Australia 

Directors to procure Director Identification Number as Director Identification regime set to launch in 2021 

On June 12, 2020, Federal Government passed a legislation which introduces a register of directors for Australian companies.  Each director will have to register and procure a Director Identification Number (“DIN”). As a result of the government facing coronavirus related challenges in 2020, the implementation of a DIN regime will probably in the first half of 2021. The DIN regime also applies to the directors of foreign companies registered in Australia. 

• Time limit for Director Identification Number (“DIN”) registration by new or prospective directors 
•  During the transition period of 12 months from the commencement of the Act – Need to register/apply for DIN within 28 days of their appointment as a director 
•  After the transition period of 12 months – Need to register/apply for DIN before being appointed as a director. 

• Time limit for Director Identification Number (“DIN”) registration by existing directors: 
• During the transition period of 12 months from the commencement of the Act – Need to apply for DIN within a prescribed time period which will be specified by the legislative instrument made by the Minister. 

Penalty for contravention of DIN requirement – The criminal and civil penalties for contravention of DIN requirements are broadly consistent with current penalties applicable to comparable provisions in the Corporations Act 2001, the criminal penalties for a director applying for multiple DINs or misrepresenting a DIN could be 12 months’ imprisonment. 

Implication

Prior to this legislation, directors could have had multiple records within ASIC systems with minor variations of name (with a middle name), address and/or other personal details. The mandatory DIN requirement will prevent the directors from registering under different names. All the existing and proposed directors should obtain these as soon as the same becomes applicable. 

National Minimum Wage increased to AUD 753.80 or AUD 19.84 per hour (from AUD 740.80 per week or AUD 19.49 per hour) w.e.f. July 1, 2020 

From July 1, 2020, the national minimum wage is increased to AUD 753.80 or AUD 19.84 per hour (from AUD 740.80 per week or AUD 19.49 per hour). 

High income threshold for employees increased to AUD 153,600 from AUD 148,700 w.e.f. July 1, 2020 

From July 1, 2020, the high-income threshold is increased to AUD 153,600 from AUD 148,700. 

Employees can have access to unfair dismissal eligibility if their annual earnings are less than the high income threshold. Half the amount of the high-income threshold represents the cap on the amount of compensation available in unfair dismissal proceedings (AUD 76,800 from July 1, 2020). 

Implication

Employers need to be aware about the increased thresholds while ascertaining risks of dismissing an employee. 

Parental Leave Pay increased to AUD 753.80 per week from AUD 740.60 per week w.e.f. July 1, 2020 

Parental leave pay as of July 1, 2020 is AUD 753.80 (previously AUD 740.60 per week and tax for a maximum of 18 weeks.) From July 1, 2020 the employees will now have an option to split Parental Leave Pay over 2 periods within 2 years. The first set period is of 12 weeks which is to be used in one continuous period within 12 months of birth or adoption of child. The second flexible period allows an employee to use up to 30 days of flexible Parental Leave Pay. The flexible Parental Leave Pay period can be taken in flexible periods as negotiated by the employee with their employer and must be taken within 24 months of the birth or adoption of a child and usually starts after the first Parental Leave Pay period ends. 

Implication

Employer will have to review the employment agreements and employee policies. 

Maximum salary ceiling for Superannuation contribution increased to AUD 57,090 from AUD 55,270 w.e.f. July 1, 2020 

The maximum salary ceiling for Super contribution is AUD 57,090 per quarter for the year 2020-21 w.e.f. July 1, 2020. (For the year 2019-20 the salary ceiling was AUD 55,270). 

Implication

The payrolls will have to be revised accordingly. 

Corporate tax rate for small businesses reduced to 26% from 27.5% for year 2020-21 

Corporate tax rate for base rate entities (small businesses with aggregate turnover of less than AUD 50 million) is reduced to 26% from the previous 27.5% for the financial year 2020-21. 

Implication

The reduced rate, albeit small, will benefit many entities in Australia. 

