Australia

Australia Federal Budget 2021-22 Highlights

On May 11, 2021, Treasurer, Josh Frydenberg presented Australia’s Federal Budget 2021-22 to the House of Representatives. The budget focuses on economic recovery post COVID-19.

The key highlights of budget are as follows:

For Individuals

• The Federal Budget 2021-22 made no changes in the personal income tax rates and are as under:

Income Tax Rate (%)	Taxable income (From July 01, 2020)	Taxable income (From July 01, 2024)
Nil (Tax free)	Up to AUD 18,200	Up to AUD 18,200
19	From AUD 18,201 to AUD 45,000	From AUD 18,201 to AUD 45,000
30	NA	From AUD 45,001 to AUD 200,000
32.5	From AUD 45,001 to AUD 120,000	NA
37	From AUD 120,001 to AUD 180,000	NA
45	More than AUD 180,000	More than AUD 200,000
Low- and middle-income tax offset (LMITO)	Up to AUD 1,080 (For 2021-22 income year)	Nil
Low-income tax offset (LITO)	Up to AUD 700	Up to AUD 700

• The Budget 2021-22 provides further extension to the Low- and Middle-Income Tax Offset (LMITO) up to AUD 1,080 for individuals and up to AUD 2,160 for couples for the 2021-2022 income year. The effect of maximum non-refundable LMITO is as follows:

Taxable income	Maximum offset
Up to AUD 37,000	Up to AUD 255
From AUD 37,001 to AUD 48,000	AUD 255 + 7.5 cents per dollar of income over AUD 37,000
AUD 48,001 to AUD 90,000	AUD 1,080
AUD 90,001 to AUD 126,000	AUD 1,080 less 3 cents per dollar of income over AUD 90,000

Thus, the taxpayers will receive the offset as a lump sum after filing of tax returns.

In case of low-income tax offset (LITO) is unchanged and will be as under:

Taxable income	Maximum offset
Up to AUD 37,500	Up to AUD 700
From AUD 37,501 to AUD 45,000	AUD 700 less 5 cents per dollar of income over AUD 37,500
AUD 45,001 to AUD 66,667	AUD 325 less 1.5 cents per dollar of income over AUD 45,000

• The Medicare levy is unchanged at 2% of taxable income. It is a contribution by the income tax payers to the Australian Taxation Office (ATO) for accessing the public healthcare system in Australia.

• Self-education expenses:

The Federal Budget 2021-22 will remove the exclusion of the first AUD 250 of deductions for prescribed courses of education (where self-education is related to the current work activities as an employee), which will simplify the tax return process and reduce compliance costs for such individual taxpayers. It will be made effective from the first income year after the date of Royal Assent given.

• The Federal Budget 2021-22 raises the Child Care Subsidy by 30% from July 1, 2022, for those families with more than one child in childcare. It will result in a maximum subsidy of 95% of fees paid for their second and subsequent children. The Child Care Subsidy cap of AUD 10,560 per child per year will also be removed.

For Companies

• There is no change in Corporate Income Tax (CIT) rates, which remains at 30%. (25% for small and medium companies.)

• Employee share schemes (ESS):
  • The Federal Budget 2021-22 provided support to Australian companies to attract and retain talent by removing the cessation/termination of employment as a taxing point for tax-deferred Employee Share Schemes (ESS).
  • Due to this, the taxing point may get extended beyond the termination of employment, to the earliest of:
• For shares when there is no risk of forfeiture and no restrictions on disposal.
• For options, when the employee exercises the option and there is no risk of forfeiting the resulting share and no restrictions on disposal.

Up to a maximum period of deferral of 15 years from the date, the shares or rights were granted.

The change to the cessation of employment as a taxing point will apply to ESS interests issued on or after July 1 following Royal Assent.

The Federal Budget 2021-22 also proposed to make regulatory improvements to the ESS regime like reducing disclosure requirements, increasing the value of shares that can be issued to an employee with simplified disclosure requirements, and exemptions from licensing, anti-hawking and advertising requirements, from AUD 5,000 to AUD 30,000 per employee per year etc. These regulatory changes will apply three months after Royal Assent of the enabling legislation.

• Extending tax support for businesses:

The Federal Budget 2021-22 has continued to support Australian businesses to invest, grow and create more jobs by providing one year extension to the two tax incentives viz., Temporary full expensing and Temporary loss carry-back, which were announced in its earlier 2020-21 Budget.

Australian Taxation Office (ATO) issued guidance for tax treatment of work-from-home benefits

The Australian Taxation Office (ATO) has issued a guidance for providing relief due to the  COVID-19 Pandemic. It provides information for employers to understand their Fringe Benefit Tax (FBT) obligations when employees are provided with benefits to facilitate working from home (WFH).

• An eligible work-related item such as a portable electronic device (like laptops, tablets, smart phones, calculators etc. but does not include desktop computer), computer software, protective clothing, a briefcase, a tool of trade are exempt from FBT if it is primarily for use in the employee’s employment and not a duplicate of something with a substantially identical function that has already been provided to the employee in the FBT year (unless it is a replacement).

• From April 1, 2021, the turnover threshold for small businesses to be eligible for FBT concession for car parking benefits and work-related portable electronic devices has been increased from AUD 10 million to AUD 50 million. 

• FBT Exemption can be available for benefits arising from lending general office equipment to employees during temporary WFH arrangements due to Covid-19 subject to certain conditions like the use of office equipment is directly in connection with business operations and such property is ordinarily located on business premises.

