Brazil

Revised employee social security contributions for private sector employees

Ordinance no. 3,659 of February 10, 2020, provides for the revised* employee social security contribution (i.e. National Social Security Institute – INSS) threshold and rates for private sector employees. The same is as follows:

 

From January 1, 2020 to February 29, 2020 –

Contribution wage (BRL)

Non-Cumulative Rate For INSS Collection Purposes

Up to 1,830.29

8%

From 1,830.30 to 3,050.52

9%

From 3,050.53 to 6,101.06

11%


 

From March 01, 2020 –

Contribution wage (BRL)

Progressive Rate For INSS Collection Purposes

Up to 1,045.00

7.5%

From 1,045.01 to 2,089.60

9%

From 2,089.61 to 3,134.40

12%

From 3,134.41 to 6,101.06

14%

 

*Please note that the rates as per the Constitutional Amendment 103 of November 12, 2019 have been substituted by Ordinance no. 3,659 of February 10, 2020.

 

Implication

 

Employers are required to make necessary changes in their payroll to comply with new employee social security rates, especially noting the differences in the amounts in first 2 months.

Canada

Provincial Budget highlights 2020 – British Colombia introduces new top personal income tax rate of 20.5% and requirement for Provincial sales tax registration etc., Nova Scotia reduces general corporate income tax rate by 2% 

British Colombia

British Columbia’s Finance Minister Carole James delivered the Province’s Budget for the year 2020 on February 18, 2020. The key highlights of budget are as follows:

For Individuals

  • Introduction of new top personal income tax rate of 20.5%. Below are the personal income tax brackets and rates for the year 2019 and 2020.

Tax Year 2019

Tax year 2020

Taxable Income (In CAD)

Tax rate

Taxable Income (In CAD)

Tax rate

0 to 40,707

5.06%

0 to 41,725

5.06%

40,707.01 to 81,416

7.70%

41,725.01 to 83,451

7.70%

81,416.01 to 93,476

10.50%

83,451.01 to 95,812

10.50%

93,476.01 to 113,506

12.29%

95,812.01 to 116,344

12.29%

113,506.01 to 153,900

14.70%

116,344.01 to 157,748

14.70%

Over 153,900

16.80%

157,748.01 to 220,000

16.80%

Over 220,000

20.50%

  • Deduction for basic personal amount increased from CAD 10,682 (2019) to CAD 10,949 (2020)

For Companies

  • There is no change in Province’s Corporate Income Tax rates.

Provincial Sales Tax (PST)*

  • From July 1, 2020, Canadian sellers of goods and Canadian and foreign sellers of software and telecommunication services are required to register to collect PST if specified British Colombia revenues exceed CAD 10,000.

* Provincial sales tax (“PST”) is a retail sales tax that applies when a taxable good or service is purchased, acquired or brought into British Colombia, unless a specific exemption applies.

Nova Scotia

Nova Scotia’s Minister of Finance, Karen Casey, presented the province’s budget 2020 on February 25, 2020. The key highlights of budget are as follows:

For Individuals

  • No changes in personal income tax rates

For Companies

  • Effective from April 1, 2020, reduction in general Corporate income tax rates by 2%, from 16% to 14%
  • Effective from April 1, 2020, decreases in Nova Scotia’s small business tax rate from 3% to 2.5%

Implications

 

  • British Colombia Employers are required to withhold income tax from salary based on new personal income tax rates.
  • Businesses supplying goods or software and telecommunication services in British Colombia are required to consider Provincial Sales Tax registration requirements in British Colombia.
  • Companies in Nova Scotia are required to pay less corporate income tax (“CIT”) due to reduced CIT rate.

Quebec: From May 1, 2020, rise in Minimum wage from CAD 12.50 per hour to CAD 13.10 per hour

Effective from May 1, 2020, the minimum wage in Quebec will be increased by CAD 0.60 an hour. Thus, minimum wage in Quebec will increase from CAD 12.50 per hour to CAD 13.10 per hour.

Canada Automobile Allowance increased by one cent for 2020

For 2020, there is CAD 0.01 (1 cent) increase in income tax deduction limits on tax-exempt allowances paid by employers to employees who use their personal vehicles for business purposes (mileage allowance).

Particulars

2019*

2020*

For first 5,000 kilometers driven

CAD 0.58 per kilometer

CAD 0.59 per kilometer

And each additional kilometer thereafter

CAD 0.52 per kilometer

CAD 0.53 per kilometer

*In the Northwest Territories, Yukon, and Nunavut, there is an additional four cent per kilometer allowed for travel.

China

Temporary relief in social security contributions and housing provident fund payment for small and large companies due to coronavirus impact

On February 18, 2020, China government announces temporary relief from social security contribution for the period February to June 2020 in following manner:

  • For Small and Medium Sized Company* – Full exemption from Old age pension contribution, unemployment insurance contribution and work-related injury insurance contribution.

  • For Large Company – 50% exemption from Old age pension contribution, unemployment insurance contribution and work-related injury insurance contribution.

