring and tax liability calculations.
· Executive directors of limited liability companies are considered employees for income tax purposes. Hence, the tax-advantaged employee benefits regime will also apply to executives.
· Further in times of pandemic, when work from home is allowed mostly everywhere a tax-advantaged meal allowance will be beneficial instead of the meal voucher.
Denmark
Anti-Tax Avoidance Directive Compliant CFC Rules Bill receives approval of Danish Parliament
With an object to be in conformity with the EU Anti-Tax Avoidance Directive (“ATAD”), the Danish Parliament approved Bill L 89, which consists of the following amendments:
· Widening the scope of the control test requiring that a taxpayer itself or together with associated persons own directly or indirectly at least 50% of the voting rights, capital, or rights to profit in the controlled foreign company (“CFC”); in addition, a 25% ownership threshold to apply for determining associated persons;
· The abolishment of the current CFC financial asset test (greater than 10% of total assets);
· Decrease in the CFC (passive) income test from one-half (1/2) to one-third (1/3) of total income; and
· There is inclusion of the following new definition of CFC income:
Ø Taxable interest income, dividend income, and deductible interest expenses, as well as commissions and the similar items that are deductible according to the Tax Assessment Act;
Ø Taxable gains and deductible losses on receivables, liabilities, or financial contracts covered by the Capital Gains Act, with certain exceptions;
Ø Income from intangible assets, including copyrights, patents, trademarks, etc., subject to certain exemptions;
Ø Taxable profits and losses relating to shares, etc., which are covered by the Capital Gains Tax Act;
Ø Tax deductions relating to income as mentioned above;
Ø Taxable income from financial leasing, including gains and losses on the disposal of assets that have been used for financial leasing;
Ø Income from insurance and banking activities, as well as other financial activities; and
Ø Income from invoicing companies that derive income from goods and services purchased from and sold to affiliated persons and which contribute no or little economic value.
A partial Substance test has also been added in the said bill, which provides the following:
· Other income from intangible assets shall be included in CFC income only if the subsidiary does not carry on significant economic activity relating to the intangible assets as supported by personnel, equipment, assets, and premises, as is apparent from the relevant facts and circumstance;
· Other income from intangible assets is included if the subsidiary handles only the ownership and any sales/distribution functions concerning its intangible assets, while the other significant functions relating to the assets are only insignificantly performed; and
· The partial substance test does not apply if the subsidiary is tax resident in a state where the competent authority does not exchange information with the Danish tax authorities under a double taxation agreement or another international agreement or convention, including an administratively concluded agreement on tax assistance.
The bill went into effect on July 1, 2021, and will remain effective for income years beginning on or after that date.
Implication:
Starting July 1, 2021, companies will need to look at the expanded scope of CFC regulations and apply partial substance tests to determine Controlled Foreign Company (CFC) income.
France
Incentives for employers under French economic recovery plan to encourage employment of young peoples
A new aid has come into force as an initiative for the economic recovery plan in order to encourage employers to appoint young people on permanent/fixed-term/work-study agreements. Following are summary details of the aid provided:
| Youth employment aid | Apprenticeship contract aid | |
| Amount of Aid | EUR 4000 a year | EUR 5,000 for apprentice under the age of 18 yearsEUR 8,000 for an apprentice over the age of 18 years. |
| Applicability | Available to all companies | Available to all companies |
| Conditions | Employers must hire a person below 26 years of age between August 1, 2020, to May 31, 2021. Employee’s pay must be less than or equal to 1.6 minimum wage. No redundancy in the same position since January 1, 2020. Conclude an employment contract for at least 3 months. | Companies with less than 250 employees can benefit from the aid without any conditions. Companies with more than 250 employees can benefit from the aid subject to certain conditions Note that for availing this, aid apprenticeship contracts need to be concluded between July 1, 2020 and 31 December 31, 2021 for the preparation of a vocational diploma or qualification |
| How to avail the benefit | Within 4 months of hiring an eligible employee, an employer must send the application to the Agence de services et de paiement. | The aid is paid monthly, as soon as the Nominative Social Declaration (“DSN”) has been received and verified by the Agence de services et de paiement. |
Implication:
The employer should consider if they can avail the government benefits subject to their human resource requirement.
Germany
Germany mulls whistleblower Protection Act; New compliance requirements on their way
EU Member States are required to implement EU Whistleblowers Protection Directive by December 2021. The Federal Ministry of Justice and Consumer Protection of Germany has submitted a new Bill on the Protection of Whistleblowers (“Whistleblower Protection Act – HinSchG”).