Brazil 

Brazil simplifies Company registration process w.e.f. July 1, 2020 

The Normative Ruling No. 81 consolidating several regulations regarding the registration of Brazilian companies has been published by the Brazilian National Department of Company Registration and Integration (“DREI”), which is effective from July 1, 2020. Some of the changes are as follows: 

• Corporate name: Use of any national or foreign language words will be allowed in the corporate name. However, it may be denied based on the similarity of such name (partially or not) with already existing corporates. 

• Notarization and certification of copies: The presentation of notarized or certified documents is no longer required for filing of documents with the Board of Commerce. Instead a lawyer or an accountant may confirm the authenticity of such documents. 

• Automatic registration: Corporate documents related to incorporation, amendment and termination of EIRELI and limited liability companies (“LLCs”), will be treated as automatically registered when the viability of the business name and location have been concluded, such documents are implemented with standardized clauses as provided by the Board of Commerce and all mandatory documents are presented. 

The move is expected to significantly simplify the set-up process and reduce the set-up time. 

Implication

Those incorporating LLCs in Brazil can now use foreign language words in the name of Brazilian LLC. The new process is likely to reduce the time for set up, which has been amongst the highest in the world. 

Canada 

British Columbia (BC) amends Business Corporations Act to introduce “Benefit Company” as a new type of legal entity 

The British Columbia (“BC”) has introduced a new type of legal entity as “Benefit Company” by making amendments to the British Columbia Business Corporations Act (“BCBCA”). Post amendment, existing business have an option to convert their businesses into Benefit Company. These changes are made effective from June 30, 2020. 

The British Columbia Business Corporations Act (“BCBCA”) will be applicable to Benefit Company along with some specific requirements as mentioned below: 

• Benefit Company is a for-profit company and its commitments are towards conducting business in a responsible and sustainable manner. It means the business will consider the well-being of the persons affected by its operations and it tries to use a fair share of social, economic and environmental resources. 

• Benefit Company shall promote any one or more public benefits like for benefit of class of persons other than its shareholders, for benefit of environment, animal, fish, plant habitats etc. 

• An application along with the notice of articles is required to be made to Registrar of Companies for incorporation of Benefit Company. The notice of articles shall contain the “Benefit Statement” disclosing that the company is a benefit company and business to be conducted in a responsible and sustainable manner. It shall also mention one or more public benefits. 

• The articles of the company shall also include a “Benefit Provision” prescribing details about its commitment to public benefits. 

• Further, a company can convert itself into a Benefit Company by amending its articles through its shareholder’s’ approval via a special resolution. Similarly, a benefit company may convert itself into another type of entity by amending its articles. 

Czech Republic 

Money instead of meal vouchers 

A new option is introduced regarding meal vouchers and meal allowances that will enable employers to provide its employees meal allowance directly in cash. This new option is not mandatory; an employer can adhere to its original practice. 

Implication

Employer’s administrative burden will be eased and will save money from high fees and unnecessary paperwork if they choose to provide meal allowance in cash instead of vouchers. 

Hong Kong 

Employment Support Scheme (ESS) to employers to retain employees 

The Employment Support Scheme (“ESS”) was introduced in Hong Kong on May 18, 2020. ESS provides wages subsidies to eligible employers to retain their employees. The scheme introduced by the government is to provide time-limited financial support to employers to retain employees who could be dismissed during pandemic. The Subsidies will be disbursed in two tranches. The first tranche of subsidies will cover the period from June to August 2020 and the second tranche will cover the period from September to November 2020. 

Employers have to undertake that: 

• Wage subsidies shall be used for paying wages to the employee 
• Not to make redundancies during the subsidy period. 

All employers who have been making Mandatory Provident Fund (“MPF”) contributions for employees are eligible. ESS subsidies will be calculated at 50% of actual wages paid during the specified month The Subsidy will have a wage cap of HKD 18,000 per month and the maximum wage subsidy per employee is HKD 9,000 per month. 

Implication

Employers should apply for their ESS subsidy through the Hong Kong government online portal and makes sure that for availing this subsidy there are no violations of ESS provisions otherwise there will be penal implications. 