In addition to the above benefit. Companies can also apply for deferring payment related to Housing provident fund. Such companies will have a grace period for paying Housing provident fund contribution from February to June 2020 without affecting employee’s interest.

*Criteria for determining Small and Medium Sized Company vary from industry to industry. Usually the range is between

  • Employees less than 200 to 1000 and

  • Operating income less than RMB 20 (about USD 2.84 million) to 200 million (about USD 28.4 million)

Implication

Such temporary relief will benefit companies in saving payments related to compensation and benefits and will also help them to cope up with losses suffered due to corona outbreak.

The payrolls need to be adjusted to avail the benefits.

Small-Scale taxpayers in all Sectors are allowed to issue Special VAT invoices with effect from February 01, 2020

Starting from February 1, 2020 Small scale taxpayers in all sectors (earlier this was allowed to specific sectors such as hotel industry, construction industry, software and IT industry etc.) will now be allowed to issue Special VAT invoices* to its customers in accordance with circular issued by State Administration Tax of China in August 2019.

*Special VAT invoices is one of the important documents for claiming off set of the input VAT against output VAT thereby reducing the VAT liabilities. But it is to be noted that special VAT invoices are subject to stricter supervisions by the tax authorities.

New law on Internet content and governance regulation with effect from March 1, 2020

China New law on internet content and regulations has been published and will be in effect from March 1, 2020. The new law requires companies or organization hosting website in china to make following changes in their website governance guidelines:

  • In addition to currently existing categories such as defaming national unity and integrity, the new law requires prohibiting publications that defame national heroes.
  • Appointing officer who will be responsible for content publishing and monitoring.
  • Maintaining positive obligation in relation to managing online accounts, advertisements, regular audits of content etc.

Implication

Companies which are hosting websites in china should update their internet content and governance as per the new law otherwise they will be liable for legal consequences.

France

Changes in employee stock option scheme for encouraging startup companies in France

French government has introduced changes in one of the most commonly used employee stock option schemes in startup companies viz, Bons de Souscription de Parts de Créateur d’Entreprise (“BSPCE”).

Now the BSPCE scheme will also be allowed for foreign startup companies with France based employees. Moreover, under this scheme employee will be allowed to exercise the stock options at fair market value giving the possibility of discount as compared to valuation derived from latest fund raising.

Further, exemption available to employer from employer’s contribution (Cotisations Patronales) under allocations of free shares scheme (Attributions Gratuites d’Actions/AGA) is also expanded. Now the benefits are also applicable to large companies with 250 to 4,999 employees. Earlier this benefit was limited to small companies only with less than 250 employees.

Implication

The popular Bons de Souscription de Parts de Créateur d’Entreprise (“BSPCE”) stock options scheme will now be available to foreign companies employing in France.

Germany

New version of GoBD (GrundsätzezurordnungsmäßigenFührung und Aufbewahrung von Büchern, Aufzeichnungen und Unterlagen in elektronischer Form sowiezumDatenzugriff - Principles for the Keeping and Storage of Books, Records and Documents in Electronic Form and for Access to Data) 2020 Published

From January 1, 2020, new version of GoBD (GrundsätzezurordnungsmäßigenFührung und Aufbewahrung von Büchern, Aufzeichnungen und Unterlagen in elektronischer Form sowiezumDatenzugriff - Principles for the Keeping and Storage of Books, Records and Documents in Electronic Form and for Access to Data) is published. The following changes will be needed for IT and data systems in the companies:

  • All entities should retain financial record up to 10 years and contractual and corporate mails (including letters, e-mails) up to 6 years.
  • Accounting data can be recorded and stored on centralized servers abroad.
  • The cloud has been included in the definition of "data processing systems".
  • Scanning, photographing of vouchers etc. with a Smartphone is now also permitted, provided GoBD requirements are met.

Updates in data protection law – employee consent by emails will be allowed

Following are the changes in data protection law, employment law and social security:

  • From November 21, 2019, due to The Second EU Data Protection Adaptation and Implementation Act ("ZweiteDatenschutz-Anpassungs- und Umsetzungsgesetz EU"):
  • The threshold to appoint data protection officer is increased from 10 persons involved in the processing of personal data to 20 persons.
  • Employee’s consent required by e-mail and not in writing for processing of data.

Increase in minimum wages from EUR 9.19 per hour to EUR 9.35 per hour and miscellaneous changes

  • From January 1, 2020, statutory minimum wage for adult employees had been increased from EUR 9.19 per hour to EUR 9.35 per hour.

  • From January 1, 2022, employee will no longer submit their certificate for incapacity to work to their employer. The health insurance company will inform the employer electronically about the employee incapacity to work. The health company will also inform about the beginning, duration of employee’s incapacity and expiry of continued payment of remuneration.