• For availing FBT exemption, in case of ongoing WFH arrangements (on a long-term basis), a no-private-use declaration covering all office equipment provided to employees is required. In case an employee does not complete a no-private-use declaration, the taxable value of benefits may be reduced under otherwise deductible rule (ODR).

• If the office equipment that has been given to an employee having a notional taxable value of less than AUD 300 (including Goods and Services Tax (GST)) or have reimbursed for expenses of less than AUD 300 which employee incurred in acquiring equipment, then the item may be exempt from FBT or its taxable value of benefits may be reduced under otherwise deductible rule (ODR). In cases where taxable value of an office equipment is more than AUD 300, then FBT is generally payable.

Implication:

Employers need to consider fringe benefits tax obligations when employees have been provided with benefits to facilitate their working from home.

Superannuation contribution thresholds increased for year 2021-22

The maximum super contribution base is increased from AUD 57,090 per quarter for 2020-21 to AUD 58,920 per quarter for 2021-22.

Implication:

Employers should make changes with respect to increased superannuation contribution base in their payroll calculations for 2021-22.

Unification of Australian Business Register (ABR) will facilitate several functions like new business registration under single entry point

Australian Securities and Investments Commission (ASIC) has come up with the unification of 31 separate business registers including Australian Business Register (ABR) into a single platform. It will provide a single-entry point for business owners for establishing their businesses through the Australian Tax Office (ATO) unlike the current system that has up to seven entry points for various business registry interactions to establish a business. The plan will take place between 2021 and 2024.

The new platform will also introduce Director Identification Number (DIN) for individuals who wish to be appointed as a Director after November 30, 2022.    

Implication:

It will be easier and less time consuming for business owners to establish their businesses using a single-entry point system.

Change in effective date of resignation of a Director under the Corporations Act, 2001

As per the Section 203A of the Corporation Act, 2001, a company director may resign by giving a written notice to the company. However, a director’s resignation was not effective if the company remains with no director due to such resignation.

From February 18, 2021, with the implementation of Section 203AA of the Corporations Act, 2001, the effective date of resignation of a company director is changed and calculated as under:

• In a case where Australian Securities and Investments Commission (ASIC) has been notified about the resignation of a director within 28 days from of the resignation, then the resignation takes effect from the date such person stopped being a director; or

• In a case of failure to notify the ASIC within 28 days, then the actual date on which the ASIC is notified.

Implication:

Effective date of resignation of a company director now depends on the date of notification to the ASIC. If not notified within stipulated timelines, it may lead to additional responsibilities for such company directors, despite resignation.

Argentina

Proposal to Increase Corporate Income Tax Rates

On April 7, 2021, the Argentine government circulated a publication with an updated version of the previous bill planning to increase Corporate Income Tax (CIT) rates for tax years starting from January 01, 2021, and thereafter. It will also extend the 7% withholding tax to dividends from profits accrued in tax years starting from January 1, 2021 & thereafter. The new bill would replace the 25% fixed tax rate currently in effect with a progressive tax range.

The following ranges would apply:

Net Taxable Income	Tax Rate
Up to ARS 5 million	25% tax rate
From ARS 5 million to ARS 20 million	30% tax rate
Exceeding ARS 20 million	35% tax rate

Implication:

This will be a significant change if the bill gets approved and thereby increasing corporate tax liability.

Increase in Special Tax Allowance for Employees

On April 21, 2021, Argentina published an Official Gazette Law. 27617, amending the Income Tax Law, which will be applied retroactively from January 1, 2021.  Following are some of the important amendments:

• Increases the Special Tax Allowance – This new law increases the special tax allowance for employees that fundamentally provides an exemption from Income tax on monthly salary of up to ARS 150,000.

• 13th-month Monthly Salary is Exempted – Moreover, it is provided that the 13th-month monthly salary is exempt from income tax for employees with monthly gross salary up to ARS 150,000.

• Exemption from Tax on Productive Bonuses – This new regime provides that payments such as productivity bonuses or any similar kind of payments are exempt from income tax for employees with a monthly gross salary of up to ARS 300,000. It is subject to limitations equal to 40% of personal allowances (non-taxable income).

• Benefits on Varied Allowances – It includes beneficial measures regarding allowances for dependent spouse, child, pensioner, and reimbursements for pre-school and travel expenses.

Implication:

The above-mentioned amendments will reduce the tax liability of employees who qualify for the exemptions.

Brazil

The Individual Income Tax (IRPF) declaration could be further extended till July 31, 2021

Brazilian President Jair Bolsonaro, has vetoed a Bill 639/2021, which the Chamber of Deputies has approved on April 13, 2021, for further extending the deadline for submitting the Individual Income Tax (IRPF) declaration for calendar year 2020 to July 31, 2021. However, this further extension is subject to the approval of the National Congress. The original deadline for filing IRPF was April 30, 2021, which was earlier extended until May 31, 2021.

Canada

Canada Federal Budget 2021 Highlights

On April 19, 2021, the Deputy Prime Minister and Minister of Finance, the Honorable Chrystia Freeland, released Canada’s Federal Budget for 2021. It is called “A Recovery Plan for Jobs, Growth, and Resilience” as it involves a plan to ensure a robust post COVID economic recovery post.

The key highlights of budget 2021 are as follows:

For Individuals

• The Canada Budget 2021 also introduces Canada’s first national tax at a rate of 1% on value of vacant property owned by non-residents from January 1, 2022.
• The Canada Budget 2021 proposes to amend the Income Tax Act to allow individuals the option to claim a deduction in respect of the repayment of a COVID-19 benefit amount in computing their income for the year in which the benefit amount was received rather than the year in which the repayment was made. This option would be available for benefit amounts repaid at any time before 2023. For these purposes, COVID-19 benefits would include:
• Canada Emergency Response Benefits/Employment Insurance Emergency Response Benefits;
• Canada Emergency Student Benefits;
• Canada Recovery Benefits;
• Canada Recovery Sickness Benefits;
• Canada Recovery Caregiving Benefits.