Amendments in Anti-discrimination and Harassment law 

Important changes have been made to Hong Kong anti-discrimination and harassments laws through Discrimination Legislation (Miscellaneous Amendments) Ordinance 2020 (Ordinance) that came into effect from June 19, 2020. 

Following are the important changes as per the relevant ordinances: 

• Sex Discrimination Ordinance – To make direct and indirect discrimination on the ground of breastfeeding unlawful. These provisions will not come into effect till June 19, 2021. 
• Race Discrimination Ordinance – To harass or discriminate a person on the basis of race of an associate (i.e. spouse, carer, relatives etc.) of such person. These provisions are effective from June 19, 2020. 

Implication

Employers can make changes in the company policies to have them in line with the newly introduced provisions. Employee awareness will help avoid any violations of these provisions. 

India 

Extension of GST annual return for FY 2018-19 till September 30, 2020 

Central Board of Indirect Taxes and Customs (“CBIC”) voted its Notification No. 41/2020 (Central Tax) dated May 5, 2020 has further extended the deadline for submission of the GST Annual Return or Reconciliation Statement (GSTR 9 / GSTR 9C) for the financial year 2018-19 until September 30, 2020. 

Tax deducted at source (TDS) applicable on E-Commerce Transactions with effect from October 01, 2020 

Effective October 1, 2020, an e-commerce operator* is required to deduct TDS at the rate of 1% of gross amount of sales or services or both, for facilitating any sale of goods or providing services of an e-Commerce participant** through its digital or electronic facility or platform. TDS to be deducted at the time of credit of amount of sale or services or both to the account of an e-commerce participant or at the time of payment thereof to such e-commerce participant by any mode, whichever is earlier. 

• “e-commerce operator” means a person who owns, operates or manages digital or electronic facility or platform for electronic commerce. 
• “e-commerce participant” means a person resident in India selling goods or providing services or both, including digital products, through a digital or electronic facility or platform for electronic commerce. 

Implication

The e-commerce operators will have additional compliances to report and pay this TDS. 

New Format of Form 26AS (Tax Credit Statement) introduced by the Income Tax Department w.e.f. June 1, 2020 

The Income Tax Department (IT Dept.) has introduced a new format for Form 26AS (Tax Credit Statement) w.e.f. June 1, 2020. Brief details of new format of Form 26AS is as under: 

• There will be additional personal information available in new format like email ID, mobile number, date of birth along with PAN, name, address which is already available in earlier version. 
• New format will provide the details of taxes paid including advance tax or self-assessment tax. 
• New format will also provide details of outstanding tax demand, if any. Such information will help you ascertain whether the same demand is genuinely outstanding or the same is disputed. Taxpayer can make application for rectification of mistake or can file an appeal or apply for condonation of delay in case of any disputed demand. 
• Details of all pending income tax proceedings with tax department. It also includes details of proceedings which have been completed during the year. 
• Currently, banks, listed companies, mutual funds, registrar, stock exchanges etc. are required to furnish details of certain financial transaction above prescribed threshold to the tax department on annual basis. Such information will be made available to respective taxpayers under the new format. E.g. deposit in saving bank account and fixed/recurring deposits of more than INR 1 million in a financial year. Details of transactions for credit cards, foreign exchange, purchase of shares, purchase of bonds and debentures will also be reported if respective transaction limits are crossed. 
• In case of purchase of property, details of seller and buyer will be shown in new Form 26AS if the stamp duty value of such immovable property exceeds INR 3 million . 

Implication

The availability of such tax details and other related information in new Form 26AS will help the taxpayers to verify those details and take corrective steps, if any, of the information submitted is incorrect. This may increase work for employers and deductors as there may be additional questions from employees, etc. 

Italy 

The frequency of Esterometro filing changed from Monthly to Quarterly reporting w.e.f January 01, 2020 

The Resident Italian VAT registered businesses in Italy would have to submit electronically to the Italian Tax Authorities the data relating to the transactions with non-registered customers and suppliers (cross border sales and purchase invoices). From January 2020, the electronic filing of such communication must be carried out on a quarterly basis by the end of the month following the relevant quarter instead of monthly filing. 

