Global Employment Taxes Newsletter - PwC...Global Employment Tax and Payroll Lead E:...

Global Employment

Taxes NewsletterDecember 2019 Edition

PwC

We are pleased to present the latest edition of the Global Employment Taxes newsletter, bringing you updates on what’s happening to employment tax regimes in various countries across the PwC network.

This edition includes updates and insights looking forward to upcoming budget updates throughout our network, in particular see Finland, Poland, Sweden and Japan as well as tax authority consultations in New Zealand and the UK. There are also updates to tax rates, please see proposed income tax changes in Japan and Polish PIT rate updates as well as updates across the network on the treatment of non-residents.

We hope you find this interesting and insightful. Please contact us, or any of your PwC Employment Tax colleagues, if you have any queries or would like to discuss anything further.

Introduction

PwC | 2Global Employment Taxes Newsletter

Tom Geppel

Global Employment Tax and Payroll Lead

E: [email protected]

Ken O’Brien

Global Employment Tax and Payroll Lead


PwC

Contents

NORAM

APAC

Africa

Europe and the Middle East

Eurasia

LATAM

Eurasia

Africa

APAC

LATAM

NORAM

Europe and the Middle East1

2

3

4

5

6

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1Europe and the Middle East

PwC

The Finnish government’s new tax decisions

relating to the state budget 2020

The Finnish government has made the tax decisions relating to the 2020 state budget on Tuesday 17th September 2019.

Within the decisions it states the most important contents from the viewpoint of global mobility, personal income taxation and payroll taxation are as follows:

• The tax deduction of home loan interest will be decreased in the upcoming years and abolished wholly by 2023.

• The deductible portion of home loan interest will be decreased by 10 percentage points to 15% in 2020 and 5 percentage points in each year from 2021 to 2023.

• The maximum absolute amount of tax credit for household expenses will decrease from EUR 2,400 to EUR 2,250.

• The proportional amount of the deduction will decrease from 50% to 40% in service bills and from 20% to 15% in paid salaries.

• The income taxation of low income earners and average income earners will decrease by EUR 200 million by increasing work income deduction, the basic deduction in municipal taxation and pension deduction in state and municipality taxation.

• The all earned income tax levels will be corrected with the income index.

• The highest level of progressive earned income taxation, so called solidarity tax will be continued to the end of the term of the government.

The government will also propose to the Finnish Parliament that half of the moving costs paid by employer would be tax-exempt in the future in order to advance mobility of labour. The foreign expert tax regime will be stabilized and fixed tax-at-source rate and decrease from 35% to 32%.


Belgium

Control activities of the SPF Finances to

verify compliance with the tax obligations

In 2019, the Belgian tax authorities will focus their control activities on individuals in the following situations:

• The taxpayer is claiming a deduction for alimony payments in the tax return, in particular if the beneficiary of the payment is living outside of Belgium;

• The taxpayer is claiming the deduction of actual professional costs (instead of the lump sum professional costs);

• If the income from the rental of real estate in Belgium has not been correctly reported when the real estate is used for business purposes by the tenant.

• If movable income (e.g. interest/dividend) of foreign account(s) were not reported.

• If no tax return was filed, despite the reminder sent by the tax authorities (especially if it is not the first time of non-filing of the tax return).

Impact of FATCA & CRS communications for

Belgian residents

FATCA (US legislation) and CRS (an OECD initiative broadly inspired from FATCA) regulations aim to tackle international tax evasion and fraud by creating an automatic exchange of information in tax matters. Further to the FATCA and CRS communication, PwC experienced that more and more (extensive) requests for information were sent by the Belgian tax authorities, especially when no movable income (e.g. interest or dividend) and/or foreign bank account were reported in the individual’s annual tax return.

Global Employment Taxes Newsletter

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Finland

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6

The employment tax updates for 2019 are as follows:

Following the recent change of the Greek Government during summer 2019, many legislative amendments to Greek taxation are expected to be introduced within the coming months, but have not yet been implemented.

In this regard, the employment tax update for Q3 2019 could be summarised as follows:

• There has been no further development since the Q2 employment tax newsletter.

• Based on Government announcements, as from 1 January 2020 a new income tax (employment income tax) scale may be introduced for individuals and more specifically the income tax rate for income not exceeding the amount of EUR 10.000 may be reduced from 22% to 9%. In parallel, specific income tax reductions may be provided based on specific income thresholds and the number of children the taxpayer may have.

• In addition, it has been officially announced by the new Greek Government that over the following years the special solidarity contribution may be gradually reduced until its total abolition.

• Moreover, based on the relevant government announcements, the dividend tax rate is expected to be reduced from 10% to 5% as from 2020.

• It is to be noted that a relevant draft law introducing the above-mentioned amendments of the Greek income tax provisions is expected to be submitted to the Greek Parliament in mid-October 2019.

France

Greece

A More Attractive Framework for Retirement Savings

Retirement savings have been transformed. The PER (Plan d’Epargne Retraite) contains 3 savings vehicles since Oct 1 2019;

● - an “individual PER” which replaces PERP plans and “Madelin” contracts (for non-salaried workers), and

● - Two “company PER” plans that replace the collective retirement plans known as “PERCO” plans and “Article 83” plans respectively.

The PER eliminates the condition that the individual complete his/her career in the same company that set up the plan. This reform of French retirement will be complete if the Government successfully reforms the State pay as you go system.

PwC


Company Cars

Revenue revisited the guidance on company cars in EBrief 094/19 which led to the Tax and Duty Manual 05 04 02 being updated. The key aspects of the update include: • Consolidating previous guidance on company vans; • Providing a useful summary of the taxation of

electric vehicles (i.e. exempt regardless of the open market value of the vehicle for the period 10 October 2017 to 9 October 2018) the exemption remaining in place until the start of the 2021 tax year.

• For electric cars provided by an employer post 9 October 2018, an exemption applies to cars up to the value of EUR 50,000 and where the OMV exceeds this, then the excess is taxable under normal car BIK rules.

At odds with efforts to encourage the move to electric transport, from the recent 2020 budget, the Government has ended the EUR 3,800 grant for business purchasing electric cars or plug-in hybrids. The changes apply to all applications received 23 October 2019. The grant will continue for companies purchasing electric vans.

Carbon Tax

A new tax based on vehicle’s nitrogen oxide emissions will be applied to new car purchases and used imports from 1 January 2020.In addition, an increase of carbon tax on diesel and petrol to the value of EUR 6 per tonne will likely add 2 cent to a litre of diesel and 1.7 cent to a litre of petrol.

Ireland


7

Honorariums and one off lectures

Ebrief 161/19 updates Tax Duty Manual 05 05 11 and sets out Revenue’s revised position in respect of ‘honorariums’ or individuals who give a ‘Guest Lecture’ or one off lectures. The historic practice was that individuals who gave one off lectures (or no more than two in a tax year) could receive the payment (or in some cases an honorarium) gross without deduction of tax/PAYE. Revenue’s view is now that effective from 1 September 2019, all payments to such individuals must incur PAYE under Real Time Reporting rules. This would apply to guest lecturers at third level institutions or companies. It is difficult to reconcile Revenue’s position, as in order to attract PAYE in the first instance, there must be an office or employment (as required under S112 TCA 1997). Furthermore, this could have knock on consequences in respect of travel and subsistence expenses (historically paid without deduction of PAYE) in instances where Revenue appear to be suggesting that an employment exists and therefore the normal place of work being that where the services are provided.

Tax Treatment of expenses of travel and subsistence to office holders and employees

EBrief 149/19 highlights the updates to Tax and Duty Manual 05 01 06 and collates Revenue's guidance on the tax free reimbursement of expenses. The following are covered:

• The reimbursement of tolls (i.e. home to work tolls are taxable);

• E-working and where the individual’s normal place of work is located (no change to pre existing practice);

• Temporary assignees from the State working abroad on a foreign assignment.

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8

:

Tax Treatment of expenses of travel and subsistence to office holders and employees cont. • Guidance previously included in IT54 is now

included in the Tax Duty Manual. One point to note is that Revenue’s view is that travel and subsistence may only be reimbursed tax free where the individual has 3 months service with the Irish employer prior to going on assignment;

• Incidental duties’ in the context of members of non commercial bodies. In this particular context Revenue view attendance at conventions or meetings as delegates of the body as permissible and ‘incidental’ as individuals should generally undertake their work at the periodic meetings of the bodies. This will be relevant to sports organisations, trade unions and other voluntary bodies/groups.

The most fundamental addition to the tax and duty manual highlighted by the Ebrief relates to travel and subsistence expenses by intermediaries (i.e. travel and subsistence for employees of service companies). Typically these arrangements arise where an individual sets up their own services company and are employees of that company. The service company then contracts to provide services to an end user (typically another corporate). The updated guidance highlights that:

• The facts of each case will be reviewed to determine whether there is an implied contract of employment, which in turn permits Revenue to find that an individual is an employee of the end user.

• Revenue consider the individual’s normal place of work to be that of the end user/organisation benefitting from the services and not the individual’s employer’s location, thereby denying the tax free reimbursement of travel and subsistence expenses in respect of travel and attendance at the end user’s premises.

ItalyIreland cont.