For Employers

• The Government of Canada through Budget 2021 has proposed to introduce a legislation for establishing a federal minimum wage of CAD 15 per hour (rising with inflation), with a provision to ensure that where provincial or territorial minimum wages are higher, that wage will prevail.
• The Canada Budget 2021 proposes to make legislative changes for improving labor protection for gig workers, including those who work through digital platforms.
• A new Canada Recovery Hiring Program introduced to provide eligible employers with a subsidy of up to 50% on the incremental remuneration paid to eligible employees between June 6, 2021 and November 20, 2021.

For Companies

• The Canada Budget 2021 proposes to amend the Income Tax Regulations to allow issuers of T4A (Statement of Pension, Retirement, Annuity and Other Income) and T5 (Statement of Investment Income) information returns to provide them electronically without having to also issue a paper copy and without the taxpayer having to authorize the issuer to do so. This measure would apply in respect of information returns sent after 2021.
• The Canada Budget 2021 proposes to eliminate the mandatory electronic filing thresholds for returns of corporations under the Income Tax Act, and of Goods and Services Tax/Harmonized Sales Tax (GST/HST) registrants (other than for charities or Selected Listed Financial Institutions) under the Excise Tax Act. This measure would apply in respect of taxation years/reporting periods that begin after 2021.
• The Canada Budget 2021 proposes to implement a Digital Services Tax (DST). The proposed tax is intended to ensure that revenue earned by large businesses (foreign or domestic) from engagement with online users in Canada, including through the collection, processing, and monetizing of data and content contributions from those users, is subject to Canadian tax. The DST will be effective from January 1, 2022. The highlights of the Digital Services Tax (DST) are as follows:
• The DST rate will be 3 % on revenue from certain digital services that rely on data and content contributions from Canadian users.
• DST Will apply to businesses having global groups revenues from all sources is EUR 750 million or more in the previous calendar year,
• DST Will apply to businesses having in-scope revenue from Canadian users of more than CAD 20 million in the particular calendar year (the new DST would only apply to in-scope revenue over that CAD 20 million threshold)
• Annual DST return and payment is required for entities subject to DST.

GST/HST (Goods and Services Tax / Harmonized Sales Tax) Regulations

• Effective from July 1, 2021, a non-resident vendor or distribution platform operator with sales to consumers in Canada that exceed, or are expected to exceed, CAD 30,000 over a 12-month period is required to register for the GST/HST under the simplified framework and charge the GST/HST on their sales.

Covid-19 Support Schemes:

Some of the Covid-19 support measures are as follows:

• Budget 2021 proposes to extend the Canada Emergency Wage Subsidy, the Canada Emergency Rent Subsidy, and Lockdown Support until September 25, 2021. It also proposes to gradually decrease the subsidy rate, beginning July 4, 2021.

• Canada Recovery Benefit
• The budget proposes to provide up to 12 additional weeks of Canada Recovery Benefit to a maximum of 50 weeks.
• The first four of these additional 12 weeks will be paid at CAD 500 per week, and the remaining eight weeks will be paid at CAD 300 per week.
• All new Canada Recovery Benefit claimants after July 17, 2021 would also receive the CAD 300 per week benefit, available until September 25, 2021.

• Canada Recovery Caregiving Benefit
• The budget proposes to extend the number of weeks for the Canada Recovery Caregiving Benefit from 38 weeks to 42 weeks. The payments will remain at CAD 500 per week.

• Budget 2021 proposes enhancing Employment Insurance Sickness Benefits from 15 to 26 weeks.

• Introduction of new Canada Digital Adoption Program. It will create thousands of jobs for young Canadians and help as many as 160,000 small and medium-sized businesses adopt new digital technologies.

• Budget 2021 enhances the Canada Workers Benefit (CWB) starting in 2021.

• The Canada Budget 2021 proposes to improve the Canada Small Business Financing Program through amendments to the Canada Small Business Financing Act and its regulations.

• The Canada Emergency Business Account (CEBA) has provided interest-free, partially forgivable loans to Canadian small businesses. In December 2020, the government increased the value of the loan from CAD 40,000 to CAD 60,000 to help small businesses bridge to recovery. If a business repays their loans by December 31, 2022, then up to a third of the value of their loans (meaning up to CAD 20,000) will be forgiven. The CEBA has extended the application deadline for CEBA to June 30, 2021.

Changes in Federal Personal Income Tax Threshold for 2021

Federal Personal Income Tax Rate for the year 2021 is as under:

Income Tax Rate	2021 Federal income tax brackets	2020 Federal income tax brackets
15.00%	Nil to CAD 49,020	Nil to CAD 48,535
20.50%	Over CAD 49,020 to CAD 98,040	Over 48,535 to CAD 97,069
26.00%	Over CAD 98,040 to CAD 151,978	Over CAD 97,069 to CAD 150,473
29.00%	Over CAD 151,978 to CAD 216,511	Over CAD 150,473 to CAD 214,368
33.00%	Over CAD 216,511	Over CAD 214,368

Chile

Tax Relief Measures under Emergency Plan (COVID-19)

There are tax relief measures under emergency plan in answer to the (COVID-19) pandemic in Chile. List of important tax measures under emergency plan are given below:

• Application of temporary reduction of the rate of the IDPC (Impuesto de Primera Categoría) – (First Category Income Tax) from 25% to 10%, designed for economic and employment reactivation. This IDPC regime, (applicable to businesses), is planned to offer benefits from this reduction for the year of 2020, 2021, and 2022.