The Bill is proposed to apply to all companies and will require companies with 50 or more employees and all financial service providers to establish an internal reporting channel. While companies with 250 or more employees will have to implement this requirement starting December 17, 2021, companies with less than 250 employees have additional two years (up to December 2023) to establish an internal reporting channel. The Draft Bill goes beyond the scope as per EU Directive and covers infringement of German law in addition to EU law.
Implication:
Eligible companies in Germany need to consider new legal requirements and additional compliance burden due to the Whistleblower Protection Act.
Germany passes Anti-Tax Avoidance Directives (ATAD); Transposes EU’s ATAD into German tax laws
The Act implementing the EU Anti-Tax Avoidance Directive (“ATAD”) was passed by the Upper house of the German parliament on June 29, 2021, and the law entered into force on July 1, 2021.
It transposes the EU anti-tax avoidance directive (including provisions of ATAD I and ATAD II) into domestic German tax law, to amend among others, the anti-hybrid rules, the Controlled Foreign Corporation (CFC) rules, and the change to the exit tax rules.* The amended CFC rules and hybrid mismatch rules will be applicable from January 1, 2022.
*Exit tax is applicable for a natural person when he is domiciled (habitually resident) in Germany for 7 years, who has at least 1% shares in a domestic or foreign company and moves abroad. For a non-natural person, it is applicable when there is a transfer of tax residence/assets abroad.
Under the amended law, the interest-free, unlimited deferral of the exit tax is abolished while moving to another country of EU or EEA, however, the tax is payable in installments over 7 years period. Further, the domicile requirement of the natural person in Germany is tightened from 10 to 7 years. The amendment standardizes deferral rules. It also introduces measures to improve the rules on reverse exit tax i.e. for taxpayers returning to Germany, and makes amendments to prevent tax avoidance in connection with substantial profit distributions.
In case of a reverse transfer (when a taxpayer relocates to Germany), for valuation of the transferred assets, the initial valuation would need to correspond to the valuation in the other country i.e. the tax base (or exit taxation), which shall not exceed the fair market value.
The revised rules apply retroactively from January 1, 2020, for other persons and from January 1, 2022, for natural persons.
Grace period for filing
The ATAD implementation law contains an extension of the corporate income tax return filing deadlines for the year 2020, as a response to the current COVID-19 situation. The filing date is extended by 3 months i.e. up to March 31, 2022, for taxpayers using a tax advisor and up to October 31, 2021, for others.
Implication:
The organizations need to check tax positions as per the new rules (if applicable) and the earlier reporting periods may have to be revisited due to the retroactive applicability of certain rules for expenses accruing after December 31, 2019.
German transparency register (“E-TraFinG Gw”) on beneficial ownership; new filing requirements
To meet the requirements of the European interconnection of Transparency Registers as per the 4th and 5th EU Money Laundering Directives, Germany has introduced elemental changes to the German transparency register, thereby giving rise to new reporting requirements.
Applicability
With effect from August 1, 2021, all legal entities in Germany will be required to notify the transparency register (maintained in electronic format), regardless of whether the relevant information can be derived from the Commercial Register or other publicly accessible sources.
Reporting by Foreign entities
Furthermore, with effect from August 1, 2021, foreign entities are also required to collect and file information on their beneficial owners with the German transparency register, where they directly or indirectly acquire German real estate.
Beneficial ownership definition
The definition of a beneficial owner remains unchanged.
The beneficial owner refers to those individuals who own (directly or indirectly – via a controlled legal entity)
· More than 25% of the capital;
· More than 25% of the voting rights; or
· Directly or indirectly exercises any control.
Transition periods
The TraFinG contains transition periods for those companies that are required to file beneficial ownership information for the first time solely due to the cancellation of the notification fictions of § 20 (2) GwG:
· By March 31, 2022 – Stock corporation, European stock corporation (“Europäische Gesellschaft, SE”), partnership limited by shares (“Kommanditgesellschaft auf Aktien, KGaA”)
· By June 30, 2022 – Company with limited liability
· By December 31, 2022 – Other legal forms.
The transitional periods apply only if no beneficial owner was declared due to the previously applicable reporting fiction. The report must be made immediately in any other case.
Information to be provided
The information to be provided includes the
· Name;
· Date of birth;
· Place of residence, country of residence, and nationalities of the beneficial owner; and
· The nature and extent of the economic interest held by the beneficial owner.
Penalty
A non-compliant entity is punishable by an administrative fine of up to EUR 150,000, whereas repeated offenses can be punished with a higher of – fine of up to EUR 1 million or twice the amount gained.