Hong Kong

Statutory Holidays to be increased from 12 to 17 Days per Year

On January 14, 2020, Hong Kong government announces its intention to increase statutory holidays from 12 to 17 per year. Following will be the 5 additional holidays:

  • Good Friday
  • Day following Good Friday
  • Easter Monday
  • Christmas Day
  • First weekday after Christmas.

Implications

The employers will have to factor in additional holidays and adjust their employee handbooks.

Hong Kong Budget 2020-2021 Highlights

The Financial Secretary of Hong Kong presented the budget for the year 2020 – 2021 to the legislative council on February 26, 2020. The key highlights of budget are as follows:

For Individuals

  • Reduction of salaries tax by 100 % (capped at ceiling of HKD 20,000/USD 2,575) for the year of assessment 2019-2020. Same percentage and ceiling were applicable for the year of assessment 2018-19

  • No changes in tax rates, allowances.

For employers/companies

  • Reduction of profit tax by 100% (capped at ceiling of HKD 20,000/USD 2,575) for the year of assessment 2019-2020. Same percentage and ceiling were applicable for the year of assessment 2018-19

  • Business registration fees waiver for the year 2020 - 2021.

  • Annual registration fees waiver for all company annual returns for 2 years i.e. 2020-21 and 2021-22.

  • No changes in profit tax rates.

India

India Union Budget 2020-21 Highlights

The Finance Minister Nirmala Sitharaman presented the Union Budget for the year 2020-21 on February 1, 2020. As mentioned in budget statement, India is now the 5th largest economy in the world. The key highlights of budget are as follows:

For Individuals

  • Introduction of a new personal income tax regime: New income tax slabs and lower rates for individuals have been introduced. The new rates are optional and are available to those who are willing to forego some exemptions and deductions.

Finance Minister has removed around 70 exemptions, deductions (e.g. deductions under Chapter VI-A of Income Tax Act – which includes deduction for LIC, Investment in Equity Linked Saving Scheme (“ELSS”), Medical insurance premium etc.) with a view to simplify the tax regime.

Existing rates

(For Financial year 2019-20)

Proposed rates in Union Budget 2020-21**

(For Financial year 2020-21)

Annual Taxable Income (in INR)

Tax rate

Annual Taxable Income (in INR)

Tax rate

0 to 250,000

0%

 0 to 250,000

  0%

250,001 to 500,000 *

5%

 250,000 to 500,000*

  5%

500,001 to 1,000,000

20%

 500,001 to 750,000

  10%

1,000,001 and above

30%

 750,001 to 1,000,000

  15%

 

 

 1,000,001 to 1,250,000

  20%

 

 

 1,250,001 to 1,500,000

  25%

 1,500,001 and above

  30%

* Individual taxpayers having taxable income up to INR 500,000 get full tax rebate and are not required to pay income tax. Please note that taxable income exceeding INR 500,000 do not get any benefit from such tax rebate and hence individuals have to pay income tax on full taxable income.

** As the new tax regime will be optional for the taxpayers and hence an individual who is currently availing deductions, exemption under the Income Tax Act may choose to forgo them and pay tax in the new regime. Some of the common deductions that need to be forgone include – House rent allowance, Leave travel allowance, Standard deductions, Interest on property, Investment related deductions under 80C, 80D, 80DD etc.

Note – surcharge and cess will continue to apply at existing rates, depending up on the level of individual’s income.

For employers – the employers will need to obtain confirmation from the employees whether they wish to shift to the new tax regime and calculate the withholding taxes accordingly. The salary structures may need tweaking in such cases. Also, this will be an annual option, so the confirmation will need to be obtained every year.

  • Dividend Distribution Tax (tax on dividends) shifted to individuals instead of companies. Dividend to be taxed only in the hands of recipients, at the applicable rates.

  • PAN will soon be instantly allotted online on the basis of Aadhaar without any requirement for filling up of detailed application form.

  • An upper limit of INR 750,000 has been set for employer's contribution in a year to national pension scheme, superannuation fund and recognized provident fund and any excess contribution to be taxable.

 

  • The maximum number of days that a person can stay in India and not be a resident for tax purposes have been reduced from 183 days to 120 days.

 

  • The budget proposed that any Indian citizen who is not liable to tax in any other country or territory will now be deemed to be tax resident in India. However, the government has clarified that – “the new provision is not intended to include in tax net those Indian citizens who are bonafide workers in other countries. In some section of the media the new provision is being interpreted to create an impression that those Indians who are bonafide workers in other countries, including in Middle East, and who are not liable to tax in these countries will be taxed in India on the income that they have earned there. This interpretation is not correct.”

For Companies

  • Companies would not be required to pay Dividend Distribution Tax. Hence, the setting up a company instead of limited liability partnership (“LLP”) may become even more advantageous for many foreign companies. The Corporate Income Tax Rate is already 22% (excluding Cess and surcharge) as compared to LLP rate of 30% (excluding Cess and surcharge).

  • Currently under Companies Act, criminal liabilities are imposed for acts that are civil in nature. The Budget proposes certain amendments to be made under Companies Act to correct this.