Signed the renewal of the NCLA applied to executives belonging to the industrial sector: supplementary pension schemes, lifelong learning and contractual regulation in the spotlight

On the 30 July 2019 Confindustria and Federmanagersigned the agreement for the renewal of the NCLA (dated 30 December 2014) for executives belonging to the Industrial sector. The agreement, running on the 1 January 2019 up to the 31 December 2023, achieves a considerable reversal trend in respect to the previous regulatory outlook, including several amendments and updates. On the economic side, new annual salary minima are set forth starting from year 2020 (basis EUR 69.000), while regarding the executives already employed at the 1 January 2015 the previous amounts remain applicable if more favourable. Moreover, if annual paid holidays exceeding the legal minimum threshold are not used within 24 months after the end of the accruing period, they will result in no longer being usable nor eligible for compensation if the employer has expressly invited the executive to use them within that period. Where not reported, or in cases where agreed by both parties, the employer will be obliged to pay the respective compensation indemnity, within the first month following the deadline. Furthermore: • The so called “Manager association”, has been

introduced, financed through the payment of an annual amount of EUR 100,00 for each executive by the employer;

• the increase from EUR 150.000 to EUR 180.000 of the upper limit for the calculation of fund Previndai (Integrative Pension Scheme) contribution, confirming the overall limit of 8% (4% employer charge, 4% employee) calculated on the TFR basis, together with the grant to the employer to borne a portion of contribution in charge of the executive up to the 3% (leaving a residual 1% to the employee); in the end

• starting from the 1 January 2022, the minimum Previndai contribution in charge of the employer, fixed at EUR 4.800 per year, will be due without any minimum seniority required.

PwC


Italy

Second-level collective bargaining agreement reporting: starting from 15th of September effective only through the online procedure

As communicated by the Italian Ministry of Labour with official note no. 2761 of the 29 July 2019, starting from the next 15th of September, the reporting of second-level agreements shall be performed only online – on the institutional ministerial - according to section 14 of the Legislative Decree no. 151/2015. This regulatory requirement is extended to all hypotheses into which the respective regulatory framework requires a prior reporting of the agreement to obtain social contribution and tax relief measures. Therefore, the signatory parties will no longer be admitted to address the content of the agreement by certified e-mail addressed to the National Labour Inspectorate offices. In the lack of predicted formal filing requirement, the legitimating condition imposed by the law will be considered missed with potential consequences on tax and social security benefits.

Labour cost in fixed-term contracts: published the INPS circular on the increase of the additional contribution

On the 6 September 2019, the INPS (National Institute of Social Security) published the Circular No. 121/2019, containing instructions for the management of the increase and related arrears of the i.e. NASpI (New Social Insurance for the Employment) of the additional contribution due in case of renewal of fixed-term employment contracts, starting from September 2019. The increase of the NASpI additional contribution (already fixed at an amount of 1.4% of the social security taxable basis in charge of the employer) has been set up to the amount of 0.5% for each contract renewal from 14 July 2018– even in the cases of temporary workers –following the amendments to the law i.e. DecretoDignità (Law Decree no. 87/2018, converted in law no. 96/2018). This disposition – directly related to the labour cost - has finally clarified several issues after a long wait. Firstly, the increase application occurs even in case the fixed-term contract is signed between parties following the conclusion of a pre-existing temporary employment contract between the same parties (and vice versa). Secondly, the increase must be applicable even when the parties decide to extend the employment contract modifying the justified reason, even though the application of the additional contribution should be only in case of renewals (new fixed-term agreement when the previous employment contract has already expired).


9

PwC

Stock Options

Starting from 1 February 2020, employee stock

options exercised at no cost or for lower than their fair

market value price not earlier than 3 years following

their grant date will be treated as non-taxable income

for personal income tax purposes meaning that

taxation should only arise at the time of sale in the

form of capital gains tax. This relief will apply to stock

options granted in 2020 and later years.


Poland

New Income Tax Threshold for EEs up to age 26

According to the new amendment to the Polish Personal Income Tax Act, which was introduced on 1 August 2019, income earned by the individuals under age 26 are exempt from personal income tax. The exemption is limited and applies to revenues not exceeding the first threshold of the tax scale, which is PLN 85 528. In 2019 the exemption limit was reduced proportionally (as binding for 5 months only) to PLN 35,636.67.

The exemption applies to the income from employment, and mandate/freelance contracts. The exemption does not apply to the individuals earning income from other titles, e.g. business activity, sale of the shares, as well as income taxed with a flat rate tax.

A surplus of over PLN 85 528 is subject to taxation on general terms, using a progressive tax scale (18% and 32%). The exemption only applies to the personal income tax, while the social security and health contributions continue to be withheld from the full amount of the remuneration.

In order to benefit from the new regulations in 2019, the young employees are required to file a written statement to the employer in which they confirm that their income to be received in the period August-December 2019 will be fully exempt.

Once such a statement is filed the employer is obliged to apply the new regulations and not withhold personal income tax due on the income up the limit of PLN 35,636.67. If no declaration is filed to the employer, then no actions are required from the employer, while the employees can still claim the relief within their personal income tax return for 2019.

As of January 2020, no declaration is required, and the employer is obliged to apply the new regulations to their employees aged up to 26 and not withhold personal income tax from their remuneration up to

PLN 85,528.


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Lithuania

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Portugal


11

Lower tax rate and increased deductible costs

A further amendment adopted by the Parliament relates to lowering the PIT rate in the first tax bracket from 18% to 17%, increasing the tax-deductible costs and changes in the calculation of the tax-free amount. Most changes will enter into force in October 2019.

• Lower tax rateAdopted changes in the PIT Act contain the reduction of the tax rate from 18% to 17%, while the tax rate of 32% for income above PLN 85,528 remains unchanged.Lowering the tax rate will apply to all taxpayers who receive income taxed according to the general rules, including employees, pensioners, as well as entrepreneurs who have not chosen a flat rate income tax or lump sum taxation.

• Tax deductible costsThe bill also provides a two-fold plus increase in deductible costs for employees. Monthly deductible costs due to one employment increases from month PLN 111.25 to PLN 250. The annual limit of tax costs from one employment currently cannot exceed PLN 1,335, and after the amendment it will increase to PLN 3,000. In the case of obtaining income from more than one employment relationship, the upper limit of costs will be increased from PLN 2,002.05 to PLN 4,500.For commuting employees the monthly limit of the tax deductible costs will be increased from PLN 139.06 to PLN 300, while the annual limit from the current PLN 2 502.56 will reach the level of PLN 3,600. Taxpayers with more than one employment contract at the same time who commute, will benefit from the tax costs of PLN 5,400. There are transitional provisions regarding income obtained in 2019.

• Tax-free amount and tax advancesLowering the tax rate results in changes in tax-free amount as well as the change in the method of withholding tax advances by the employer.When calculating tax advances (from annual income not exceeding PLN 85 528), the amount reducing tax in the amount of PLN 525.12 will be applied (from October 2019). The tax advances exceeding the second threshold of the tax scale are taken in the month of exceeding the threshold and not in the next month as it is currently. It may result in lack of underpayment in the annual tax returns caused by passing the threshold.

Poland

Non-Habitual Residents (NHR) Regime

Published in the Official Gazette of 23 July 2019, the Decree no. 230/2019, amending Decree no. 12/2010 of 7 January, namely in what regards to the list of high value-added activities under the Non-Habitual Residents Regime.

In addition to the update of the activities covered by the regime, the new list of high value-added activities is based on a new model that has direct correspondence with the Portuguese Classification of Jobs ("Classificação Portuguesa de Profissões"), which will also be used to clarify interpretative queries that may arise regarding the scope and the extension of those activities. The new list shall enter into force from 1 January 2020 and it will apply to taxpayers who are registered under the Non-Habitual Residents Regime as from 2020.For taxpayers who are already registered as Non-Habitual Residents or who will be registered in the regime with effects as from 2019, the list currently in force will continue to apply. However, these taxpayers may also benefit from the new list of high value-added activities once it has entered into force.

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12

Changes in Currency control legislation:

Russian citizens will enjoy a less stringent

regime for using foreign accounts

The changes introduced by the Law affect both legal

entities and individuals. The Law will come into force

on 1 January 2020. It will consist of:

● Less stringent regime for using a foreign bank

account (lifting of restriction on crediting cash

to foreign bank accounts in certain instances.

As defined by the Law, foreign bank accounts

belonging to individual residents can be used

to credit cash without any restrictions,

provided that the bank is located in a foreign

state that is an OECD or FATF member and

the foreign state exchanges information with

Russia under the CRS) and abolishing cash

flow statements in certain instances (the total

cash credited to an account / saved on the

account in the reporting period may not

exceed RUB 600k or the equivalent in foreign

currency);

● New grounds for crediting funds to a foreign

bank account (income from the sale of

precious metals in case if the income may not

be directly credited to a Russian account and

the return of a cash amount that was earlier

transferred by an individual for asset

management to a non-resident asset

manager).

Tax legislation: New situation with the sale of

real estate by non-residents.

In April 2019, there was approved law to which the

provisions of paragraph 17.1 of Art. 217 and paragraph

1 of article 217.1 of the Russian Tax Code are to be

applied by non-residents in relation to property,

regardless of the date of its acquisition.

These updates allow non-residents to sell real estate

acquired before 2016, which they have owned for at

least 5 years, without tax consequences in Russia.