*Note – Earlier, to avoid duplication of filing exceptions were given to certain entities if the necessary “ultimate beneficial ownership” information was available in certain publicly accessible electronic registers or on publication platforms such as shareholders’ list or the commercial register. The exemption is now removed from the TraFinG i.e. the transparency register.
Implication:
Legal entities that have so far been exempt from the reporting obligation also will be required to make a report to the transparency register within the transitional periods.
Hungary
Hungary introduces tax relief measures in light of COVID-19 Pandemic; Option for surcharge-free delayed tax payment and tax reduction
The Hungarian Government, due to the difficulties caused by COVID-19, introduces the following relief measures mentioned as under:
· Taxpayers facing difficulties due to the COVID-19 pandemic are given the option to pay surcharge-free tax with a delay of up to 6 months or allow payment in installments spread over a 12 month period.
· The Hungarian tax authority may reduce the amount of the tax liability of the non-natural person taxpayers up to a maximum of HUF 5 million, at one time, if the difficulty in tax payment can be traced to the effect of the COVID-19 pandemic.
· An application will be required for availing of the benefits, which is to be submitted by companies by December 31, 2021.
· Social Contribution Tax will be exempt on business gifts and entertainment, if they are provided in the period between June 10, 2021, and December 31, 2021.
· Extension of tax benefit on the amount transferred to Széchenyi Recreation (“SZÉP”) Card. SZÉP Card allows employees to divide fringe benefits among accommodation, catering, and recreation.
Implication:
Companies/legal entities may apply for claiming tax reliefs subject to fulfillment of certain conditions.
Hungary Budget 2022 Highlights; Social contribution tax rate reduced to 15%, as against earlier 15.5% starting July 1, 2022
The Hungarian Parliament presented its Budget for the year 2022 on May 4, 2021. The highlights are as under:
· Vocational training contribution of 1.5% will be abolished; i.e. No social security tax needs to be paid on the VET employment contract or the apprenticeship contract.
· The social contribution tax to be paid by enterprises at the rate of 15% as against earlier 15.5% starting July 1, 2022.
· From 2022, the VAT limitation period for claiming repayment is increased from 6 months to 1 year. It will also be possible to claim VAT on bad debt.
· Further, in case of notification of the use of registered office, if the taxpayer declares a registered office provider who is not registered with the supervisory body, the authorities will ask the taxpayer to declare another place as a registered office or withdraw its intimation of the use of the registered office service. Non-compliance will lead to the cancellation of the tax registration number.
· Regarding family allowance for the children, for avoiding data duplication, the employees (mothers raising 4 or more children) are no longer required to give declarations each year if there are no changes.
· Under the small business tax (“KATA”) system, in order to mitigate practices of concealed employment* if the total value of transactions with a KATA entrepreneur exceeds HUF 3 million annually, the employer will have to pay 40% tax on the amount exceeding HUF 3 million.
*Note- concealed employment practices whereby companies do not employ people by way of an employment agreement, but as individual entrepreneurs paying taxes suo moto under KATA)
Implications:
· The employers will have to check tax implications before hiring contractual employees (hired as entrepreneurs or consultants).
· Reduction in Social Security contribution of employer will need revision of salary structure, employment contracts, etc. An employer should consider a reduction in Social Security contribution while processing payroll.
India
India: Various compliances extended and granted an exemption to expenditures and ex-gratia received under COVID-19
The Central Board of Direct Taxes (CBDT) vide its Circular No. 12/2021 dated June 25, 2021, has granted an extension to various compliance deadlines because of the COVID-19 pandemic and granted tax exemption for expenditure on COVID-19 treatment and ex-gratia received on death due to COVID-19.
The details are as under:
· Tax Exemptions:
Ø CBDT grants income-tax exemption to a taxpayer for the amount received for medical treatment from an employer or any person for treatment of COVID-19 during FY 2019-20 and subsequent years.
Ø An income-tax exemption is provided for any ex-gratia payment received by the family members of a person from the employer or any other person due to the death of such person on account of COVID-19 during FY 2019-20 and subsequent years. There will be no limit for exemption for an amount received from an employer.
· Compliance deadlines extended:
- The time limit for processing Equalisation Levy returns is further extended to September 30, 2021.
- Linking of Aadhaar with PAN is further extended to September 30, 2021.
- The last date of payment of the amount under “Vivad se Vishwas scheme” (without additional amount) is further extended to August 31, 2021.
- The last date of payment of the amount under “Vivad se Vishwas scheme” (with additional amount) has been notified as October 31, 2021.