  • For Start-ups, taxation point for Employee Stock Option Plan (“ESOP”) in the hands of employees has been deferred from “at the time of exercise” to “tax payment by fifth year or till employee leave the company or when employee sell their shares, whichever is earlier”.

  • Increase in the turnover threshold for audit of small and medium enterprises from INR 10 million to INR 50 million, provided that the cash receipts and payments are less than 5% total receipts and payments respectively.

  • Introduction of ‘Vivad Se Vishwas’ scheme, which proposes payment of only the disputed amount of taxes to the government. The interest and penalty will be completely waived provided the tax amount is paid by March 31, 2020. Those who avail this scheme after March 31, 2020 will have to pay some additional amount. The scheme will remain open till June 30, 2020. Taxpayers in whose cases are pending at any level of appeals can benefit from this scheme.

Goods and Service Tax (GST)

  • From April 1, 2020, a simplified GST return shall be implemented. It will make return filing simple with features like SMS based filing for nil return, return pre-filling, improved input tax credit flow and overall simplification.

  • Refund process has been simplified and has been made fully automated with no human interface.

  • Electronic invoicing will be implemented in a phased manner starting from this month itself on optional basis. It will facilitate compliance and return filing.

Once these proposals are passed by the Parliament, these changes will become effective from the financial year 2020-21.

SPICe+ Web Form: New Facility introduced for incorporation of a company in India w.e.f. February 15, 2020

Ministry of Corporate Affairs (MCA) has introduced a new SPICE+ web facility for incorporating a company in India. The major differences with the existing form have been identified in bold -

Particulars

SPICe+ Web Form – new form

SPICe e-Form (INC-32) – current form    

Form Name

SPICe+ stands for Simplified Proforma for Incorporating Company electronically Plus: INC 32.

SPICe stands for Simplified Proforma for Incorporating Company electronically.

Type/purpose  of form

It is an integrated web form offering multiple services for incorporating a company in India.

It is an integrated web form offering multiple services for incorporating a company in India.

Facilities provided

  • Reservation of company name
  • Company Incorporation
  • Application for Director Identification Number (“DIN”) allotment
  • Application for issue of Permanent Account Number (“PAN”)
  • Application for Tax Deduction and Collection Account Number (“TAN”)
  • Reservation of company name
  • Company Incorporation
  • Application for Director Identification Number (“DIN”) allotment.
  • Application for issue of Permanent Account Number (“PAN”)
  • Application for Tax Deduction and Collection Account Number (“TAN”)

Use of Facility/Forms

All new name reservations for new companies as well as new incorporations shall be applied through SPICe+ only

Incorporation of companies for names reserved through the existing RUN (Reserve Unique Name) service shall continue to be filed in the existing SPICe eform along with related linked forms as applicable

Effective date

February 15, 2020 onwards

Already in Place

Application for other registration

The application for incorporation of a company (i.e. SPICE+ web form) shall be accompanied by e-form AGILE - PRO  (INC-35) containing an application for registration of the following numbers, namely:-

  • Goods and services tax Identification Number (“GSTIN”)
  • Employees provident fund organization registration (“EPFO”)
  • Employees State Insurance Corporation registration (“ESIC”) c
  • Profession Tax Registration with effect from the February 23,2020 (Maharashtra).
  • Opening of Bank Account with effect from February 23, 2020.

The application for incorporation of a company (i.e. SPICe e-form) shall be accompanied by e-form AGILE (INC-35) containing an application for registration of the following numbers, namely:-

  • Goods and services tax Identification Number (“GSTIN”)
  • Employees provident fund organization registration (“EPFO”)
  • Employees State Insurance Corporation registration (“ESIC”)

Implication

Although Incorporation of company in India has become much easier and less time consuming with these new forms, one should take a note that all compliances will start immediately after the registrations like profession tax, provident fund, ESIC, GST etc. and ideally such registrations should be obtained as and when needed.

Changes in due date for filing GST monthly return (GSTR-3B) for taxpayers having annual turnover below INR 50 million

The due date for filing of GST monthly return (GSTR-3B) is amended and it will be based on the annual turnover of the business and the state in which the business is situated.

The current due date of filing GSTR-3B is 20th of every month which will be changed as under:

Sr. No.

Criteria

Due Date of filing GSTR-3B Return

1

Taxpayer having annual turnover of INR 50 million or above in a previous financial year

20th of every month

2 (a)

Taxpayer having annual turnover below of INR 50 million in a  previous financial year and situated in Chhattisgarh, Madhya Pradesh, Gujarat, Daman and Diu, Dadra and Nagar Haveli, Maharashtra, Karnataka, Goa, Lakshadweep, Kerala, Tamil Nadu, Puducherry, Andaman and Nicobar Islands, Telangana and Andhra Pradesh.