• IDPC taxpayers are permitted to depreciate 100% of the value of assets in the year in which they are acquired, applicable for the period June 1, 2020 through December 31, 2022.

• 100% amortization of certain intangible property, if it is purchased between June 1, 2020 and December 31, 2022.

China

Increase in monthly VAT exemption threshold from CNY 100,000 to CNY 150,000 for Small-Scale Taxpayers

The Ministry of Finance and the State Administration of Taxation jointly announced an increase in the monthly sales threshold for VAT exemption for Small-Scale Taxpayers (Announcement No. 11 of 2021 dated March 31, 2021). The monthly sales income exemption threshold has been increased from CNY 100,000 to CNY 150,000. The exemption threshold will be in effect from April 1, 2021, to December 31, 2022.

Implication:

The increased threshold would help more small-scale taxpayers to be exempted from VAT and compliance.

Reduction in Corporate Income Tax Liability for Small and Low-Profit Enterprises

Since 2019, China has been implementing preferential tax treatment for small and thin-profit enterprises (STEs)* as briefed below:

• For annual taxable income less than RMB 1 million – the annual taxable income would be reduced by 75% and shall be subject to CIT rate of 20%. Thus, the effective applicable CIT rate will be 5%.

• For annual taxable income of more than RMB 1 million and less than RMB 3 million – the annual Taxable Income would be reduced by 50% and shall be subject to CIT rate of 20%. Thus, the effective applicable CIT rate will be 10%.

On April 7, 2021, the State Taxation Administration (STA) issued Announcement No. 8 of 2021 to clarify the Preferential Corporate Income Tax (CIT) policy for small and low-profit businesses, which further reduces the rate of CIT from 5% to 2.5% for STEs with Annual Taxable Income, less than RMB 1 million.

Thus, the CIT calculation formula for small and low-profit enterprises is as follows:

• For annual taxable income less than RMB 1 million – the annual taxable income would be reduced by 87.5% and shall be subject to CIT rate of 20%. Thus, the effective applicable CIT rate will be 2.5%.

• For annual taxable income of more than RMB 1 million and less than RMB 3 million – the tax treatment remains same

*Small and thin-profit enterprises (STEs) refer to enterprises engaged in industries that are not prohibited or restricted by the government and which satisfies the below conditions:

• annual taxable income does not exceed RMB 3 million;
• number of total employees does not exceed 300 persons; and
• Total assets do not exceed RMB 50 million

Implication:

The Small and Thin-Profit Enterprises (STEs) will benefit from the reduced corporate income tax liability.

Czech Republic

Czech Republic introduces a new regulation on the screening of foreign investments from May 01, 2021

Czech Republic has introduced a regulation for screening of foreign investments made in public or private companies. It is effective from May 1, 2021.

Any investment made by a foreign legal entity or natural persons from countries outside the EU to gain effective control on the economic activity of the company or entity (target person in Czech Republic) will come under the purview of this regulation.

There is an obligation to notify to the Czech Ministry of Industry and Trade about such investments where following conditions are fulfilled:

• Investment is made by a foreign person.
• To exercise the control.
• A field related to ensuring public order and security of the Czech Republic.

Reporting is required for all investments that are incomplete before May 1, 2021, and those that meet the criteria as mentioned above. Here, the date of completion of the investment is when:

• Last contracts concluded on the basis of which the investment is made.
• Acquiring an effective degree of control over the target person; or
• The start of economic activity.

Implication:

Any foreign legal or natural person wishing to make investments in the Czech Republic needs to make essential reporting to avoid any penalty.

Denmark

Denmark: Personal Income Tax rates, threshold and certain other deductions amended for the year 2021 and 2022 and Subsequent Years

Denmark published a Law No. 532 dated March 27, 2021, amending its personal income tax amount limits and rates for the year 2021 and 2022 and subsequent years, as follows :

Particulars	Year 2020	Year 2021	Year 2022 and subsequent years
State Tax – Bottom rate	12.11%	12.09%	12.10%
State Tax – Top rate	15%	15%	15%
Effective tax ceiling (including state, municipal and certain other taxes)	52.06%	52.06%	52.07%
Top tax ceiling	Kr. 531,000	Kr. 544,800	Kr. 546,000
Personal deduction	Kr. 46,500	Kr. 46,700	Kr. 46,100
Maximum employment deduction	Kr. 39,400	Kr. 40,600	Kr. 41,100
Employment deduction Percentage	10.50%	10.60%	10.65%

Germany

Enhanced compliance required under newly introduced “Supply Chain Act” for German companies

Recently, Germany has introduced a new Supply Chain Act, which is intended to oblige large German companies to ensure that their suppliers from abroad comply with environmental and social standards.

• The objective of the Supply Chain Act is to prevent child and forced labor as well as discrimination among foreign suppliers of German companies.

• It will apply to larger companies with a workforce of at least 3,000 employees beginning in 2023, and this threshold will be lowered to 1,000 employees from 2024. The employee count includes the employees of all companies belonging to the German company group, even if the group companies are domiciled abroad. 

Hong Kong

Employment Ordinance to increase the number of statutory holidays from 12 days to 17 days

On March 5, 2021, Hong Kong’s Employment (Amendment) Bill 2021 (the “Bill”) was published with the objective of increasing the number of statutory holidays under the Employment Ordinance. From 2022 to 2030, the number of statutory holidays will gradually rise from 12 to 17 days.