- Various other deadlines have also been extended
Implication:
Taxpayers will now get additional time to make payment of amounts under Vivad se Vishwas Scheme.
India: Bureau of Indian Standards (BIS) issues Data Privacy Standards for organizations
The Bureau of Indian Standards (BIS) has issued a new data privacy assurance standard (IS 17428) for organizations to establish, implement, maintain and continually improve their data privacy management system.
This standard will act as a certification for an organization for assurance of privacy practices and can be treated as a differentiator from market competitors. The data privacy assurance standard will be divided into two parts:
· Part 1: Basic requirements of engineering design and information management (mandatory in nature)
· Part 2: Details of practices acting as an aid in the implementation of the above requirements (suggestive in nature)
Implication:
Companies implementing these BIS standards will have additional compliance burdens as well as benefits as it will act as a differentiator from market competitors.
India: CBIC introduces self-certification for GST Reconciliation Statement (Form GSTR-9C)
The Central Board of Indirect Taxes and Customs (“CBIC”) vide its Notification No. 30/2021 – Central Tax dated July 30, 2021, has issued the Central Goods and Services Tax (Sixth Amendment) Rules, 2021 which are effective as of August 1, 2021. The CBIC has made amendments to Rule 80 of the Central Goods and Services Tax (“GST”) Rules, 2017, which deals with the submission of annual returns under the Goods and Services Tax (“GST”) Act, 2017.
· Under the GST Act, 2017, every registered taxpayer (excluding certain types of taxpayers like an Input Service Distributor, a casual taxable person, a non-resident taxable person, etc.) is required to furnish an annual return in Form GSTR-9 on or before December 31 following the end of the previous financial year.
· Additionally, a taxpayer, whose aggregate turnover during a financial year exceeds INR 20 million, is required to submit a reconciliation statement (Form GSTR-9C) along with certification (Part B of Form GSTR-9C) i.e. an audit of accounts by a Chartered Accountant (“CA”).
With the amendment in GST rules:
· Furnishing a self-certified reconciliation statement (Form GSTR-9C) is permitted for a taxpayer, whose annual aggregate turnover (“AATO”) exceeds INR 50 million from FY 2020-21 onwards by omitting Part B of Form GSTR-9C i.e. Certification.
· Aggregate turnover (“AATO”) for furnishing a reconciliation statement (Form GSTR-9C) is raised from INR 20 million to INR 50 million for a taxpayers from FY 2020-21 onwards.
· Taxpayers whose aggregate turnover (“AATO”) is up to INR 20 million in FY 2020-21 are exempted from submission of GST annual return (Form GSTR-9).
Implication:
The change results in the reduction of compliance burden and business costs for eligible GST taxpayers.
India proposes prospective application of law taxing the indirect transfer of shares
India amended its Income-tax Act in 2012 pursuant to the Supreme Court judgement in the case Vodafone International BV and levied capital gains tax on indirect transfer of share or interest in Indian Company, with retrospective effect from April 1, 1962. The retroactive application of the amendment invited considerable criticism from stakeholders. Income tax liability was raised on Vodafone like transactions undertaken prior to the amendment in 2012. In a few cases, taxpayers invoked arbitration provisions under Bilateral Investment Promotion Treaties. Earlier, in a couple of cases such as Vodafone, and Cairn Energy, the Arbitration Tribunal has ruled in favor of taxpayers and against the Indian tax Department.
Today, the Indian Government has presented a bill in Lok Sabha (the lower House of the Indian Parliament) proposing that the above amendment shall apply prospectively only to the transactions undertaken after May 28, 2012 (the date on which the Finance Bill, 2012 received presidential assent). The Bill also proposes that tax demands raised in respect of transactions undertaken prior to May 28, 2012 shall be nullified subject to fulfilment of certain conditions, such as withdrawal of pending litigation, furnishing of undertaking to the effect that no claim for damages, cost shall be filed.
Implication:
Many times, companies invest in Indian entities through holding companies in jurisdictions with favorable capital gains tax provisions such as Mauritius, Singapore or Netherlands. Any restructuring or divestment of investments in Indian subsidiaries/group companies prior to 2012 by transferring shares in such overseas holding companies had a risk of Indian tax exposure due to the above retrospective amendment. The proposal once enacted will provide certainty about non-taxability of such transactions undertaken prior to 2012.
Israel
Mandatory general and individual reporting for employers
As of May 2021, Israeli employers with at least 180 employees or early retirement pension recipients (total reporting contracts) must comply with the new reporting requirements. For salaried employees or beneficiaries of early retirement pensions, the reporting obligations fall into two categories: general reports and special monthly reports.