22ndof every month

2 (b)

Taxpayer having annual turnover below of INR 50 million in a  previous financial year and situated in Jammu and Kashmir, Ladakh, Himachal Pradesh, Punjab, Chandigarh, Uttarakhand, Haryana, Delhi, Rajasthan, Uttar Pradesh, Bihar, Sikkim, Arunachal Pradesh, Nagaland, Manipur, Mizoram, Tripura, Meghalaya, Assam, West Bengal, Jharkhand and Odisha.

24th of every month

New tax forms Form 10-IC to opt for reduced corporate tax rates for domestic companies

The Central Board of Direct Taxes (“CBDT”) has introduced the new Form 10-IC for exercising option of reduced corporate tax rate of 22% by amending the Income Tax Rules vide a notification dated February 12, 2020. The new Form 10-IC will be effective from April 1, 2020. Such filing of Form 10-IC for reduced corporate tax rate of 22%.

The taxpayer can file Form No. 10-IC electronically either under digital signature or electronic verification code.

Implications

Filing of form 10-IC is necessary to claim the benefit of the reduced tax rate from April 1, 2020. This should help most companies in India in reducing their tax burdens. Certain companies that are claiming special exemptions like tax break for special economic zones may not file this form.

India: New format of Auditor's Report notified for the financial years commencing on or after April 1, 2019

Ministry of Corporate Affairs (“MCA”) has issued the Companies (Auditor's Report) Order, 2020 (“CARO”) dated February 25, 2020. It provides the applicability criteria for various types of organizations and details regarding the matters to be included in the Auditor’s Report of an organization. It is applicable for the financial years commencing on or after the April 1, 2019. The new CARO has many additional disclosures compared to the old format.

  • Certain clauses are newly added in CARO, 2020. It includes:
  • Disclosure of undisclosed transactions – Reporting of any disclosure made on transactions which are not recorded in the books but have been surrendered or disclosed as income in tax assessments.
  • Internal Audit System- Reporting whether Internal Audit System is commensurate with the size and nature of the Company and whether reports of Internal Auditors were considered by the Statutory Auditor.
  • Cash Losses- Reporting of whether the company has incurred any cash losses in the F.Y., if yes, then its amount.
  • Consideration of outgoing auditor- Whether there has been any resignation of statutory auditors during the year, if any, whether the auditor has taken into consideration the issues, objections or concerns raised by the outgoing auditors.
  • Material uncertainty in relation to realization of financial assets and payment of financial liabilities - On the basis of the financial ratios, ageing and expected dates of realization of financial assets and payment of financial liabilities, other information accompanying the financial statements, the auditor’s knowledge of the Board of Directors and management plans, whether the auditor is of the opinion that no material uncertainty exists as on the date of the audit report that company is capable of meeting its liabilities existing at the date of balance sheet as and when they fall due within a period of one year from the balance sheet date
  • Compliance of Corporate Social Responsibility (CSR) – Reporting on whether in respect of other than ongoing projects, the company has transferred unspent amount to a fund specified in Schedule VII to the Companies Act, 2013 within a period of 6 months of the expiry of F.Y.; Whether any amount remaining unspent has been transferred to special account
  • Qualifications or adverse remarks in the consolidated financial statements - Whether there have been any qualifications or adverse remarks by the respective auditors in the CARO reports of the companies included in the consolidated financial statements, if yes, indicate the details of the companies and the paragraph numbers of the CARO report containing the qualifications or adverse remarks.

  • Certain clauses of CARO 2016 are modified by CARO 2020, as follows: (This is an illustrative list and not an exhaustive list)
  • Additional reporting on maintenance of proper records of Property, Plant, Equipment and Intangible Assets is required
  • Reporting is required for any revaluation of Property, Plant, Equipment and Intangible Assets, if any and to specify any change which is more than 10%.
  • Reporting made mandatory for disclosure of any proceedings of Benami Property under Benami Transactions (Prohibition) Act, 1988.
  • Reporting on physical verification of inventory, its coverage and procedure, its disclosure if discrepancy is 10% or more in aggregate for each class of inventory.
  • Disclosure for any sanction of working capital limits in excess of INR 50 million, in aggregate, from any banks and financial institutions on the basis of security of current assets
  • Reporting is required for any investments made in or provided any guarantee or security or granted any loans or advances to companies, firms, Limited Liability Partnerships or any other parties
  • Reporting whether company is declared willful defaulter by any bank or financial institution or other lender.
  • Whether funds raised on short term basis have been utilized for long term purposes, if yes, the nature and amount to be indicated;
  • Reporting on whether the company has taken any funds from any entity or person on account of or to meet obligations of its subsidiaries, joint ventures or associates, if yes, then amount and nature of the same.

Implication

Effective from April 1, 2020, there will be additional disclosure requirements due to CARO 2020. This will increase the audit costs and efforts for smaller companies in India. The audit process may have to be started earlier to complete audits on time.

Ireland

Universal Social Charge (USC) limits change from February 1, 2020.