Russia

The third wave of capital amnesty

Amnesty declarations can be filed from 1 June 2019 to

29 February 2020. The third stage appears to be more

stringent than the previous two. Applicants will not

just declare their foreign assets and foreign bank

accounts – they will also need to repatriate their

capital to Russia by:

● Re-domiciling the declarer’s CFC to a special

administrative district (all declared CFCs

must be registered as multinational

companies based in SADs);

● Transferring funds from foreign bank

accounts to accounts in eligible Russian banks

(the situation regarding accounts that were

already closed is unclear);

● Providing additional information when

declaring foreign accounts (e.g. cash flow

statements for accounts (deposits) and

account (deposit) transaction statements).

The individual can file a special declaration during the

third stage even if he had already filed a declaration

during the first or second stages (a one-time

declaration is allowed at every stage).

On the website of the Federal Tax Service of

Russia, you can now pay taxes by foreign bank

card

The Federal Tax Service of Russia has launched the

service “Payment of taxes by a foreign bank card”.

With it, you can pay taxes if the payer constantly lives

and works abroad, and he does not have a Russian

bank card. The service is designed for all categories of

users and is available in two languages - Russian and

English.

The service is as automated as possible and allows you

to pay property taxes in a single tax payment or enter

an index if you have a payment document. In addition,

with the help of this service, foreign electronic service

providers can pay VAT, as well as other taxes, fees and

duties, by filling out all the necessary details of the

payment order.

No commission is charged. After entering the payment

details in the service, the user is redirected to the State

Services Portal, where without authorization enters

the card data and makes the payment. The service is

intended for payment of taxes by cards of foreign

banks.

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13

Employer tax

In a recently issued press release, the Swedish government has announced plans to introduce the concept of “economic employer” in Sweden on 1 January 2021.

The initiative started in 2017, when the Swedish Tax Agency presented a memorandum with a proposal to introduce the concept of “economic employer” into Swedish tax legislation. Under the proposal, more people employed by foreign companies would be liable to pay tax in Sweden. The memorandum also contained a range of other proposals affecting foreign companies.

According to the Tax Agency’s proposal, the “economic employer” concept should be introduced in Sweden in connection with the application of the 183-day rule. An employee who is employed by a foreign company with no permanent establishment in Sweden should therefore be taxed here when they have performed their services on behalf of a Swedish business, company or other type of organization. The determining factor of whether or not the employee should be taxed is based on who they perform their services for – not who pays their salary.

The press release does not present any details, or explain how or whether the previous proposals will be changed or amended. However, the government reaffirms that the determining factor of whether or not the employee should be taxed is based on who they perform their services for – not who pays their salary. In addition, exceptions should be made for some intra- Group situations.

The government intends to present a more detailed draft of the proposal at a later date. We will therefore have to wait and see whether any changes will be made to previous proposals. The government proposes that the provisions will come into force on 1 January 2021. That will give authorities, companies and employers plenty of time to prepare for the introduction of the new regulations.

Sweden

PwC


UK


14

HMRC consultation on cross-border tax disclosure rules

From 1 July 2020 an EU directive known as DAC 6 will require taxpayers and their advisers to report details of certain cross-border arrangements that could be used to avoid or evade tax to HMRC. The aim of the consultation is to clarify HMRC’s intended approach for businesses, as it moves to finalise the regulations, which will be implemented regardless of the outcome of Brexit negotiations. The consultation also looks at definitions of a ‘relevant taxpayer’ and the circumstances that would trigger a reporting event.The draft regulations will require promoters, intermediaries and taxpayers to report details of certain types of cross-border arrangements to HMRC, where those arrangements meet certain hallmarks or criteria (which include confidentiality, remuneration arrangements, and the use of standardised documentation, among others).

HMRC will share information received in these reports with other EU member states, who will in turn share reports they receive with HMRC. This will provide HMRC with early information about new schemes which could be used to avoid or evade tax, enabling timely compliance action to be taken.The DAC provides that a cross-border arrangement is reportable if it meets one or more of the hallmarks set out in the annex. An arrangement is a cross-border arrangement if it concerns either more than one EU member state, or an EU member state and a third country.

PAYE RTI penalties – continuation of the risk-

based approach to charging penalties

Following a review, HMRC has decided to continue the risk-based approach to PAYE late filing and late payment penalties throughout the 2019/20 tax year.This means that late filing and late payment penalties will be considered on a risk assessed basis rather than being issued automatically. Penalties for 2019/20 will be issued from September 2019.HMRC will not charge late filing penalties automatically for 2019/20 provided a FPS is filed within 3 days of the payment date. Where there is a pattern of persistent late-filing within three days of the statutory filing date, employers will be reviewed and may be charged a filing penalty as part of HMRC’s risk-based approach.

Class 1A liabilities on Termination Awards on Sporting Testimonial Payments

Termination Payments - From 6 April 2020 onwards the National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill 2019 is introducing a Class 1A NICs liability on non-contractual “cash” (or cash equivalent) taxable termination payments over a GBP 30,000 threshold, which have not already incurred a Class 1 NICs liability as earnings. This will bring closer alignment between income tax and NICs treatment of termination payments.

Sporting Testimonial Payments - To bring closer alignment between the income tax and NIC treatment of sporting testimonial payments via the National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill 2019, from 6 April 2020 onwards any non- contractual and non-customary sporting testimonial payment over GBP100,000 paid to a sportsperson by a testimonial committee will incur a Class 1A NICs liability. That new Class 1A liability will be chargeable on the sporting testimonial committee and will be the responsibility of the committee controller to report and pay that Class 1A liability to HMRC.The Class 1A NIC liability arising on termination and sporting testimonial payments will be chargeable on the employer and will be payable at the same annual Class 1A percentage rate (currently 13.8%) but will not be paid or reported via the annual P11D(b) payment/reporting process. From 6 April 2020 onwards, the Class 1A NICs due on termination awards that comprise of cash payments and sporting testimonial payments should be paid and reported through the PAYE/RTI process.

PwC

HMRC consultation - Good Work Plan: Proposals

to support families

The Government has launched a new consultation on high-level options and principles to enable parents to balance the gender division of parental leave. The consultation asks whether Statutory Paternity Leave for fathers and same sex partners should be changed and for suggestions on ways in which the Shared Parental Leave Policy, introduced in 2015, could be improved.The consultation also sets out a proposal for a new Neonatal Leave and Pay entitlement, for parents of premature and sick babies who need to spend a prolonged period in neonatal care following birth. Parents would receive one week of Neonatal Leave and Pay for every week that their baby is in hospital, subject to certain conditions which form part of the consultation. This would be available to mothers, fathers and partners.The Government is also consulting on whether employers should publish:

• family related leave and pay;• flexible working policies; and,• whether there should be a requirement for employers

to consider advertising jobs as flexible.

The consultation ends on 29 November 2019.


UK


15

Parental Bereavement Leave and Pay

The Government is working to bring forward the secondary legislation necessary to implement Parental Bereavement Leave and Pay. The Government intends to introduce the new right from April 2020.The Parental Bereavement (Leave and Pay) Act 2018 applies only to Great Britain. Currently there is no legislation to introduce parental bereavement leave or pay in Northern Ireland, therefore in this instance the measure will not apply.

Independent review of loan charges

Chancellor Sajid Javid has commissioned a review to consider whether the policy is an appropriate way of dealing with disguised remuneration loan schemes used by individuals who entered directly into these schemes to avoid paying tax.The Treasury has asked Sir Amyas Morse, former Comptroller and Auditor General and Chief Executive of the National Audit Office (NAO), to report back by mid-November, giving taxpayers certainty ahead of the January Self Assessment deadline.The review will focus on the impact on those individuals who were using the schemes directly, reflecting the main concerns that have been raised by MPs and campaigners about the Loan Charge. HMRC has been challenging the use of disguised remuneration loan schemes for more than 20 years, and the government introduced targeted anti-avoidance legislation in 2011 to shut them down.While the review is under way the Loan Charge remains in force. The review will not affect taxpayers who have already disclosed and settled, are in the process of settling, or are in the process of finalising their disclosure. However, HMRC have also acknowledged that some taxpayers may want to wait for the government’s response to the review before finalising their settlement – HMRC will release further updates to guidance for these individuals, setting out next steps if potential liabilities change as a result of the government’s response.

PwC

Standards committee to scrutinise HMRC powers

HMRC is to be put under greater scrutiny, with a new professional standards committee to oversee its use of wide-ranging powers to tackle tax avoidance and evasion. The committee, which will take advice from a range of independent experts, will consider, among other things, issues relating to the implementation of HMRC powers. It will not consider individual cases or government tax policies. HMRC will publish details of the committee’s membership and terms of reference in the autumn.The plans are part of a package of measures revealed in a written statement on HMRC powers and taxpayer safeguards made by Jesse Norman, financial secretary to the Treasury, to the House of Commons. He outlined what he described as ‘several actions HMRC are taking to maintain and develop public trust in their operations’.Norman was responding to a report published by the House of Lords economic affairs committee at the end of last year, which claimed: ‘since 2012, perhaps due to reduced resources, HMRC has been granted some broad, disproportionate powers without effective taxpayer safeguards. High penalties, designed to deter some taxpayers from continuing appeals against tax liabilities, are a tax on justice.’The committee voiced particular concerns about the application of the loan charge on outstanding loans from disguised remuneration schemes and plans for extending HMRC’s time limits for assessing offshore matters to 12 years.Norman has also asked HMRC ‘to evaluate the implementation of powers introduced since 2012 in relation to the powers and safeguards principles, engaging with stakeholders, including taxpayers and their representatives’. This is expected to be published in early 2020.HMRC is also required to undertake a comprehensive review of the findings identified in the 2019 adjudicator’s report and will publish the results of the review by the end of this year.HMRC is also set to report on the effectiveness of the work of its extra support service for vulnerable taxpayers, and to review taxpayers’ experiences during compliance enquiries.