General Reporting Online – Form 102 (Employers) and Form 617 (early retirement pension payers) need to be filed online through the website.
Individual Reporting Online – Employers must submit Form 100 for all employees or early retirement pension recipients through the website. The report should contain detailed information on the salary/early pension of each employee which is declared via Form 102 or Form 617.
The reporting timeline is given below which is determined based on the number of employees.
Employer with more than 180 Employees: have to report from May 2021.
Employer with up to 180 Employees: have to report from October 2021.
Implication:
The change results in an increase in compliance burden and cost for employers.
Italy
Italy’s tax reporting system (“esterometro”) will be replaced by the Sistema de Intercambio (“SdI”) in 2022
Italy’s tax reporting scheme i.e. esterometro will be phased out in 2022. As a result, all international invoices/bills related to foreign transactions of non-established businesses will be submitted electronically via the Sistema de Intercambio (“SdI”) – a system for verifying and transmitting electronic invoices by the 15th of the month following the month in which documents are received by the parties.
Implication:
Starting January 1, 2022, companies would be required to submit electronically the international invoices or bills through the new Sistema de Intercambio (“SdI”) system instead of the current tax reporting (“esterometro”) system within the prescribed time to avoid administrative fines of EUR 2 per invoice capped to a maximum of EUR 400 per month.
Malaysia
Country by country reporting to be part of annual company tax return in Malaysia
On May 25, 2021, the Inland Revenue Board of Malaysia issued a notice stating that the constituent entities can now use the “C form” (Company tax return) to file their country-by-country (“CbC”) reporting information for the assessment year 2021. The deadline for submitting the CbC information stands changed from the last day of the reporting fiscal year to the return filing deadline i.e. generally 7 months after year-end. The constituent entities filing other forms should continue to use their current existing methods.
Implication:
Constituent entities in Malaysia can use C Form (Company tax return) for submitting Country by Country (“CbC”) reporting information and should abide by the return filing deadline.
Malaysia provides waiver of interest and penalty for Sales and Services Tax payments as well as the waiver of penalty for late payment of GST
Upon fulfillment of certain requirements, the tax authority in Malaysia is providing relief from penalties faced due to late payment of Goods and services tax (“GST”) for payments made between May 1, 2021 and August 31, 2021.
Full payment of GST is a mandatory requirement to avail the said relief. If the late payment is for an outstanding late-payment penalty, relief is available if 20% of the penalty is paid between May 1, 2021, and August 31, 2021 (with relief allowed for the remaining 80% of the penalty).
Service tax exemption
· Effective from May 1, 2021, the Malaysia-Thailand joint authority and companies operating in the joint development area are exempted from paying service tax on the taxable services provided within the area by any company in the principal customs area.
· Note that, imported taxable services (including digital services) into the joint development region are nevertheless subject to service tax.
· Between May and August 2021, the Royal Malaysian Customs Department (Malaysian tax authority), will waive interest and penalties on Sales and Service Tax (“SST”) payments. An application is required for availing relief by using the Taxpayer Access Point (“TAP”), along with the following documents:
- Application letter for the remission of penalty
- Proof of payment
- GST Account Statement before payment is made
· Note that the 6% Goods and Services Tax (“GST”) consumption tax was suspended on June 1, 2018, as the Sales and Service Tax (“SST”) was re-established in Malaysia from September 1, 2018.
Implication:
Eligible taxpayers may avail of tax reliefs by fulfilling certain conditions and can thereby reduce their tax burden.
Netherlands
Tax relief measures introduced to tackle COVID difficulties to remain effective until October 1, 2021
Tax relief measures put in place to assist businesses and residents to tackle the difficulties faced due to the coronavirus outbreak will last until September 30, 2021. A few of the tax relief measures are listed below.
Administrative Payroll Obligations relaxed:
Due to difficulties faced in meeting the administrative payroll obligations arising from the current work from home situation, the authorities have decided against taking any actions in case of delays in meeting these obligations. This relief measure is in effect until October 1, 2021.
Reimbursement of Fixed Travel Allowances:
Regardless of whether the employee works from home or not, the employer can reimburse existing fixed travel allowances tax-free until October 1, 2021, without any tax liability. This is subject to the condition that the company has been paying such fixed travel allowance to employees before March 13, 2020.
Implication:
Employers can take advantage of these tax relief measures provided in the wake of the COVID-19 crisis.
Increase in minimum wages effective from July 1, 2021 from EUR 1.684.80 per month to EUR 1.701.00 per month.