Japan 

Social Security rates for Children Upbringing increased to 0.36% 

Effective from May 2020, the social security rate for Children Upbringing increased from 0.34% to 0.36%. Company bears this tax liability. 

Mexico 

Non-resident providers of digital services to withhold tax (VAT) on payments received for the provision of digital service w.e.f. June 1, 2020 

From June 1, 2020, the non-resident providers of digital services are required to withhold VAT on payments received for digital services provided in Mexico. Non-resident providers of digital services in Mexico must electronically issue and send a voucher (in PDF format) clearly indicating that a payment for digital services is subject to VAT, and the VAT amount. 

Implication

Increased VAT compliance will apply for non-resident digital service providers in Mexico. 

Netherlands 

Dutch Ultimate Beneficial Ownership Register to enter into effect from September 27, 2020 

The Dutch Senate adopted the Implementatiewet registratie uiteindelijk belanghebbenden (Implementation Act on Registration of Ultimate Beneficial Owner) and accordingly, from September 27, 2020, legal entities will be required to report their Ultimate Beneficial Owner’s (“UBO’s”) within 18 months from the deadline, however, they may start collecting the information from July 8, 2020 onwards. 

The new entities have to register their UBO’s within a week from incorporation after the deadline. 

An Ultimate Beneficial Owner (“UBO”) is a natural person or persons ultimately owning or controlling the entity (details available in our August 2019 Newsletter). A clarification regarding pseudo ultimate beneficial owner is added. In certain cases, a lower percentage than 25% also may lead a natural person to be qualified as a UBO, for e.g. if, pursuant to a contractual relationship the authority exists to appoint or dismiss the board ( bestuur ), the person so authorized will be deemed UBO subject to other conditions. 

Certain UBO information will be publicly available. However, in exceptional circumstances the UBO can request the Chamber of Commerce to block public UBO information in the register. 

Initially the implementation deadline was January 10, 2020 as mentioned in our January 2020 Newsletter, but was delayed due to privacy concerns of the UBO’s and the subsequent Dutch Senate’s preliminary inquiry. 

The listed companies and their 100% subsidiaries are, however, exempt from the registration requirement. 

Implications

• Existing legal entities will have an additional compliance of identifying and registering the Ultimate Beneficial Owner/s. 
• Persons intending to form a company will have to declare their Ultimate Beneficial Owners. 

Singapore 

Proposed changes to Personal Data Protection Act 

Singapore Government published the Personal Data Protection (Amendment) Bill 2020 on May 14, 2020 for public consultation. Following are some of key highlights of proposed bill. 

• Increased in financial penalties in case of breach of Personal Data Protection Act provisions. The penalty will be higher of up to 10 % of annual gross turnover in Singapore or SGD 1 million. 
• Mandatory data breach notification to Singapore’s Personal Data Protection Commission and affected individuals. Timeline will be 3 calendar days from the day an organization assesses that a breach is modifiable. 
• Expansion of the scope of Deemed consent to include contractual necessity and option for opting out before data processing 
• New data portability rights for individuals i.e. giving individual right to request transmission of their data to another service provider. 
• Enhanced protection against unsolicited telemarketing and spam. 

Implication

Organizations collecting, processing and preserving personal data shall track the effective date of the above-mentioned proposed changes and accordingly change the policies of the organization to make it in line with the existing provisions of the act. 

Sweden 

Proposal of withholding tax on dividends 

The Swedish Ministry of Finance has proposed a withholding tax on dividends and thereby replacing the current withholding tax law (1970:624). The new tax law will be referred as a withholding tax on dividends. This new withholding tax act on dividends is proposed to be in force for dividends paid after June 30, 2022. 

United Kingdom 

UK introduces new UK Global Tariff (UKGT) on imports by replacing EU’s Common External Tariff (EU CET) from January 1, 2021 

The United Kingdom (“U.K”) has introduced its new Global Tariff (“UKGT”) which will become effective from January 1, 2021. These new tariffs will make it easier and cheaper for UK economy to import and export goods from overseas as it will use sterling pound (“GBP”) instead of EU’s Euro (“EUR”). 