UK


16

Residence and Domicile

There has been an increase in the number (and intensity) of HMRC’s enquiries on residence and domicile.Members of the major professional bodies have noted that in domicile enquiries HMRC routinely seeks extensive information and documents from clients regardless of their relevance, abuses the issue of information notices and will not disclose its position and concerns in the early stages of the enquiry, thereby prolonging enquiries unnecessarily and increasing the cost of dealing with same.

Where a view is taken with regards to residence and domicile and a tax return is submitted on this basis and a Tribunal or Court subsequently disagrees with that view, the return contains an inaccuracy and the person may be exposed to a penalty where the inaccuracy was careless or deliberate and results in an understatement of a liability to tax, a false or inflated statement of a loss or a false or inflated claim to a repayment of tax.While the burden of proving that an inaccuracy was careless or deliberate rests with HMRC, taxpayers should retain evidence to support their position. Consideration should also be given to including a disclosure covering all relevant technical issues on the matter on the tax return in order to have the best possible chance of obtaining finality under the 4 year time limit imposed on HMRC for the raising of assessments. Longer time limits apply where a loss of tax is deemed brought about either through careless or deliberate means. The discovery provisions are also relevant.

HMRC’s Residence, Domicile and Remittance Basis Manual lists, at para RDRM23080, ‘the types of information that might be requested during an enquiry’ - there are 41 categories of information and 27 categories of documents.

PwC


Ukraine


17

Update on Subsistence and Mileage

Based on the Taxes Code of Ukraine the employees' expenses due to business reasons are not taxable in cases where they are supported with documents properly. Mileage reimbursements in case of trips by company-provided vehicle can be treated as the tax-free in case if the employee provides the company with supporting documents confirming purpose of trip, with itinerary, distance, norms of fuel consumption according to the car registration certificate, fuel bills etc. Otherwise, the mileage allowance is taxable in full.The max tax-free amount of per diems during the business trips within Ukraine is 10% of min salary, i.e. UAH 417.30 (appr. USD 16) per a day, out of Ukraine -EUR 80 per a day. Amounts of subsistence allowance exceeding the max tax-free amount of per diems are treated as additional benefits, so are taxable.

SEPA Payments Roll Out in Ukraine

In 2019 Q3 starting from August 2019 the new format of bank accounts (IBAN) is being implemented in Ukraine. Effective 1 November 2019, the use of IBAN will be mandatory for all Domestic payments made within Ukraine and therefore all domestic payments must quote the beneficiary account in IBAN format only.

PwCPwC

2APAC

PwC

APAC

17

Australia

Individual Tax

Single Touch Payroll Reporting for Expatriates

Prior to 30 June 2019 employers are granted automatic exemptions to Single Touch Payroll (STP) for inbound expatriate employees. The exemption was granted if the employee was employed by an overseas entity while being seconded to Australia, all, or part, of the employee's salary was paid by an overseas entity and there was a shadow payroll arrangement in place.It has now been announced, as of 1 July 2019, employers will now need to report payments made to inbound employees under STP - with a one month extension for filling to reflect the fact that information is coming from an overseas payroll.Comparatively, for outbound employees, if they have broken Australian residency, it is assumed they should not have Australian tax withholding obligations, so they do not need to be reported under STP. Alternatively, if all employees are being reported under STP, then employers will suggestively have queries as to why you are not withholding PAYG.

Social Security Leave Loading and Superannuation Guarantee

In response to the complexities surrounding payments of leave loading and whether these constitute ordinary time earnings for superannuation guarantee purposes, the ATO have announced that it does not intend to dedicate compliance resources to review historic leave loading payments made by an employer where:

• There is a reasonable basis for the employer to have concluded that payments of leave loading are attributable to the lost opportunity to earn overtime; and

• There is no evidence over the preceding five years which indicates leave loading was paid for a reason other than overtime.

Importantly, the ATO has specifically noted that employers should not simply rely upon an opinion as to the basis for leave loading being introduced.


Employment Law

Black economy legislation update

From 1 July 2019, new law prevents a deduction for payments to employees or service contractors where the payer has failed to withhold any PAYG withholding amount or did not notify the Commissioner of Taxation of the amount withheld. Since the distinction between employee and contractor is often difficult, the measure will not apply where the payer has complied with the no-ABN withholding rule. This law comes as part of the ATO's black economy review.

When the Black Economy Taskforce issued its report in October 2018, the estimated impact of undisclosed cash payments in Australia was over AUD 30 billion, resulting in understated business income and wages, as well as underpayments of superannuation. From this we are seeing authorities be more aggressive, arguing that contractors should be treated as employees, and this is showing in the current level of activity in the courts.

PwC

APAC

17

Australia


Ride-sourcing travel not exempt from Fringe

Benefits Tax (FBT)

The ATO has announced its final FBT position regarding

the provision of ride-sourcing services to employees (e.g.

Uber). The ATO has confirmed that the FBT taxi

exemption is limited to travel in a vehicle licensed by the

relevant state or territory to operate as a taxi, which

unfortunately does not extend to ride-sourcing services

provided in a vehicle that is not licensed to operate as a

taxi. As a result, employers must pay FBT on rideshare

expenses paid for their employees, unless they can exclude

those expenses under separate FBT concessions (such as

the minor benefit exemption or the ‘otherwise deductible’

rule).

Updated ATO FBT guide: home phone and

internet

The ATO has updated its guidance for employers to clarify

how taxpayers should work out the taxable value of the

fringe benefit related to home phone and internet

expenses, together with the evidence required to support

the claim. The ATO expects that where the employer

reimburses an employee’s home or internet costs, in order

to reduce the taxable value of the benefit, the employee (at

a minimum) will need to provide a declaration detailing

the percentage of business use and keep documentation

and records.

ATO insights to Superannuation Guarantee (SG)

Speaking at the 2019 Australian Superannuation Funds

Association National Policy Roadshow, James O’Halloran

(ATO deputy commissioner) superannuation and

employer obligations, said that with the implementation

of Single Touch Payroll (STP), the ATO now has greater

visibility over the super system than it ever had before.

With that greater access to data, the ATO’s immediate

focus is to reduce non-payment of SG by employers

through early detection and a proactive “nudge” approach

to reach out to those employers who haven’t paid SG to

their employees within 30 days after the end of the

reporting quarter.

PwC

APAC

China

Individual Tax

Guangdong-Hong Kong-Macao Greater Bay Area

China’s Ministry of Finance on 16 March 2019 released new policies about tax incentives for overseas (including Hong Kong, Macau and Taiwan) high-end talents and urgently-needed talents in the Guangdong-Hong Kong-Macau Greater Bay Area (GBA), allowing related talents to receive subsidies for individual income tax.

This means that permanent residents of Hong Kong will pay the same tax rate in other GBA cities as they do in Hong Kong. Hong Weimin, Chief Liaison Officer of Hong Kong Affairs of the Qianhai Administration, said the policies will attract high-end talents from Hong Kong and Macau to start a business or work in other GBA cities.

The policy is applicable to the municipalities of Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen and Zhaoqing in Guangdong Province. The Notice is valid from 1 January 2019 to 31 December 2023.


21

Public Notice Issued by the MOF and the SAT Regarding the IIT Policies for Non-residents and Residents without Domicile to implement the revised IIT (Individual Income Tax) Law and its DIRs (Detailed Implementation Regulation), the MOF (Ministry of Finance) and the SAT (State Administration of Tax) issued the Public Notice to clarify the IIT Policies for non-residents and residents without domicile (hereinafter as the individuals without domicile) as follows:

• The regulations on the sources of several types of income include: wages and salaries, bonus and equity incentives, remuneration for directors, supervisors and senior executives, as well as manuscripts income;

• The regulations on calculating the income of wages and salaries of the individuals without domicile, including non-residents, residents and senior executives; - The regulations on calculating the IIT payable amount of individuals without domicile, including non-residents and residents;

• The application of tax treaty to individuals without domicile, including the treatments of employment income, dependent personal service income or business profit, directors' fees, royalties and technical service fees; and

• The regulations on the IIT collection and administration on individuals without domicile.

PwC

Social Security

China and Japan have signed the social

security agreement which has been launched

since 1 September 2019

This can help further exempt the pension in the other

country if the qualified individual has participated in a

pension plan and made contribution in his/her home

country. The exemption can be applied provided the

certificate of coverage can be obtained in his/her

home country and the relevant record filing would be

duly performed. The exempted period would be up to

5 years and for any period that is more than 5 years,

the extension application with the in charge authority

should be duly performed.

China: IIT reform is impacting immigration

applications

Payment arrangements under the Individual Income

Tax (IIT) Law that was fully implemented on 1

January 2019, are having an increasingly significant

impact on China work permit applications. The new

IIT reform increases the standard basic deduction and

further clarifies tax policy regarding non-resident

individuals. These factors have affected the calculation

of monthly tax. As a result, it has become more

complicated for employers to decide if they should

apply for a China work permit for foreign employees

under the salary ‘undertaking’ approach.