Following are the five additional statutory holidays:

• The Birthday of Buddha on the 8th day of the 4th lunar month (effective from January 1, 2022).
• The first weekday after Christmas Day (effective from January 1, 2024).
• Easter Monday (effective from January 1, 2026). 
• Good Friday (effective from January 1, 2028).
• The day following Good Friday (effective from January 1, 2030).

Implication:

Most multinational companies always provide the above-mentioned holidays as an add-on benefit to their employees. Companies that previously did not provide such holidays will now be mandated to comply with the new amendment within the said timeline.

India

Mandatory e-invoicing for business with a turnover exceeding INR 500 million in effect from April 1, 2021

From January 1, 2021, e-invoicing became applicable to taxpayers having a turnover more than INR 1 billion (INR 100 Crore) a year. As per Central Board of Indirect Taxes and Customs (CBIC) notification no 05/2021 dated March 8, 2021, Goods and Services Tax (GST) e-invoicing is applicable from April 1, 2021, for those taxpayers whose aggregate turnover threshold has crossed INR 500 million (INR 50 Crore) in any preceding financial year from 2017-18 onwards.

Implication

Businesses falling into the threshold criteria may need to revise their processes to enable compliance with the new e-invoicing regulation.

India: Extension of due dates for certain compliances in view of severe pandemic

On May 20, 2021, Ministry of Finance (India) issued Circular No 9 of 2021 for the extension of time limits of certain compliances to provide relief to taxpayers in view of the severe pandemic. In case the returns (with * below) are delayed for any reason beyond the original due dates, then interest payment is payable as per the note below.  

Compliance	Original Due Date	Extended Due Date
Statement of Financial Transactions (SFT) (Form 61A) for the Financial Year (FY) 2020-21	May 31, 2021	June 30, 2021
Statement of Reportable Account (Form 61B)  for the calendar year 2020	May 31, 2021	June 30, 2021
Statement of Deduction of Tax (Form 24Q/Form 26Q) for the last quarter of FY 2020-21 (i.e., Q4  – January – March 2021)	May 31, 2021	June 30, 2021
Certificate of Tax Deducted at Source to the employees (Form 16) for the Financial Year (FY) 2020-21	June 15, 2021	July 15, 2021
Income Tax Return (in case where Tax Audit is not applicable) for the Assessment Year 2021-22, including individual returns*	July 31, 2021	September 30, 2021
Tax Audit Report (Form 3CA and Form 3CD) for the Assessment Year 2021-22	September 30, 2021	October 31, 2021
Transfer pricing Report (Form 3CEB) for the Assessment Year 2021-22	October 31, 2021	November 30, 2021
Income Tax Return (in case where Tax Audit report is applicable) for the Assessment Year 2021-22*	October 31, 2021	November 30, 2021
Income Tax Return (in case where Transfer Pricing report is applicable ) for the  Assessment Year 2021-22*	November 30, 2021	December 31, 2021
Belated or Revised Income Tax Returns for Assessment Year 2021-22	December 31, 2021	January 31, 2022

*Note that for taxpayers whose entire income tax liability is not discharged by the Tax Deducted at Source (TDS) and advance tax, and such shortfall is more than INR 100,000, they should file their income tax return within the respective original due dates to avoid interest for defaults in furnishing return of income (i.e., Section 234A of Income Tax Act 1961).

Ireland

Proposal to increase paternity leaves from 2 weeks to 5 weeks

Under Republic of labor law, there will be an upcoming change in parental leave entitlements which will increase paternity leave from 2 weeks to 5 weeks. The change will be in effect retrospectively, which means that the addition of 3 weeks is available for any child born/adopted on or after November 1, 2019. However, this particular legislation is yet to be passed officially by the government. In addition, the time phase during which this leave could be opted has been extended from 12 to 24 months.

Implication:

Once the proposal is in effect, employers should change the family leave policies as required.

Publication of New Code of Practice by Irish Government Enabling Right to Disconnect outside Working Hours

On March 31, 2021, the Irish Government, Department of Enterprise Trade and Employment circulated its Code of Practice on the “right to disconnect from work outside normal working hours”, which will be in effect from April 1, 2021. The purpose of the code is to create a culture of good work/life balance  for employees referring to a ‘right to maintain clear boundaries between work and leisure time’ which have 3 main elements:

• Not to create a work culture routinely outside of normal working hours.
• Not to be penalized for refusing work outside normal working hours.
• Duty to respect another’s right to disconnect.

It must be noted that it is not legally binding but can be used against employers in assertions for breach of employment rights.

Implication:

The new code of practice, although not mandatory, will put more obligations on employers to track the company’s working hours. It will be important to see how many companies adopt these and whether this becomes a market practice.

Israel

Israeli Tax Authority (ITA) provides Annual Tax Return Filing Extension for financial year 2020

In light of the ongoing Covid-19 crisis, the Israeli Tax Authority (ITA) issued a notice on April 7, 2021 offering an extension of the deadline for filing annual tax returns for all taxpayers, including individuals and businesses. The deadline for filing annual tax returns for the 2020 tax year has been extended to June 30, 2021.

Italy

Italy introduced tax relief measures during Covid-19 pandemic

The Italian government introduces tax measures through a law decree—Decree Law no. 41 of March 22, 2021 with an objective to provide relief in response to the Covid-19 pandemic.