The Government has announced the revised minimum wages, which will go into effect on July 1, 2021. The Government revises the minimum wages twice a year i.e. on January 1 and July 1.
Gross minimum wages are as follows:
| Timeline | As of July 1, 2021 | As of January 1, 2021 |
| Per Month | EUR 1.701.00 | EUR 1,684.80 |
| Per Week | EUR 392.55 | EUR 388.80 |
| Per Day | EUR 78.51 | EUR 77.76 |
Partially Paid Parental leaves for 9 weeks to be effective from August 2, 2022
The Government has decided to pay for the first 9 weeks of parental leave, out of a total of 26 weeks of leave. Parental leave is available for the first eight years after the child’s birth. Unless otherwise agreed upon with the employer, most parental leaves are unpaid.
The change will allow parents to receive the paid parental leave for the first 9 weeks, which needs to be availed in the first year after the child’s birth. This leave of the first 9 weeks is paid at 50% of the daily salary of the employee with payments capped at 50% of the maximum daily wage. The Employee Insurance Agency (“Uitvoeringsinstituut Werknemersverzekeringen/UWV”) shall be responsible for such paid leave.
Implication:
The employer needs to make necessary changes in the Employee Policies and other necessary documents related to employment to accommodate the newly announced changes once they are effective.
Philippines
Corporate tax reforms under CREATE Law in Philippines
The Corporate Recovery and Tax Incentives for Enterprises Act (the CREATE Law – Republic Act No. 11534) introduced in the Philippines has brought corporate tax reforms, including a reduction in the normal corporate income tax to provide relief to domestic and foreign corporations in the midst of COVID-19 crisis. The law is in effect from April 11, 2021.
Some of the changes introduced under CREATE Law have increased some tax rates imposed on corporate transactions and have gradually decreased favorable tax rates enjoyed by certain companies to rationalize tax rates and incentives.
The CREATE Law has retroactive provisions in the sense that it would have an impact on most firms’ income tax liability for the financial year 2020. This means that the law will have an impact on company income tax filings in 2020, even if it doesn’t take effect until April 2021. Some of the provisions with retrospective effect are listed below.
· Income tax
- Reduced corporate income tax:
From July 1, 2020, the CREATE Act reduces the corporate income tax rate from 30% to 25% for domestic and resident foreign corporations. The tax rate is 20% if the MSME Corporation’s net income is less than PHP 5 million and its total assets are less than PHP 100 million (excluding land where the firm is located). Beginning January 1, 2021, the tax rate for nonresident foreign corporations will be 25%.
- Reduced Minimum corporate income tax (“MCIT”):
From July 1, 2020, until June 30, 2023, the MCIT will be applied at a rate of 1% (formerly 2%) for domestic corporations and resident foreign corporations.
- Regional operating headquarters (“ROHQ”):
ROHQs shall be subject to the regular corporate income tax of 25% from January 1, 2022.
- Capital gains tax (“CGT”):
The CGT from the sale of shares of stock not traded in the stock exchange shall be 15% for both resident and non-resident foreign corporations.
· Reduction in Value-added tax (“VAT”)
From July 1, 2020, VAT-exempt taxpayers and non-VAT registered persons whose yearly gross sales or receipts do not exceed PHP 3 million will be liable to a 1% tax (formerly a 3% percentage tax) on their gross quarterly sales or receipts (previously a 3% percentage tax).
Implication:
Taxpayers are required to make adjustments for new tax rates including rates for earlier periods, as it will affect their tax liability
Poland
Proposed increase in minimum wages for the year 2022 from PLN 2,800 per month to PLN 3,000 per month
The government has proposed an increase in the minimum wages for the year 2022. The revised amount for the year 2022 is as follows:
| Timeline | Proposed Minimum Wages | Existing Minimum Wages |
| Per Month | PLN 3,000 | PLN 2,800 |
| Per Hour | PLN 19.60 | PLN 18.30 |
The proposed rise in minimum wages will now be presented to the Council for Social Dialogue, a three-part organization made up of the government, employers, and labor unions.
Spain
Spain Royal Decree regulates remote work by employees through changes in employment agreement
To reduce the risk of getting infected with COVID-19, the Spanish government has given more emphasis on remote working.
The Royal Decree-Law 28/2020, dated September 22, 2020, provides a single set of rules for all types of remote work. It provides that a remote working agreement shall be in written format, generally in the form of the employment agreement, and shall be agreed upon before the employee begins to work remotely.