APAC

China


22

Cooperating with MNCs - new incentives in

Shanghai to attract MNC regional

headquarters

On 13 August 2019, the Shanghai Municipal

Government issued the Opinions on Promoting the

Development of Regional Headquarters (RHQs) by

Multinational Corporations (MNCs) in Shanghai

(Circular Hufugui [2019] No. 30, hereinafter the

“Opinions"). The Opinions put forward 30 specific

measures in the following four areas: enhancing

efforts to encourage the establishment of RHQs in

Shanghai, providing more convenience for MNCs to

make investments, supporting free flow of funds and

facilitating trade and logistics, so as to speed up the

clustering of RHQs of MNCs in Shanghai. The

Opinions was effective from 1 September 2019 to 31

August 2024.

The Opinions relax the criteria for establishing RHQs

and China holding companies, support free flow of

funds, and provide policies regarding trading,

research and development (R&D), logistics and

supporting facilities of RHQs, in order to help MNCs

deal with difficulties encountered in operation. The

implementation of these policies will facilitate their

business in China and may even develop into a new

investment and operation model. For MNCs that have

not yet entered China or are planning to do so, they

can consider optimising their business arrangements

by taking into account the new policies.

PwC

APAC

China


23

Individual Tax

The Public Notice took effect from 1 January 2019 and the non-residents who obtained income after 1 January 2019 could claim tax refund for the overpaid IIT in accordance with the previous regulations. Meanwhile, the following circulars and certain articles listed in Article 6 were abolished from 1 January 2019.

Public Notice Jointly Issued by the MOF and the SAT Regarding Criteria for Determining Days of Individuals without Domicile within the Mainland ChinaTo implement the newly revised IIT and its DIRs, the MOF and the SAT released the Public Notice, clarifying the criteria for determining days of individuals without domicile within the Mainland China.

If an individual without domicile stays in the Mainland China for

(i) 183 days or more in a year and(ii) in the preceding six consecutive years the

individual stays 183 days in each of the year and does not leave the Mainland China for more than 30 days in any occasion, the individual's overseas-sourced income and domestic-sourced income will be subject to IIT.

If an individual without domicile stays in the Mainland China for

(i) 183 days or more in a year and(ii) in the preceding six consecutive years the

individual stays less than 183 days any one year or leaves the Mainland China for more than 30 days in one occasion, the individual's overseas-sourced income will be exempted from IIT.

In counting the days that an individual stays in the Mainland China, any day with less than 24 hours in the Mainland China will not be counted as a day. The Public Notice took effect from 1 January 2019.

PwC

To counter the challenging external and local economic environment, the Financial Secretary announced a package of measures to support enterprises, especially small and medium enterprises (SMEs), to safeguard jobs and relieve people's financial burden.

The proposed supportive package includes one tax measure, to increase the reduction of salaries tax, tax under personal assessment and profits tax for year of assessment (YOA) 2018/19 from 75% as originally proposed in the 2019/20 Budget to 100%. The reduction ceiling of HK$20,000 remains unchanged.

Amendments to Inland Revenue (Amendment) (Tax Concessions) Bill 2019 will be proposed in October 2019 when the Legislative Council resumes meetings to implement the enhanced tax concession.

Tax demand notes for YOA 2018/19 will be issued by the IRD upon the passage of the above-mentioned bill by the Legislative Council.

APAC

Hong Kong


24

Individual Tax

From the year of assessment 2019/20, taxpayers are entitled to tax deductions under salaries tax and personal assessment for their premiums paid to qualifying deferred annuities and contributions made to tax deductible Mandatory Provident Fund (MPF) voluntary contribution accounts. The maximum tax-deductible limit is HK$60,000 each year per taxpayer.

A taxpayer can claim tax deductions for deferred annuity premiums covering his or her spouse as joint annuitant, or either the taxpayer or the taxpayer's spouse as a sole annuitant. A couple can also allocate tax deductions for deferred annuity premiums amongst themselves in order to claim the total deductions of HK$120,000, provided that the deductions claimed by each taxpayer do not exceed the individual limit.

Tax deductible MPF voluntary contributions are subject to "preservation requirements", meaning that the accrued benefits can be withdrawn only upon reaching the age of 65 or based on statutory grounds.

In addition, to counter the challenging external and

local economic environment, the Financial Secretary

announced a package of measures to support

enterprises, especially small and medium enterprises

(SMEs), to safeguard jobs and relieve people's

financial burden.

The proposed supportive package includes one tax

measure, to increase the reduction of salaries tax, tax

under personal assessment and profits tax for year of

assessment (YOA) 2018/19 from 75% as originally

proposed in the 2019/20 Budget to 100%. The

reduction ceiling of HK$20,000 remains unchanged.

Amendments to Inland Revenue (Amendment) (Tax

Concessions) Bill 2019 will be proposed in October

2019 when the Legislative Council resumes meetings

to implement the enhanced tax concession.

Tax demand notes for YOA 2018/19 will be issued by the IRD upon the passage of the above-mentioned bill by the Legislative Council.

India

Individual Tax Black Money Act

As per the India tax laws, individuals qualifying as RORs (Resident and Ordinarily Resident) are required to report their overseas assets in their India tax returns. Non-disclosure of overseas assets not only attract penalty, but could also result in initiation of prosecution proceedings under the BM (Black Money) Act.

The BM Act has severe implications from penalty and prosecution standpoint in case of non-disclosure of foreign assets. In fact, the Government of India had provided a one-time window to the taxpayers in 2015 to rectify such lapses in the past by disclosing the overseas income and assets by discharging the prescribed tax and penalty.

The Indian tax authorities have started enforcing the BM Act to ensure strict compliance regarding disclosure of overseas assets.In its recent judgement, the Calcutta High Court has clarified that prosecution can be initiated against individuals under the Income tax Act and BM Act. This judgement would empower the tax authorities to expand their scope of enforcement of BM Act. The taxpayers who are ROR’s in India should pay attention to disclosing their overseas income and assets accurately in their India tax returns to avoid facing severe consequences under the BM Act.

PwC

APAC

India

Social Security Supreme Court Ruling on Provident Fund (PF)

Salary in India is generally delivered in the form of basic pay, house rent allowance, special allowance and flexible benefit. Under the PF regulations, employees need to contribute 12% of the basic pay towards PF along with a matching contribution from the employer. The basis for making these contributions has been a matter of litigation. While the PF authorities have been arguing that the PF contributions need to be made on the total monthly salary of the employees (excluding certain specific allowances / performance related payments), the industry in general has been contributing towards PF only on basic pay.

The Supreme Court has recently confirmed the view of the PF authorities. The court has held that basic pay for the purpose of PF contributions would include any other allowances which are paid universally toall employees. The mandatory provisions relating to PF contributions would apply only to employees earning a basic pay of less than INR 15,000 per month.It will be worthwhile to evaluate the contributions being made for the following categories of employees/ contract employees:

• Employees in receipt of basic pay of less than INR 15K per month; • Contract employees drawing a basic pay of less than INR 15K per month; and • Foreign nationals on the rolls of the Company (either on India payroll or on assignment).


25

Quoting of Aadhar

Aadhaar has been given its due importance now wherein

Aadhaar can be quoted interchangeably with Permanent

Account Number (PAN) for filing individual income tax return

or for any other income-tax related transactions.

Levy of surcharge

The tax burden has increased for the super-rich by hike in

surcharge for income from INR 2 Crores to INR 5 Crores at 25%

of taxes and at 37% of taxes for income above INR 5 Crores

resulting into the maximum effective tax rate as below:

Income slab Surcharge rate

Maximum effective tax rate

Above INR 5,000,000 to INR 10,000,000 10%

34.320%

Above INR 10,000,000 to INR 20,000,000 15%

35.880%

Above INR 20,000,000 to INR 50,000,000 25%

39.000%

Above INR 50,000,000 37%

42.744%

Deduction for interest on housing loan

With the mission of providing home for all,

under the affordable housing scheme, a new

section has been inserted under section

80EEA of the Income-tax Act, 1961 (the Act)

wherein an individual would get an

additional INR 1.5 lakhs deduction towards

interest payout on housing loan in addition to

the INR 2 lakhs deduction already available

for self-occupied property subject to the

following conditions:

- The stamp duty value of the house should

not exceed INR 45 lakhs.

- The individual should not be owning any

other residential property on the date of

sanction of loan

- The loan must be taken during the period 1

April 2019 to 31 March 2020

PwC

APAC

Indonesia

Individual Tax

Updated Certificate of Domicile for Indonesia Tax Residents

The Directorate General of Taxes ("DGT") has released a new Certificate of Domicile (CoD) for Indonesian tax residents through the issue of regulation No. PER-28/PJ/2018 (PER-28) on 14 December 2018. PER-28 becomes effective 1 February 2019 and revokes DGT Regulation No. PER- 08/PJ/2017 (PER-08).

To obtain a CoD, Indonesian tax residents should submit an application via the DGT electronic system (manual submission is no longer available). A CoD application can be made for current tax year or tax period, and also prior tax years (within the statute of limitation). However, the tax resident must submit the Annual Income Tax Return (AITR) for the respective tax year.