Among the tax relief provisions in the decree are the following:

• Extension of tax-collection suspension and automatic cancellation of tax bills of up to €5,000
• Extension of the digital services tax deadlines
• Extension of the electronic archiving deadline
• New wage subsidy measures
• A freeze on redundancies until June 30, 2021
• Allowances for seasonal workers in tourism sector, the spa industry, show business and sports industries
• Allowances for workers in the sports sector
• Emergency income
• Measures to safeguard vulnerable workers
• Extension or renewal of fixed-term employment contracts

The measures in the decree are applicable from March 23, 2021 but should be converted into law within 60 days of the decree’s publication in the official gazette (March 22, 2021). It is possible that certain measures could be amended during the legislative conversion process.

Italy introduced new VAT online registration for reporting cross-border sales and transactions

The Italian tax authority has started a new online registration portal for value added tax (VAT) purposes and launched with effect beginning April 1, 2021.  The authority has opened the online registration portal for the new OSS (One Stop Shop) and IOSS (Import One Stop Shop) regimes, to implement the changes introduced by the VAT e-commerce directives that are effective from July 1, 2021.

• The OSS: Scheme to apply for remote (distance) sales of goods dispatched from an EU Member State to private consumers in another EU Member State and for the supply of services to private consumers subject to VAT in the EU Member State where the services are consumed.

• The IOSS: Scheme to apply for sales to private consumers of goods imported from third countries not exceeding EURO 150 in value.

The OSS and IOSS regimes bring changes to the VAT obligations of taxable persons engaged in cross-border trade with private consumers. Under the new rules, the simplified VAT registration measures are to expand the current norms that apply with regard to the provision of telecommunication, broadcasting, and electronic services to private consumers—the MOSS (Mini One Stop Shop)—to remote sales and supplies of services to private consumers.

Implication:

Beginning April 1, 2021, the online registration portal for value added tax (VAT) has been opened for the new OSS (One Stop Shop) and IOSS (Import One Stop Shop) regimes. Businesses engaged in such supplies will have to comply with the changes introduced by the VAT e-commerce directives.

Japan

Effective dates of important amendments to the Japanese data protection act released

On March 24, 2021, the Government of Japan released the effective dates of important amendments to the Japanese Act on the Protection of Personal Information (“APPI”).  The amended APPI was enacted on June 5, 2020 and promulgated on June 12, 2020. The revised Act will fully come into effect on April 1, 2022.

Enforcement of Timeline

• Provisions on increased penalties to fines of up to 100 million JPY (about USD 1 million) have been in force since December 12, 2020. (Contravention of an order from the authority or unlawful use of data).

• From October 1, 2021, Restrictions will be imposed on the use of the “opt-out” exception for data subjects’ consent. The revised version of the Act on the Protection of Personal Information limits the cases where data handlers can utilize an “opt-out provision” for transfers to third parties.

• The provision of “Pseudonymously Processed Information” will be effective from April 2022 concerning provisions on mandatory breach reporting, personal-related information, and extraterritorial jurisdictions.

Implication:

Companies are required to take additional measures to implement these changes from the effective dates to avoid penal implications.

Qualified invoice system to be introduced beginning October 2023

The Japanese Consumption Tax (JCT) regime from October 1, 2023, will be subject to a new invoicing system. The qualified invoice system will need additional information to be entered on the invoices that have Japanese Consumption Tax on goods and services.

A JCT taxpayer will be obligated to retain a qualified invoice under the new system, issued by a registered invoice issuer in order to be qualified to claim an input credit tax. All the applications to be a registered invoice issuer shall be submitted between October 1, 2021, and March 31, 2023 to the suitable National Tax Office.

Information Needed on Tax Invoice as from October 1, 2023:

• Supplier’s name
• Registration number
• Customer’s name
• Date of transaction
• Description of goods or services
• Total Invoice amount (JCT inclusive/exclusive) for each JCT rate and the applicable JCT rate

Implication:

Businesses should start registering as the registered invoice issuer as soon as possible.

Malaysia

Companies employing foreign nationals required to register and update workplace and employment information

As per the announcement of the Expatriate Services Division (ESD) of the Department of Labor of Peninsula, Malaysia, dated March 23, 2021, companies employing foreign nationals in Malaysia are required to register and update their work location and employment information using the “Workplace Registration Form” provided by Malaysian Labor Department. Such employers are required to complete following steps:-

• Submission of the Workplace Registration Form manually at the nearest Labor Department where the company is located.

• Obtaining the acknowledgement with the stamp and signature from the Labor department is necessary.

• Submission of such stamped form is required while making any employment pass application.

• Company/employer shall submit Workplace Registration Form each time when there are any changes in company’s name, business location, or employment information and within 90 days from such change.

The effective date for this change is not specified, but employers are advised to start immediately.

Implication:

The compliance burden has increased for companies employing foreign nationals in Malaysia. All companies employing expats need to inform the labor department immediately. Any failure may lead to penalties.

Mexico

Subcontracting Reforms Now in Place

In April 2021, a decree reforming labor outsourcing in Mexico was published. The decree amends the outsourcing provisions of the Federal Labor Law (FLL), the Social Security Law, and the Law of the Institute of the National Housing Fund for Workers, the Federal Fiscal Code (FFC), the Income Tax Law and the Value Added Tax Law.

The new law now expressly prohibits subcontracting as defined as the practice of providing or making available workers for the benefit of another person or legal entity.

Further, a contractor would be allowed to provide services or perform specialized works that are not part of the corporate purpose or the economic activities of the beneficiary as long as the provider is duly registered as a provider of specialized services with the Ministry of Labor and Social Welfare (STPS).

The reform also considers specialized services as those shared or complementary services rendered between entities of the same corporate group if such services are not part of the beneficiary’s corporate purpose or its economic activities.