The remote work agreement shall contain provisions regarding:
· Inventory of means, equipment, and tools necessary for remote working;
· Expenses to be borne by the employee and method of quantification, time, and process for payment of such compensation;
· Working hours, rules and availability, and bifurcation between on-site work and remote work;
· Guidelines on data protection; and
· Duration of the remote work agreement.
Employees who work distantly are entitled to the same rights and opportunities as those who work on-site, including access to training, professional advancement, privacy and data protection, collective representation, and the ability to be digitally detached, among other things.
Employees who work from home, on the other hand, are required to follow the employer’s instructions regarding data protection, equipment use, and cyber security, etc.
Implication:
Employers in Spain should examine and update employment contracts of employees working remotely for them.
Spain implements new Royal Decrees regulating Equal Pay in Employment and formulation of Equality Plans at workplaces
Royal Decree 902/2020 regarding equal pay for men and women came into force on April 14, 2021, whereas Royal Decree 901/2020 regarding gender equality plans came into effect on January 14, 2021, for confronting gender inequality in salaries, bringing clarity in pay rates and equal pay for genders and developing equality plans in the workplace. Under the new decrees, all companies irrespective of their sizes are now required to keep a remuneration register.
Following the Royal Decree 902/2020, the remuneration register shall include detailed information of all employees (both men and women) and their salaries including those employed at the senior level as well as management personnel. The remuneration register shall include information as under and it should be disaggregated by gender:
· Total annual salary and gender gap;
· Annual base salary and gender gap;
· Annual salary supplements and gender gap; and
· Extra-salary payments and gender gap.
Businesses need to be aware that:
· All the required information shall be elaborated by each professional group, professional category, level, job position, or any other applicable classification system. The arithmetic average and median of what is received must also be established.
· One calendar year shall be treated as a standard reference period unless firm amendments are introduced to that concept. The first remuneration register that is required is for the year 2020.
· Employees’ legal representatives, if any, must be consulted 10 days before the register is created and before it is modified.
· If there is any misconduct or unethical practice in the equal pay policy of the company, the employer shall submit a document detailing what steps it would take to correct the situation.
· Non-compliance with an obligation to maintain the remuneration register and discriminatory practices will attract penalties ranging from EUR 6,251 to EUR 187,515.
As per Royal Decree 901/2020, businesses having more than 100 employees are required to have an Equality Plan in place. Starting March 7, 2022, this will apply to businesses with more than 50 employees. The Equality Plan must include a Remuneration Audit that will require a job evaluation. The Equality Plan is generally negotiated with employee representatives or labor unions and should be submitted for registration in the Public Register.
The contents of the Equality Plan include the following:
· Determining the parties to be involved;
· Personal, territorial scope;
· Report on company’s situation;
· Remuneration audit results;
· Quantitative and Qualitative objectives of the plan;
· Monitoring review of plan;
· Implementation actions and evaluation measures for the plan;
· Identification of human and material resources for the implementation of the plan;
· Composition and working of the body responsible for evaluation and review of plan;
· Procedure to resolve any discrepancy in reviewing or monitoring the plan;
· Description of specific measures and implementation time for the plan.
Implication:
Employers are required to maintain a remuneration register and form an equality plan (if applicable) at the workplace. This may involve additional business costs and increased compliance burden.
Sweden
Sweden proposes to reduce employer’s contribution to 10.21% for young employees for June-Aug 2021
The Swedish Ministry of Finance on April 1, 2021, announced a proposal to reduce social security contributions temporarily during the months of June, July, and August for employers with young employees born in the year 1998 to 2002. This will make it easier for young people to find work.
The reduction in contribution means that companies pay only the retirement pension contribution of 10.21% on the part of the salary that does not exceed SEK 25,000 per month. For the part of the compensation that exceeds SEK 25,000, total employer contributions of 31.42% will be applicable.
Implication:
Swedish employers may avail benefits by employing young people and reduce their financial cost towards social security contributions.
Sweden: Enhanced deduction made available for employees involved in research and development, effective from July 1, 2021
The Swedish Government has published a legislative proposal to enhance tax incentives for businesses to carry out research and development in Sweden. From July 1, 2021, the revised working hours threshold is applicable for availing R&D incentive. As per the revision, the required time an employee must spend on R&D activities has been reduced from 75% to 50% of their time. Further, there is an increase in the maximum amount of the deduction from SEK 450,000 to SEK 600,000 per month.
Implication:
Swedish businesses may avail additional deductions for research and development activities given the amendment.