Ireland's Department of Finance has changed the Universal Social Charge (USC) thresholds from February 01, 2020. As a result, the USC rates and bands are amended as follows:

  • EUR 0 - EUR 12,012 @ 0.5%
  • EUR 12,012.01 - EUR 20,484 @ 2% (previously EUR 12,012 – EUR 19,874)
  • EUR 20,484.01 - EUR 70,044 @ 4.5% (previously EUR 19,874 – EUR 70,044)
  • EUR 70,044 and above @ 8%

Implications 

The employers will need to adjust their payrolls for these changes.

               

Israel

Real-time reporting of invoices for the amount above NIS 5,000 (USD 1310) for all B2B transactions

In order to combat tax avoidance, Israel government is planning to introduce real time reporting for VAT invoices for all B2B transactions of which invoice amount exceeds NIS 5,000 (~USD 1030).  The business owners will need to take prior approval from the tax authority at the time of the transaction taking place. Failure to obtain such approval will result in non VAT deduction for tax purposes.

Italy

Digital Service Tax (DST) of 3% to be levied w.e.f January 01, 2020

On approval of Law December 27, 2019, no. 160 (the Budget Law), the Italian digital services tax (the “DST”), has come into force effective from January 1, 2020.

Pursuant to such Law, the Digital Service Tax (“DST”) will be due:

  • By any Italian or non-Italian entity, satisfying both of the following conditions, individually or on group basis, during the calendar year preceding the one in which the tax is due:
  • Total amount of worldwide revenues exceeds EUR 750 million;
  • Total amount of taxable revenues obtained in Italy during the relevant financial year from the taxable services (as defined below) exceeds EUR 5.5 million.

  • The rate is 3%, to be paid before February 16, 2021 for the preceding fiscal year;

  • Digital services are as under:
  • Providing advertising on a digital interface targeted to the users of the same interface;
  • Providing a multilateral digital interface that enables users to be in contact and interact with each other, also in order to facilitate the direct supply of goods or services;
  • Transmission of data collected from users and generated by the usage of a digital interface.

Implications

The Digital Service Tax (DST) dubbed as the “Google tax” in many countries will not apply in Italy too.

Mexico

Non-resident e-services providers to comply with VAT registration and filing requirements.

Non-resident providers of electronic or digital services to Mexican consumers must register for VAT by July 1, 2020.  Non-residents must appoint a local VAT representative as a correspondent with the Mexican authorities. Once VAT registered, providers will have to report VAT collected on monthly basis.

The new VAT liabilities apply to B2B as well as B2C supplies.

Implications

The non-resident digital service providers in Mexico will have to comply with the VAT registration formalities and also with the VAT reporting requirements on a monthly basis.

Unidad de Medida y Actualización (UMA) amounts updated from February 1, 2020

The values of the “unit of measure and update” (unidad de medida y actualización (“UMA”)) were published on January 10, 2020 in the official gazette.

The updates values of the UMA will be effective February 01, 2020:

Daily: MXN 86.88 (previously MXN 84.49)

Monthly: MXN 2,641.15 (previously MXN 2,568.50)

Annually: MXN 31,693.80 (previously MXN 30,822.00)

Implications

The UMA values have implications for tax and social security contributions. The employers will have to review their payroll and social security calculations.

Netherlands

Employers in European Economic Area (EEA) and Switzerland with Non-Dutch employees in the Netherlands to intimate Social Affairs and Employment Ministry about such employees w.e.f. March 1, 2020

As per the Posted Workers in the European Union (Working Conditions) Act, from March 1, 2020 all the employers (in European Economic Area (“EEA”) and Switzerland) having Non-Dutch Employees Working temporarily in the Netherlands must provide a notice in advance to the government through the “Dutch Ministry of Social Affairs and Employment online notification desk”. Such employees under the European Union (Working Conditions) Act have right to certain benefits such as minimum wage, minimum rest periods and holidays, safe working conditions and equal treatment.

The Employers that come to the Netherlands with their own staff, Multinationals sending employees from one of their companies to the Netherlands; and Agencies that send temporary employees to work in the Netherlands will also have to comply with the same.

Implications

The specified foreign employers having non-Dutch employees in Netherlands will have to ensure compliance with the notification. Failure to provide such an advance notice result into fine levied upon the foreign employer, foreign self-employed person and the relevant contracting party.

The Dutch UBO Register which was to be implemented by January 10, 2020 is delayed

The deadline of Dutch UBO Register implementation by January 10, 2020 is delayed without notification of a further deadline for its implementation as per the decision of the Dutch Upper House of the Parliament.

Singapore

Changes in tax treatment of benefits in kind from year of assessment 2020

With effect from year of assessment 2020, Singapore government announce changes in tax treatment of benefits in kind, key changes are given below:

Accommodation benefits

Taxable value of housing benefits will be actual rent paid by the employer less rent paid by the employee. Earlier it was based on Annual Value plus 40%-50%, depending on furnished status of the property.