If the Indonesian tax resident is excluded from the obligation to submit AITR, the taxpayer should submit a statement confirming their status, and it will be deemed equivalent to the AITR submission requirements. The DGT will issue CoD in electronic format upon the receipt of complete CoD application.

The electronic CoD is valid up to 31 December on the year of issuance, and there is one single CoD format, which requires the offshore counterpart as part of the statement that validates its Indonesian residency. If rejected due to incomplete information, the tax resident may re-submit their application.

PER-28 sets out the following transitional provisions:

• Any ongoing CoD and Special Form applications in place prior 1 February 2019 should be concluded based on PER-08.

• Valid CoDs and Special Forms based on PER-08 are still applicable up to the end of their validity period.

New Foreign Tax Credit Rules

On 31 December 2018, the MoF issued Regulation No. 192/PMK.03/2018 (PMK-192) to update rules for claiming Foreign Tax Credit, which is applicable starting fiscal year 2018. PMK 192 revokes the precedent regulation No. 164/KMK.03/2002 (KMK-164).Key changes and additional guidance provided under PMK-192 includes:

• Trust - introduce the concept of Trust under FTC rules• Combination of foreign income and timing of income recognition • Netting-off of foreign losses • FTC calculation and limit• Supporting documents for claiming FTC


26

PwC

Update on Transfer Pricing Documentation submission requirement

The DGT has redistributed Regulation No. PER-02/PJ/2019, which changes the Transfer Pricing Documentation requirement for CITR submission. The redistributed version now only requires: the Summaries of the Master File and Local File, and the receipt of either the Country-by-Country Report (CbCR) Notification or CbCR submission in the DGT online system.Employment Law Indonesia – Serbia tax treaty comes into force. The tax treaty between Indonesia and Serbia was ratified by Presidential Regulation No. 75 Year 2018 on 17 September 2018, and will affect income paid or credited on or after 1 January 2019.

New tax facilities for industries with

certain features

The Government issued Regulation No.45 Year

2019 (GR-45) that introduces new tax facilities for

industries with certain emerging features. This

facility is hereinafter referred to as “Super

Deduction”. GR-45 amends GR No.94 Year 2010

(GR-94) that serves as the main implementing

regulation of the Income Tax Law. GR-45 is dated

and effective from 26 June 2019.GR-45 only

stipulates key features of this Super Deduction

facility, where details on each type of facility will

be regulated further in a Minister of Finance

(MoF) regulation which may cover the type of

eligible labour-intensive industries, the duration

of the facility period, more detailed requirements.

In summary, the facilities are as follows:

● Facility for labour-intensive industries:- A

reduction in net income of 60% of the

amount invested in the form of tangible

fixed assets (including land utilised for

main business), spread throughout a

certain period.

● Facility for human resources development

in certain competencies:- A reduction in

gross income of up to 200% of the amount

spent for this activity.

● Facility for certain research and

development activities in Indonesia:- A

reduction in gross income of up to 300%

of the amount spent for this activity,

spread throughout a certain period.

Individual Tax

Expansion of the tax concession for

interest on bonds

On 12 August 2019, the government issued

Government Regulation No.55 Year 2019 (GR-55)

regarding income tax on bond interest. GR-55

represents a second amendment to Government

Regulation No.16 Year 2009 as lastly amended by

Government Regulation No.100 Year 2013.

Interest on bonds is generally subject to 15% final

withholding tax (WHT) when paid to resident

taxpayers and a 20% WHT (before treaty relief)

when paid to non-residents. Concessionary WHT

rates of 5% up to 2020 and 10% from 2021

onwards apply for interest payments to mutual

funds operating under a collective investment

contract (Kontrak Investasi Kolektif/KIK).

Under GR-55, the applicability of these

concessionary rates is expanded to Infrastructure

Investment Funds (Dana Investasi

Infrastruktur/DINFRA), Real Estate Investment

Funds (Dana Investasi Real Estat/DIRE), and

Asset-Backed Securities (Efek Beragun Aset/EBA)

as long as they operate under a KIK.

Corporate Tax

New rules related to filing tax returnsThe DGT has issued Regulation PER-02/PJ/2019 (PER-02), dated and effective from 23 January 2019. PER-02 stipulates that companies registered in the following tax offices must now submit their Corporate Income Tax Return (CITR) through e-Filing:

• Tax office for medium-sized taxpayers (Madya); • Jakarta Khusus tax offices include: • Tax offices for foreign investment companies

(Penanaman Modal Asing/PMA); • Tax offices for foreign companies and

foreigners (Badan dan Orang Asing/Badora);• Tax offices for listed companies (Perusahaan

Masuk Bursa/PMB); and 3. Tax offices for large taxpayers (Large Tax Office/LTO).

Additional documents that need to be attached to the CITR is the Transfer Pricing Documentation (TPD).

APAC

Indonesia


27

PwC

Tax relaxation on luxury residences

Luxury residences are subject to LST at 20%.

PMK-86 has updated the minimum threshold for

the imposition of LST on luxury residences as

follows:

In addition to Value Added Tax (VAT) and LST,

Article 22 Income Tax also applies to the purchase

of luxury residences. PMK-92 has updated the

minimum threshold for the imposition of Article

22 Income Tax on luxury residences as follows:

The Article 22 Income Tax rate on the purchase of

these very luxury residences has also been reduced

to 1% from the previous 5%. This tax constitutes a

prepayment of the buyer’s income tax liability for

the current year.

APAC

Indonesia


28

Preliminary tax refunds – an update

On 19 August 2019, the Minister of Finance (MoF)

issued Regulation No.117/PMK.03/2019 (PMK-

117) as an amendment to MoF Regulation

No.39/PMK.03/2018 (PMK-39) concerning

preliminary tax refunds.

PMK-39 outlines the taxpayers eligible for a

preliminary tax refund and includes ”Low-Risk

VAT-able Entrepreneurs”.

PMK-117 adds the following taxpayers to the

category of Low-Risk VAT-able Entrepreneurs:

- Certain pharmaceutical wholesalers;

- Certain distributors of medical equipment;

- Companies more than 50% directly owned by a

State-Owned Enterprise (SOE) and whose

financial statements are consolidated with the

parent SOE.

To be approved as a Low-Risk VAT-able

Entrepreneur, the taxpayer must file an

application to the tax office where it is registered

and attach the documents as stipulated in PMK-

117.

PwC

APAC


29

Individual Tax

2019 Tax Reform - Proposal

On 21 December 2018, the Cabinet approved the 2019 Proposals. It is expected that most, if not all, of the items contained in the 2019 Proposals will be passed into law in March 2019.The Big Picture - The major individual tax reforms this year are proposed primarily as a countermeasure to soften the impact of the consumption tax hike in October 2019. The focus by the government is on big- ticket items such as real estate and automobiles in the hopes of preventing an economic downturn as Japan has seen with the last consumption tax hike in 2014.

The 2019 Tax Reform Proposals also aim for a fairer balance of taxation, whereby introducing limits to high income earners on certain inheritance and gift tax exemptions, as well as providing an environment for the Japanese tax authorities to conduct their audits more effectively:

• Introduce a new income tax credit for housing loans for individuals who acquire a qualified residence that will be subject to the 10% consumption tax rate.

• Revise the scope and applicable requirements for tax exempt measures applied to dividend income or capital gains arising from securities accounts (“NISA”).

• Revise the scope and applicable requirements for tax qualified stock options.

• Clarify the income tax treatment of virtual currencies.

• Reduce the rates for annual automobile tax and one-time acquisition tax.

• Introduce stricter guidelines to municipalities participating in the hometown tax donation (furusato nozei) program.

• 3-year extension on My Number notification to financial institutions for those who opened accounts by 31 December 2015.

• Mandate financial institutions to maintain their securities accounts searchable by My Numbers.

• Greater audit capacity for the tax authorities to examine taxpayers’ information.

• Step up in cost basis for assets subject to a treaty country’s exit tax

Japan

PwC

APAC

Korea

Employment Law

Legislative and regulatory changes in 2019 that affect employment and labour - effective 1 January 2019

• Increase of Minimum Wage - The amount of minimum wage has been raised to KRW 8,350 per hour. The minimum wage shall apply to all workers covered by the Labour Standards Act and accordingly temporary, part-time or hourly-paid workers as well as foreign workers, regardless of employment type or nationality, shall also be eligible for the minimum wages.

• Expansion of Compensation Included in Minimum Wage - A certain percentage of bonuses paid regularly once or more than once a month and fringe benefits paid in cash or cash equivalent has been included in calculating the minimum wage. In 2019, both the bonus exceeding 25% of monthly minimum wage and the fringe benefits exceeding 7% of monthly minimum wage will be taken into account when calculating the minimum wage to determine whether employers comply with minimum wage regulations.

• Increase of Childcare Leave Allowance -From 1 January 2019, childcare leave allowance paid during the next 9 months after the first 3 months has been increased to 50% of ordinary wages (maximum KRW 1,200,000 and minimum KRW 700,000 per month). Additionally, the employees who have been taking childcare leave before 1 January 2019 will be entitled to receive the increased childcare leave allowance from 1 January 2019.

• Increase in Upper Limit of Maternity Leave Benefits – The upper limit of maternity leave benefits supported by the government has been raised from KRW 1,600,000 to KRW 1,800,000 per month. Based on the 90 days, it has been raised from KRW 4,800,000 to KRW 5,400,000. Additionally, the employees who have been taking maternity leave before 1 January 2019 will be entitled to receive the increase maternity leave benefits from 1 January 2019.