The new UKGT will remove unwanted trade barriers, cost pressures and support UK industries on global competitiveness. 

UK Parliament introduces Digital Services Tax (DST) at 2% rate for eligible businesses 

The UK House of Commons has approved the introduction of Digital Services Tax (“DST”) as provided by UK’s Finance Bill, 2020 with effect from April 1, 2020. The rate will remain at 2% on the revenues of search engines, social media platforms, and online marketplaces that derive value from UK users. 

The DST will be applicable on businesses who have their group’s worldwide turnover from digital activities exceeding GBP 500 million and revenue from UK users exceeding GBP 25 million. 

Implication

This will lead to increase in cost implications for business with a turnover from digital activities above certain thresholds. 

Global Updates 

Chile – ­­­­­­­­­­­­­­­­­­­­­­­VAT on digital services enters into force 

From June 1, 2020 Chile has imposed a new 19% Value-Added Tax (“VAT”) on digital services by foreign digital service providers. Digital services such as the following will be subject to VAT at the abovementioned rate: 

• Intermediation for services provided in Chile, provided the sales made abroad trigger an import into Chile; 
• The provision of software, storage, computing platforms or infrastructure; 
• The supply or delivery of digital entertainment content, such as videos, music, games, texts, magazines, newspapers and books or other analogous content, by means of downloading, streaming or other technology; and 
• Advertising (regardless of the mechanism through which it is delivered or created). 

Implications

• Foreign companies providing digital services in Chile have to carefully consider the VAT implication and costing. They have to pay tax/VAT at 19% under an alternative collection mechanism or under the simplified VAT regime. 
• Foreign companies providing digital services who will have to register under alternative collection mechanism will require the local beneficiary to issue the purchase invoice. 

EU – European Commission (EC) adopted a new Tax Package for fairness, efficiency and sustainability in EU Tax regime 

The European Commission (“EC”) on July 15, 2020 has adopted a range of Tax reforms along with an action plan for bringing fairness, efficiency and sustainability in European Union’s tax regime. The tax package plans to replace non-resident registrations with single EU VAT registrations, reforms of VAT on financial services, e-invoicing and live reporting of transactions, etc. 

The 3 elements in Tax Package includes: 

• Action plan for fair and simple taxation, which includes help to enforce existing tax rules for improved revenues, improved use of data technology to combat fraud, promote awareness of taxpayers’ rights, etc. 
• Revision of Administrative Cooperation which includes harmonizing exchange of marketplaces’ third-party seller data to fight fraud, etc. 
• Tax Good Governance Communications, which includes improving tax practices, tax cooperation, etc. 

VAT measures within the Tax Package’s Action Plan 2020/21 and 2022/23 include 

• VAT exemption for financial services; 
• A single EU VAT registration and return for goods and services not already covered; 
• The extension of One Stop Shop (“OSS”) single VAT return to all B2C sales across the EU; 
• Improvements to e-payment facilities for other taxes especially for small and medium sized businesses (“SME’s”); 
• Digitization of VAT reporting, including e-invoice reporting, real-time submissions for intra-EU transactions and streamlining domestic transactions, etc.; 
• Provision of more options to move to automated VAT data sharing for fraud prevention; 
• Simplification VAT laws and process relating to of the e-commerce distance selling of excise goods; 
• Data analytics methodologies will be encouraged across Member States in the drive to more risk-based VAT assessments and audits to reduce the administrative burden on honest businesses. In addition, development of a modern tax governance framework for all tax authorities; 
• More administrative cooperation agreements with third-countries, similar to the one with Norway, etc. 

Implications

• Companies incorporated in European Union (“EU”) member states in financial service sector will benefit from the VAT exemption. 
• The improved e-payment facilities will benefit the small and medium sized businesses (“SME’s”). 
• The companies will have to start analyzing and preparing for real-time submissions for intra-EU transactions, digitization of VAT reporting and e-invoicing, etc. when the member states transpose the above measures into their domestic laws. 

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