Car benefits

New formula for calculating car benefits is as follows

  • Employer owned car: 3/7 x [(Car cost - Preferential Additional Registration Fee (PARF) rebate)/10* + Actual running and maintenance costs incurred by the employer]
  • 10 years for new car and for second hand car it will be remaining period from the date of purchase of the car to the date of expiry of the Certificate of Entitlement

  • Employer leased car: 3/7 x (Rental cost incurred by the employer + Actual running and maintenance costs incurred by the employer)

In the above formula, the key change is that now employer will have to maintain all track records of actual running and maintenance costs incurred by the employer.

Implications

Employer should make sure that the taxes are calculated as per these tax changes and reported accordingly.

Singapore Budget 2020 Highlights

The Deputy Prime Minister and Finance Minister Mr. Heng Swee Keat presented the budget for the Financial Year 2020 on February 18, 2020. The key highlights of budget are as follows:

For Individuals

No changes in tax rates

For Employers/Companies

  • Corporate Income Tax (“CIT”) rebate of 25% (20% for assessment year 2019) of tax payable, capped at SGD 15,000 (SGD 10,000 for assessment year 2019) will be granted to the companies for the assessment year 2020.

  • Under the Wage Credit Scheme (“WCS”) the government co-funding ratios for wage increase (in the year 2019 and 2020) will be increased to 20% and 15% respectively from the current 15% and 10%.The qualifying ceiling for gross wages is also raised from SGD 4,000 to SGD 5,000 for both the years i.e. 2019 and 2020.

  • The number of assessment year to which unutilized Capital Allowances (“CAs”) and trade losses from assessment year 2020 can be carried back will be increased to 3 assessment years (previously 1 assessment year). The carry back can be claimed in immediately preceding assessment year 2020 i.e. 2017, 2018 and 2019). The maximum amount of deduction that can be carried back is capped at SGD 100,000.

  • No changes in corporate income tax rates.

Goods and Service Tax (GST)

GST will continue to be charged at 7% as against the earlier announcement of GST rate increase to 9% will not be implemented in 2021. The government plans to increase the GST rate to 9% by 2025.

South Korea

South Korea amends labor laws w.e.f. January 2020; more flexible family-care leave

South Korea amends Equal Employment Opportunity and Work-Family Balance Assistance Act ("EEA") to make family-care leave more flexible.  An employer can now allow the employee to take 10 days of family care leave annually on a single-day basis instead of earlier provision of taking continuous 30 days’ family care leave out of the 90 days of family care leave available.

Further, when family care leave can now be used to take care of grandparents or grandchildren or to take care of a child for reasons such as attending kids school events. Earlier the family care leave could be used only for taking care of

  • Parents
  • Spouses
  • Children or
  • In-laws

The amendment to the EEA also makes clear that an employer can only deny an employee's request to go on family-care leave, or request a change in the leave period on a limited basis.

Implications

Employers will have to change their internal policies and employment handbooks to comply with these changes.

Sweden

Reduction in amount of minimum share capital from SEK 50,000 to SEK 25,000 for incorporating a company in Sweden

Effective from January 1, 2020, minimum share capital required to incorporate private limited company in Sweden is reduced from SEK 50,000 to SEK 25,000. Existing private limited companies may reduce their share capital to SEK 25,000.

United Kingdom

UK Budget 2020 Highlights

The Chancellor of the Exchequer presented the UK Budget 2020 to Parliament on March 11, 2020. As mentioned in the budget statement, employment growth remains strong; the earnings growth continues in the UK to be above the inflation rate while the employment rate has reached a record high in 3 months to December 2019. The Budget also has allocated a whopping amount of GBP 12 billion plan in support of public services, individuals and businesses, whose finances are affected negatively due to COVID-19.

 

As per Budget 2020, Key Rates unchanged- Corporation Tax Rate maintained at 19 percent from April 2020, employer and employee NIC rates unchanged, Income Tax, Capital Gains Tax, Dividend Tax, rates also remain unchanged, the VAT rates and thresholds remain the same as well. The highlights of budget 2020 are as follows:

For Individuals 

  • With effect from April 2020, Increase in the threshold of National Insurance Contributions (“NICs”) (i.e. the amount at which employees start paying for the Contributions- ‘NICs’) from GBP 8,632 to GBP 9,500.

  • With effect from April 2020, the maximum flat-rate deduction available to employees working from home under home working arrangements to cover additional household expenses increased from GBP 4 per week to GBP 6 per week.

  • Three social security benefits introduced by the Scottish government are exempt from income tax. These benefits are viz., Job Start; Disability Assistance for Children and Young People; and, the Scottish Child Payment

  • The threshold for pension’s tax relief raised by GBP 90,000. This means that from 2020-21 the “threshold income” will be GBP 200,000, so this should now only impact individuals earning in excess of GBP 200,000 per annum and the annual allowance (GBP 40,000) will only begin to taper down for individuals who also have an “adjusted income” above GBP 240,000.