30

The Ministry of Economy and Finance (MOEF)

released the government’s tax reform proposals

for 2019 on July 25, 2019. The amendment

proposals encompass some key focus areas,

including the burden relief for submission of a

payment statement, strengthening taxation of

executive retirement income etc.

Burden Relief for Submission of a Payment

Statement

● Extension of submission date for a

statement of payment - For submission

made after January 1, 2020, the due date

for the submission of a payment statement

for compensation for employment

received on a daily basis has been

extended from the 10th of the month

following the last month of the quarter to

15th of the month following the last month

of the quarter. Therefore the deadline for

first quarter would be April 15, second

quarter would be July 15, third quarter

would be October 15, and the last quarter

would be January 15, etc.

● Adjustment to the income range for

submission of a simplified payment

statement for wage and salary income

Amendments to retirement pay for

executives

The executives’ retirement income limit in Korea is

calculated as "3-year average salary before

retirement * 1/10 * years of service since 2012 *

multiple payments". It is proposed that the

"multiple payments" is reduced from 3 times to 2

times for the income made after January 1, 2020.

PwC

APAC

Malaysia


31

Tax exemption for women returning to work

after a career break

Effective from Y/A 2018 to 2020, approved female

individuals* returning to work after a career break are

exempted from payment of income tax in respect of

the gross employment income for a period up to 12

consecutive months. The approved individual can opt

for the exemption period to commence either:-

i. in the Year of Assessment (YA); or

ii. the following YA in which she commenced her

employment.

*Please note that there are requirements/ criteria to

qualify as an approved individual and as a qualifying

employer.

Incentives for payment of education loan on

behalf of employee and income tax exemption

for employee**

An employer is allowed a tax deduction for the amount

of PTPTN educational loan paid on behalf of his

employee during the period 1 January 2019 to 31

December 2019 (ie. effective YA 2019 and YA2020).

The government has also granted the employee an

income tax exemption for the amount of PTPTN

educational loan paid on behalf by his employer

during the mentioned period (ie. YA 2019).

** There are conditions to be met by both employer

and employee to qualify for the incentives or tax

exemption.

Tax Exemption on Rental Income from a Residential Property

The exemption of 50% is available for statutory income from residential property rented out for any period from 1 January 2018 to 31 December 2018. The monthly rental shall not exceed RM2,000. This rental income is due to be reported in the Y/A 2018 tax return by 30 April 2019 (without business income) or 30 June 2019 (with business income).

Employers required to contribute social security for foreign employees

Effective 1 January 2019, all Malaysian employers must register their foreign employees working in Malaysia (excluding domestic servants) with the Malaysian Social Security Organisation (SOCSO) and contribute to the Employment Injury Scheme (EIS).

Manual Form CP39 and MTD Payment not

accepted at IRB Counters

The Malaysian IRB will no longer be accepting

manual submission of Form CP39 and will

discontinue Cash and Cheque payments for MTD

at all IRB Counters effective from 1 September

2019. Consequently, for MTD for the month of

August 2019 and subsequent months, employers

are required to:

● Submit the Statement of MTD or

employees MTD data via e-PCB, e-Data

PCB or e-CP39; and

● Make the MTD payments via e-payment.

PwC

APAC

New Zealand

Non-Resident directors’ fees

The Inland Revenue has released an Interpretation Statement IS 19/01 for the application of schedular payment rules to non-resident directors' fees, together with an accompanying operational position statement.

The Interpretation Statement considers the situations in which tax must be withheld from directors’ fees paid to non-residents. This includes a discussion of when directors’ fees paid to non- residents are considered to have a New Zealand source. The Interpretation Statement then goes on to consider when and how much tax must be withheld and paid to the Commissioner, if withholding is required from directors’ fees paid to a non-resident.Modernising tax administration billThe Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Bill passed its third reading yesterday, and will come into effect on 1 April 2019.Among several important improvements to the Tax Administration and Income Tax Acts, the Bill simplifies how tax is assessed for Individuals by issuing tax refunds automatically. Around 750,000 extra taxpayers will likely get a refund. These new processes, when implemented, will particularly benefit those who work extra jobs and have paid too much secondary tax during the year.

The new legislation also adds two new employee contribution thresholds to KiwiSaver (6% and 10%), and opens the scheme up to over 65s.Corporate Tax R&D tax incentive proposed billThe Taxation (Research and Development Tax Credits) Bill is being considered by Parliament’s Finance and Expenditure Committee. This Bill proposes a new tax incentive for businesses conducting research and development. Inland Revenue has released draft guidance, based on the Bill as introduced, to explain: - the eligibility criteria; and -what businesses need to do. As the Bill is still before Parliament, please note that this material is subject to change. Following enactment, the final guidance material will be published on Inland Revenue's website.


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Employment Law

Tax Working Group Final report

Following the Interim Report released in September 2018, the Tax Working Group’s final report was released on 21 February 2019. It made the following key recommendations with regards to the New Zealand tax system:

• Capital gains tax: Extend the existing coverage of taxing capital gains. Eight of the 11 members of the TWG favoured a broad capital gains tax that would apply at full income tax rates, on realisation (sale or other disposal) of an asset and with no allowance for inflation.

• Environment taxes: In the short term, expand the coverage and rate of the Waste Disposal Levy, strengthen the Emissions Trading Scheme (ETS) and advance the use of congestion charging.

• Personal income tax: Consider raising the bottom income tax threshold (currently NZD 0 -NZD14,000) to NZD 20,000 or NZD 30,000, and potentially combining this with an increase in the second marginal tax rate (currently 17.5%) to 21%.

• Retirement savings: Encourage greater participation in Kiwisaver for low-income earners through various measures, including refunding the ESCT for KiwiSaver members earning less than NZD 48,000, increasing the member tax credit from 0.50 to 0.75 per NZD 1 of contribution and reducing the PIE rates for KiwiSaver funds.

• Digital services tax: Be ready to implement a digital services tax if a critical mass of other countries move in that direction and New Zealand’s export industries are not materially impacted.

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APAC

New Zealand

Employer issued cryptocurrency provided to employees

Inland Revenue has released for consultation the draft public ruling PUB00344: “Income tax — employer issued cryptocurrency provided to an employee”. The deadline for the consultation is 2 July 2019.

This draft public ruling considers how fringe benefit tax applies where cryptocurrency issued by an employer is provided to an employee. It follows on from two draft public rulings that were consulted on to consider where these payments should be subject to PAYE: PUB00344[b]: “Income tax — salary and wages paid in cryptocurrency” and PUB00344[a]: “Income tax — bonuses paid in cryptocurrency”.

New DTA strengthens NZ-China economic ties

Signing of a new double tax agreement (DTA) between the People’s Republic of China and New Zealand in Beijing on 1 April 2019. The new DTA will replace the 1986 agreement with a more modern set of rules and ensures the bilateral framework for taxing cross-border economic activity remains up to date and fit for purpose. The new DTA is New Zealand’s first to be signed following the completion of the work on base erosion and profit shifting (BEPS) and the release of the 2017 update of the OECD Model Tax Convention and contains new anti-BEPS measures. These include measures to prevent companies structuring their activity to avoid taxation on profits.

The update to the existing DTA will reduce barriers to cross-border trade and investment. The new DTA will also reduce the withholding rates on certain dividends and eliminate double taxation. The new DTA will come into force once the final exchange of diplomatic notes is complete.

Budget Highlights 2019

With the focus firmly on wellbeing measures, Budget 2019 made no new tax announcements. The tax measures in respect of GST on telecommunications and the repeal of the racing totaliser duty, were already revealed in pre-Budget announcements. Budget 2019 mainly focused on areas such as mental health, child wellbeing and rail transportation.


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FBT, GST, and income tax treatment of employee contributions to fringe benefits

Inland Revenue released QB 19/12 discussing “What

is the fringe benefit tax, GST and income tax

treatment of an employee contribution to fringe

benefit?” In summary, Inland Revenue considers that

the answer depends on whether the employee makes a

full or partial contribution to the value of fringe

benefits, and who the employee makes the payment

to.

Draft determination on employee use of telecommunication tools and usage plans issued

Inland Revenue has released draft determination

“ED0219: Employee use of telecommunications tools

and usage plans in their employment” for

consultation. The deadline for comments is 20

September 2019. The draft determination provides

employers with the option of applying certain

percentages to make an allocation between business

use and private use for usage plans related to

telecommunication tools. This option will reduce

business compliance costs.

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New Zealand


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Consultation on taxing employer-provided

travel from home to a distant workplace

Inland Revenue has released the draft operational

statement ED0217 “Employer-provided travel from

home to a distant workplace – income tax (PAYE) and

fringe benefit tax” for consultation. The deadline for

feedback was 6 September 2019. This statement is

intended to clarify and simplify the tax rules around

employer-provided travel to distant workplaces. It

intends to make it easier to tell when this kind of

employer-provided travel is exempt from income tax

(PAYE) or fringe benefit tax (FBT).

Proposed changes to Kiwisaver Act 2006 -

Early access

The Minister of Commerce and Consumer Affairs, the

Hon Kris Faafoi, released (SOP) No 293 proposing

changes to the Taxation (KiwiSaver, Student Loans,

and Remedial Matters) Bill (158-1). Changes are

proposed to the KiwiSaver Act 2006 to allow a person

who has a life-shortening congenital condition to

withdraw their savings early in order to spend a

reasonable portion of their adult life in retirement.