Thailand
Thailand announces reduction in social security fund contribution rates in wake of COVID-19 crisis
Thailand’s Ministry of Labor has through Ministerial Resolution dated May 28, 2021, provided relief to the employers and insured employees by reducing the mandatory and voluntary social security fund contribution rates in wake of the COVID-19 crisis. This reduction in rates is effective for a period of 3 months from June 2021 to August 2021.
The maximum contribution stands reduced to THB 375 per month (from THB 750) for both employers and employees for the three months from June to August 2021. Whereas, monthly contributions by voluntary insured persons stand reduced to THB 216 per month (from THB 432 per month) for three months from June 2021 to August 2021.
The mandatory social security contribution rate stands reduced from 5% to 2.5% for both employer and employee for a period of 3 months from June 2021 to August 2021. The maximum monthly wage base for contributions for Social Security contribution purposes is THB 15,000. The Government may on a case-by-case basis and after reviewing the COVID-19 situation decide to further extend the reduction period.
Implication:
The employers can take advantage of this relief measure and accordingly review the payroll process as well as calculations for contribution payments keeping in mind the newly reduced rates.
United Arab Emirates
UAE Commercial Companies Law amendment allowing 100% foreign ownership is effective from June 1, 2021
The most remarkable change published in Federal Decree No. 26 of 2020 that permit 100% foreign ownership in companies incorporated in the UAE (onshore companies) is now effective from June 1, 2021. Earlier, it was mandated that 51% of the share capital of all UAE onshore companies be owned by UAE Nationals. However, this requirement is still in place for those entities carrying activities with a “strategic impact.”
Implication:
Due to this significant change, the foreign investors can now incorporate the UAE onshore company with 100% foreign ownership.
United Kingdom
UK’s HMRC announces new penalty and interest regime for late filing of VAT Returns and payment
HMRC has introduced a point-based penalty regime for late Value Added Tax (“VAT”) and Income Tax Self-Assessment (“ITSA”) submissions as a new way for settlement of penalties. Brief details are as under:
· It will be applicable for UK VAT Taxpayers from accounting periods beginning on or after April 1, 2022;
· In case of Income Tax Self-Assessment (“ITSA”) Return for taxpayers with business or property income over GBP 10,000 per year (who are required to submit digital quarterly updates through Making Tax Digital for ITSA) from the accounting period beginning on or after April 6, 2023;
· From accounting periods beginning on or after April 6, 2024, in case of all other ITSA taxpayers.
HMRC will allow each taxpayer a penalty point threshold for late submission of a return. Once the business has exceeded such a penalty point’s threshold for multiple missed returns, a financial penalty will be imposed. When a taxpayer misses a submission deadline, they will incur one point, but the penalty point threshold varies depending on the frequency of filing.
Implication:
UK taxpayers should take note of the new point-based penalty regime.
HMRC publishes change in tax free fuel rate for company car users with effect from June 1, 2021
UK’s HMRC made changes in tax-free fuel rates for company car users from June 1, 2021. These tax-free fuel rates apply only in the following circumstances:
· Claiming mileage allowance from employers for the business travel by employees using company cars; or
· Repayment of the fuel cost to the employer, which is used for private travel (including traveling between home and normal workplace).
HMRC has published new advisory fuel rates (reviewed on a quarterly basis) for company car drivers, which will go into effect on June 1, 2021. Previous rates can be used for up to 1 month from the date the new rates apply. The new rates are as under:
| Engine size (CC) | Petrol (Rate per mile) | Diesel (Rate per mile) | LPG (Rate per mile) | Electric* (Rate per mile) |
| 1,400cc or less | 11p | – | 8p | 4p |
| 1,600cc or less | – | 9p | – | 4p |
| 1,401cc – 2,000cc | 13p | – | 9p | 4p |
| 1,601cc to 2,000cc | – | 11p | – | 4p |
| Over 2,000cc | 19p | 13p | 14p | 4p |
* Fully electric cars only; p – pence
UK Employer need to check employee (EEA Nationals) documents before starting work from July 1, 2021
With effect from July 1, 2021, the UK government has published new guidance on “Right to Work” checks, which shall be followed by all employers. UK employers are required to complete pre-employment “Right to Work” checks to ensure that all new European Union (“EU”), European Economic Area (“EEA”), and Swiss employees must hold valid pre-settled status, settled status, or a valid visa to prove their “Right to Work.”
There is no requirement for employers to undertake retrospective checks in respect of those European Nationals already working for them before July 1, 2021.
Implication:
Employers should conduct a prescribed “Right to Work” check for all those commencing employment on or after July 1, 2021, to protect themselves from any illegal work and a civil penalty.
Shan & Co © (Nucleus is an affiliate of Shan & Co)