 

For Employers 

  • The budget has highlighted the off-payroll working rules (commonly known as IR35) that will be implemented on April 06, 2020 (as previously announced). The government has recently concluded a review of the reform and is making a number of changes to support its smooth and successful implementation and the reform will, therefore, be legislated in Finance Bill 2020. Under these rules, companies employing contractors will now need to decide if they are employees and not contractors and apply National insurance (NIC) and withhold taxes (PAYE) accordingly. In case of small companies this burden to determine if the he / she is an employee or contractor shifts on the contractor. The need for documentation to prove if a contractor is indeed a contractor not needing NIC / PAYE or is an employee will be critically important.  

  • The budget highlighted the announcement made by the Prime Minister in light of COVID-19 bill, allow Statutory Sick Pay (“SSP”) payable by employers is allowed to be paid from the first day of sickness absence, rather than the fourth day, for people who have COVID-19 or have to self-isolate, in accordance with government guidelines, temporarily.

  • From April 2020, the National Living Wage (minimum wages) will increase from GBP 8.21 to GBP 8.72.

  • From April 2020, the Employment Allowance for Employer National Insurance Contributions is increasing from GBP 3,000 to GBP 4,000.

 

For Companies 

  • Corporation Tax Rate is continued to be maintained at 19% from April 2020.

  • The budget has highlighted that, as announced at Budget 2018, the government will introduce a new 2% the Digital services tax (“DST”) on the revenues of certain digital businesses (search engines, social media services, and online marketplaces, etc.) effective from April 01, 2020. DST will apply when the group’s worldwide revenue from the digital activities is above GBP 500 million and the amount above GBP 25 million is derived from UK users. If the group’s revenues exceed the above thresholds, the revenues derived from UK users will be taxed at 2%. The group’s first GBP 25 million revenue from the UK users will not be subject to digital services tax (“DST”).

  • The budget has highlighted that, as set out in July 2019, the government will reduce most Company car tax (“CCT”) rates by 2% in 2020-21 for cars first registered from April 06, 2020, with a new zero percentage rate for pure electric vehicles (EVs). Rates will be increase in the next 2 years, i.e. increase by 1% in 2021-22 and another 1% in 2022-23.

  • The budget has highlighted that, as announced on October 31, 2019, the government will legislate to confirm that HMRC may use automated processes to issue taxpayers with notices to file tax returns and penalty notices.

 VAT

  • UK to introduce legislation for a zero rate VAT on e-publications w.e.f. December 1, 2020, to make it clear that e-books, e-newspapers, e-magazines, and academic e-journals are entitled to the same VAT treatment as their physical counterparts.

  • From January 1, 2021, postponed accounting for VAT purposes will be applicable on all imports of goods (including the imports from the EU).

UK’s plan to introduce point-based immigration system with effect from January 1, 2021

Post Brexit, the UK will be introducing a point-based immigration system which will be effective from January 01, 2021 and will end the free movement with EU.

The point-based immigration system will treat EU and non-EU citizens equally. This system will provide points which are based on various characteristics like salary, educational qualification and skills, etc. All applicants will need to demonstrate various fields such as job offer from approved sponsor, skill level, English speaking level, etc.

Implications

Any EU companies that have posted its employees in UK will need to recheck the further steps that may be needed for their Visas and its continuation.

UK allows 2 weeks paid bereavement leave for working parents with effect from April 6, 2020

Effective April 2020, the United Kingdom will be granting 2 weeks of bereavement leave (to be called ‘Jack’s Law’) for working parents as their statutory right if they lose a child under the age of 18, or suffer a stillbirth from 24 weeks of pregnancy.

UK Employment Allowance: Change in eligibility criteria for businesses from April 06, 2020

The eligibility criteria for UK employers who claims Employment allowance (EA) against their (secondary) Class 1 National Insurance contributions (NIC) is changing with effect from April 6, 2020. These employers can claim up to GBP 3,000 against their (secondary) Class 1 National Insurance contributions (NIC).

The extra criteria will include checks on de Minimis state aid* and on total NIC contribution amounts as under:

  • With effect from April 6, 2020, UK employers can claim EA only if their total (secondary) Class 1 NIC bill for the previous tax year is below GBP 100,000.

  • The deemed payment (payments made to off-payroll workers) will not to be included in the contribution amount calculation for employers (secondary) Class 1 NICs.

  • Connected companies shall consider all of their total employers (secondary) Class 1 NIC bills while checking their EA eligibility. Only 1 of those companies will be eligible to claim EA if total bill of the group comes under GBP 100,000

*Here, De Minimis state aid rules refers to those businesses which are engaged in economic activity (providing goods and services to a market), even if that activity does not result in a profit.

UK: Introduction of import VAT and Customs controls post Brexit transition period of 11 month

The Brexit will result in UK’s leaving of EU Single Market, Customs Union and VAT regime from December 31, 2020 i.e. at the end of 11 month transition period.

As a result, the United Kingdom will be introducing full import VAT and customs declarations for goods coming from European Union (EU) post December 31, 2020.

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