The law provides 90 days (until July 23) for an employer that seeks to directly hire any employees from the staffing agencies or insourcing company through employer substitution (i.e., the hiring entity becomes the worker’s new employer) without the transfer of assets.

Contractors now have new obligations, including periodically reporting their contracts for the provision of specialized services to the Mexican Institute of Social Security (IMSS) and to the Institute of the National Housing Fund for Workers (Infonavit). Failure to timely submit these contracts would subject the contractor to fines.

Using deceptive practices to simulate the provision of specialized services or the performance of specialized works, or subcontracting personnel, would constitute tax fraud. The penalty likely would be imprisonment from three months to nine years, depending on the nature and amount of deception involved in the fraud.

The new law enters into force and effect on April 24, 2021, with the exception of the tax laws, which will take effect on August 1, 2021.

The STPS will issue general regulations setting forth the requirements and procedures to apply for authorization as a provider of specialized services within the next 30 days following publication of the law.

Implication:

Companies operating in Mexico that use PEO services or third-party services for hiring, will need to stop immediately and hire on their own payroll. Suppliers of specialized services (PEO) must be registered with the Ministry of Labor and Social Welfare (STPS).  Companies have to take precautions henceforth that hiring of specialized services should be from a registered PEO and should not relate to the main corporate purpose or economic activity of the beneficiary company and those amongst the companies of the same group.

Netherlands

Extension given to tax-free reimbursed fixed travel expenses and work from home facility

Employers have been allowed to give their employees a tax-free allowance for fixed travel expenses until July 1, 2021, as part of the Covid-19 relief measure. The facility was initially granted until April 1 of this year (2021). Employers may reimburse commuting expenses tax-free up to an amount of EUR 0.19 per kilometer.

This tax-free benefit is welcome additional compensation for the employees, even when expenses are no longer incurred for commuting as a result of home working.

This year also, employers can reimburse homework costs through the work-related costs scheme. This scheme was previously applied and extended for the whole of 2021. The tax-free reimbursement amount of work-related costs is calculated as 3% of the first EURO 400,000 taxable wages and 1.18% of the part above EURO 400,000 total taxable wage of the employee. 

The government has extended this measure since there are employees with costs associated with traveling for work. Some employers also use the travel allowance as a home work allowance.

Implication:

Employers can continue to provide the travel allowance and homework expenses without any tax implications up to the limits notified by the government.

The process for registration of a one-stop shop for VAT E-commerce has commenced.

The new EU VAT e-commerce scheme will commence from July 1, 2021, for a Dutch entrepreneur (entity) who supplies goods in the European Union (EU) to customers (B2C) but does not have to submit a VAT return. Registration for the one-stop shop started on April 1, 2021. This measure will help to avoid having to register with the tax authorities in all countries where the goods are delivered, if registered under a new one-stop shop that allows businesses to process VAT payments for these deliveries for all EU countries at one time. 

Note that this one-stop-shop registration can also be used for the services provided to private individuals in the EU.

Implication:

This will bring ease of paying VAT and processing returns for Dutch vendors supplying goods and services across the EU.

Philippines

Revised rules for the issuance of employment permits to foreign nationals

The Department of Labor and Employment (DOLE) of the Philippines announced new rules under the Alien Employment Permit (AEP) program for the Issuance of Employment Permits to Foreign Nationals. From May 5, 2021, an employer shall consider following changes before applying or renewing the alien employment permits (AEP) for their foreign employees:

• AEP applications must be filed prior to start of employment or within 10 working days from the date of signing of employment contract.

• Requirement to post job vacancies in a newspaper of general circulation at least 15 calendar days prior to the application for AEP.

• In case a foreign national is transferred to related companies in another region, then their AEP shall remain valid. However, the employer needs to notify DOLE about such transfer within 10 working days from such transfer.

• Any change in employer’s information like name, address, contact number etc. must be notified to the DOLE. The employer is also obliged to submit a quarterly report on foreign nationals employed.

Implication:

Employers who will be applying for or renewing alien employment permits (AEP) for their foreign employees or expatriates must comply with the new rules to avoid prohibition from filing AEP applications for five years and incurring  fines.

Poland

Closing Date for Financial Statement 2020 Extended by 3 months

In response to the demands of entrepreneurs and accountants, the Minister of Finance of Poland on March 26, 2021, signed an ordinance stating that the deadlines for the preparation of financial statements for private as well as public sector entities & non-profit organizations/charitable institutions for the financial year 2020 have been extended.

Duration of Extension	Entities
3 Months	Private Sector and Non-Profit Organizations
1 Month	Units of the Public Finance Sector

The Ministry also issued a press release announcing an extension of the deadline for annual corporate income tax settlements. This includes an extension of the deadline for 2020 annual tax returns and the payment of tax to June 30, 2021. The extension applies for tax years ended in the period December 1, 2020, to February 28, 2021.

Implication:

Although the extensions are provided, business should continue to file on time if possible.

Spain

From April 14, 2021, all Companies have to keep a salary register.    

Under the Royal Decree 902/2020, on gender pay equality which came into force on April 14, 2021, all companies are required to keep a salary register in compliance with the new legislation, regardless of the number of employees.

The decree also makes it mandatory for companies with over 100 employees to implement a gender equality plan and conduct a pay audit by March 2021.   The text of the decree sets out the minimum requirements in terms of the content, how to make workforce calculations, the obligation to conduct a pay audit as part of the plan, implementation deadlines, competence of the negotiation committee, among other matters, as well as its period of validity, which may not exceed four years.

Implication:

Companies will have to take steps to maintain the salary register and implement the gender equality plan.

Additional Deferral of Initial Due Date for Financial Transactions Tax Announced by Tax Agency

The Spanish Tax Agency has announced an additional deferral of the initial deadline for the new Financial Transactions Tax (FTT) in order to give taxpayers more time to adapt and implement required changes to comply with the new tax, which entered into force on 16 January 2021.

The settlement period for the FTT is monthly, and the standard filing period is from the 10th to the 20th of the following month. Previously, the first self-assessments of the tax had been deferred to 10 April 2021. Now, for the first four months of 2021 (January, February, March, and April), it is provided that the initial self-assessment return and payment corresponding to these months will be due by the deadline for the month of May 2021 (from 10 to 20 June 2021).

New VAT rules and OSS registration for distance sales (electronic commerce) as of July 1, 2021

Title V of Royal Decree-Law 7/2021, published on April 28, 2021, includes the new VAT rules applicable to distance sales (electronic commerce) and OSS from July 1, 2021. One Stop Shop allows online businesses to report all their sales of goods to customers across Europe in a single, consolidated VAT return submitted in its country of establishment. 

Currently, EU businesses selling B2C online to customers in another EU country should follow the distance sales regime, which requires a VAT registration in the country of the customer when a given threshold is exceeded. In practice, this regime requires multiple VAT registrations across Europe, which increases the complexity and administrative costs for online sellers.

With the new regime, online sellers would no longer require multiple VAT registrations, as all foreign sales would be reported in the OSS return. A separate OSS registration would be required, and several other formalities must be kept (for example, local VAT rates in each country would still apply) but the requirement of submitting foreign VAT returns would normally be eliminated.

Note that new One Stop Shop registration is also applicable to B2C services within the EU.

Implication:

Beginning July 1, 2021, businesses will have to comply with new VAT rules applicable to distance sales (electronic commerce) and OSS (one stop shop). Now all foreign sales would be reported in the OSS return.

Sweden

Sweden provides temporary tax exemption for parking benefits at workplace and for gifts provided to employees

Sweden’s Ministry of Finance has announced a temporary tax and fee exemption on benefits that employees can receive from their employer considering the COVID-19 Pandemic situation. It includes temporary tax exemption:

• For Benefits of free parking in connection with the workplace;
• For Benefits of a gift or gifts to an employee from the employer having total value of such gifts up to a maximum of SEK 2,000 per employee. However, this does not apply to gifts given in cash.

These rules are applicable from May 1, 2021, on benefits provided after December 31, 2020, and will expire at the end of December 2021.

Implication:

Employers in Sweden can provide these benefits to their employees for the current year without tax implications.

United Kingdom

UK’s HMRC will impose penalties for any missed VAT returns under Making Tax Digital (MTD)

Due to the Covid-19 pandemic, UK’s HMRC had previously waived the late return penalty to comply with the Making Tax Digital (MTD) regime which requires digital VAT records and submission of VAT returns through compatible software.

However, beginning April 1, 2021, a regular VAT penalty on late filings will be imposed, which had been  suspended for two years. The penalty regime will apply on late filings and on failure to keep digital records or maintain a complete digital journey (i.e., no manual data manipulation, adjustments or ‘copy-and-paste’ in spreadsheets allowed).

Implication:

Taxpayers should comply with the Making Tax Digital (MTD) regime and file VAT returns in a timely manner to avoid any penalty/legal consequences due to non-compliance.

UK extends due date for reporting import VAT on the VAT returns by six months to December 31, 2021

Post Brexit, the United Kingdom (UK) introduced the Postponed Accounting (PA) while accounting for the import Value added Tax (VAT) on the VAT returns which facilitated businesses (importers) to make a declaration and to recover import VAT in the same return rather than having to pay it upfront and recover it later on.

The UK’s HMRC has extended the final date of reporting for import VAT on a VAT return by six months to December 31, 2021.

Implication:

Businesses (Importers) will get additional time to make import VAT reporting on their VAT Returns.

UK increases National Minimum Wage and Employment Payments rates for 2021-22 year

The United Kingdom (UK) has issued new rates for the National Living wage (NLW) and National Minimum Wage (NMW) from April 1, 2021. The NLW now applies to all workers aged 23 and over (the earlier age of eligibility was 25). Details are as under:

Particulars	Previous rate (per hour)	Rate from April 2021 (per hour)
National Living Wage	GBP 8.72	GBP 8.91
21–22-Year-Old Rate	GBP 8.20	GBP 8.36
18–20-Year-Old Rate	GBP 6.45	GBP 6.56
16–17-Year-Old Rate	GBP 4.55	GBP 4.62
Apprentice Rate	GBP 4.15	GBP 4.30

Additionally, the period for which employers must keep NLW/NMW records will increase from three to six years.

Effective April 4, 2021, the weekly rate of statutory maternity, paternity, adoption, shared parental, and parental bereavement pay rises from GBP 151.20 to GBP 151.97.

Beginning April 6, 2021, the following changes occur:

• The weekly statutory sick pay rate will increase from GBP 95.85 to GBP 96.35.

• The limit to additional award for unfair dismissal, set to compensate claimants, will rise from GBP 88,519 to GBP 89,493.

• The maximum amount of “a week’s pay” for redundancy pay purposes will increase from GBP 538 to GBP 544.

Implication:

Employers need to review their employment policies and documents that mention the statutory maternity, paternity, sick pay rates etc. to comply with the necessary changes.

Shan & Co © (Nucleus is an affiliate of Shan & Co)