For the purposes of compliance with financial markets

requirements related to product disclosure

statements, providers will be provided a grace period,

ending on 31 January 2021, to allow them to make the

required changes. The Bill was introduced into

Parliament on 27 July 2019 and is currently before the

Finance and Expenditure Committee for

consideration. Submissions are due on 4 September

2019.

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APAC

New Zealand

Public rulings on treatment of crypto-assets

Inland Revenue has released a series of Public Rulings BR

PUB 19/01 - 19/04 that consider the income tax and FBT

treatment of crypto-assets, including:

● Crypto-assets paid as salary and bonuses

● Employer issued crypto-assets provided to an

employee

● Application of employee share scheme rules to

employer issued crypto-assets provided to an

employee

Use of money interest rates amended

The Taxation (Use of Money Interest Rates) Amendment

Regulations 2019 (LI 2019/153) amend the Taxation (Use of

Money Interest Rates) Regulations 1998 to:

- increase the taxpayer’s paying rate of interest on unpaid

tax from 8.22% to 8.35% per annum, and

- decrease the Commissioner’s paying rate of interest on

overpaid tax from 1.02% to 0.81% per annum.

The Regulations apply on and after 29 August 2019 and

were notified in the New Zealand Gazette on 4 July 2019.


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Not Ordinarily Resident (“NOR”) scheme

Access to global talent to complement our local talent is key to maintaining Singapore’s competitiveness and driving our economic growth. The NOR scheme was introduced in Budget 2002 with the objective of attracting talent with regional and global responsibilities to relocate to Singapore.

The NOR scheme will lapse after the Year of Assessment (“YA”) 2020 (calendar year 2019). The last NOR status will be granted for YA 2020 and expire in YA 2024.

Individuals who come under the NOR status will continue to be granted NOR tax concessions until their NOR status expires, if they continue to meet the conditions of the concessions.

Singapore will continue to build a conducive environment to attract and retain highly skilled individuals. This includes a competitive tax regime, stable political, economic and social environment, strong regional connectivity and high standards of healthcare, housing and education.

Rebate for tax residents

All tax resident individuals will receive an income tax rebate of 50% of tax payable, up to a cap of SGD 200, for the YA 2019.

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APAC

Philippines

Tax Amnesty Act of 2018

On 14 February 2019, the President signed into law Republic Act No. 11213 or the Tax Amnesty Act. As Package 1B of the Comprehensive Tax Reform Program, the tax amnesty is meant to complement Republic Act No. 10963 or the TRAIN Law. In the approved bicameral version of the bill, the program covered estate tax amnesty, general tax amnesty and amnesty for delinquencies. Although on the approved bill, the general tax amnesty provision was vetoed and as such, the only remaining provisions are the estate tax amnesty (ETA) and the tax amnesty on delinquencies (TAD).The approved act covers unpaid internal revenue taxes due for taxable year 2017 and prior years for estate tax and tax on delinquencies.

Highlights of the ETA are as follows:

• It shall cover the estate of decedents who died on or before 31 December 2017, with or without assessments issued;

• Grants the estate an amnesty tax rate of 6% based on the decedent’s total net estate at the time of death;

• Taxpayers who avail of the ETA will enjoy immunity from the payment of all estate taxes arising from the failure to pay such tax from 2017 and prior years, and from all appurtenant civil, criminal, and administrative cases and penalties;

• A minimum estate amnesty tax of P5,000 shall be paid if the allowable deductions at the time of death exceed the value of the gross estate.


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Highlights of the TAD are as follows:

• Covers all national internal revenue taxes for taxable year 2017 and prior years, for taxpayers who have pending criminal cases with the Department of Justice; delinquent taxpayers and those currently being assessed by the tax authority; taxpayers with tax cases already elevated to the courts; and those withholding agents who withheld taxes but failed to remit such taxes to the tax authority;

• The tax amnesty rates range from 40% to 100% of the basic tax being assessed, depending on the status of the taxpayer’s assessment or tax case; and

• Taxpayers who avail of the TAD and have paid the amnesty tax will have their criminal case and its corresponding civil or administrative case considered settled and will be terminated, and the taxpayer shall be immune from all suits or actions.

In addition, some items were vetoed by the President: The entire Title III on the grant of a General Tax Amnesty, and its related sections; Section 6 on one-time declaration and settlement of estate taxes on properties subject of multiple unsettled estates and Section 7 on the conclusive presumption of correctness of the ETA returns.

While the President vetoed the entire provision of the General Tax Amnesty, he requested the House of Representatives (lower chamber) to pass another general tax amnesty bill which would include the lifting of bank secrecy for cases of fraud, the inclusion of automatic exchange of information, and to include safeguards to ensure the truthfulness of the asset or net worth declarations.

PwC

Revenue Memorandum Circular (RMC) No. 17-2019 / 19-2019 / 37-2019

In conjunction with the implementation of the changes to income taxation for individuals under the Tax Reform for Acceleration and Inclusion (TRAIN) Law, the Bureau of Internal Revenue (BIR) issued the above circulars prescribing the used of the revised BIR Forms.

• BIR Form 1701A – applicable for individuals earning purely from business/professions who availed of the graduated income tax rates with Optional Standard Deduction (OSD) as mode of deduction or those who opted to avail of the 8% flat income tax rate.

• BIR Form 1700 – applicable for purely compensation income earners.

• BIR Form 1701 – applicable for individuals (including mixed-income earner), estates and trusts.

Kindly note that only the BIR Form 1701A is available in the online and offline facility of the BIR. The last two forms are only available in a PDF editable copy, and can readily be downloaded from the BIR website.

Amendment of Procedures on the Registration

of Employees Earning Purely Compensation

Income

Revenue Memorandum Order (RMO) No. 37-2019

was issued last 23 July 2019 to provide the amended

guidelines/policies on the registration process of

employees earning purely compensation income in

the Philippines. Some of the salient features of this

RMO are as follows:

● Registration of new employees earning purely

compensation income

● Update of registration of employees who

subsequently transfer/change employers

● TIN Card issuance

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Philippines

Estate Tax Amnesty

RMC No. 68-2019 was issued last 1 July 2019 to

provide the list of clarifications on certain issues

relative to the Estate Tax Amnesty under Republic Act

No. 11213.

The estate of a decedent who died on or before

December 31, 2017, who is not covered by the

exceptions enumerated under Section 3 of Revenue

Regulations (RR) No. 6-2019, is qualified to avail of

tax amnesty.

Taxpayers may refer to the RMO for the full details of

the clarifications provided on the Estate Tax Amnesty.

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APAC

Philippines

Raising the retirement age and re-employment age in Singapore

Based on the latest figures of life expectancy at birth, Singaporeans have an average life expectancy of 85 years old.

In a bid to support older workers and businesses that employ them, the Tripartite Workgroup on Older Workers, set

up by the Ministry of Manpower, made four key recommendations in order to achieve that vision:

● Raise the retirement age from 62 to 65

● Raise the re-employment age from 67 to 70

● Increase CPF contributions for older workers

● Achieve all this in gradual steps by about 2030

These changes will support older workers to continue working longer and be more financially independent.


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Social Security Act (Republic Act 11199)

Republic Act No. 11199 “Act rationalizing and expanding the powers and duties of the Social Security Commission to ensure long-term viability of the Social Security System” was signed into law by the President last 7 February 2019. The government, through the implementation of the said law, aims to extend better social security protection to Filipinos based in the Philippines and those working outside the country.• Composition of Social Security System (SSS) appointive members was reduced from seven to six. The

representative from the general public who shall have adequate knowledge and experience regarding social security, to be appointed by the President of the Philippines is no longer in place. Appointed members shall now be endorsed by the Governance Commission for GOCCs:

• To strengthen the pension fund, the measure allows the gradual increase in the monthly contributions from 11% in 2019 until it reaches 15% in 2025. It also provides the gradual adjustment of the minimum and maximum monthly salary credit.

• The new law empowers the Commission to raise benefits, condone penalties, rationalize investments, among others. Specifically for employers with delinquent remittance contributions, interest is now 2% per month (3% in the previous years).

• The law also provides for the mandatory SSS coverage of overseas Filipino workers (OFWs) to ensure their social security protection “provided they are not over 60 years of age.”

• The new law will also include unemployment insurance for SSS members who will be involuntarily displaced.

Singapore

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Tax refund for individuals

The tax refund will be returned via prompt pay (e-Payment system) for individuals with Thai citizen identification number.

However, in case of an expatriate, the tax refund slip will be sent to the individual's mailing address as designated on his/her annual tax return form (PND 90/PND 91).Upon presenting the tax refund slip to any KrungthaiBank, the bank will deposit the tax refund into the individual's Krungthai bank account.

If the individual does not have a Krungthai Bank account, Krungthai Bank will generate an e-money card for the individual to withdraw from the ATM.If the individual has left Thailand, the individual may authorise a third party in Thailand to handle the refund processing on his/her behalf.


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Singapore Thailand

Removal of tax non-resident election concessionWith effect from 2020, the IRAS will be removing the concession allowing Singaporeans who are away from Singapore for at least 6 months in the calendar year to elect to be regarded as a Non-Resident for tax purposes. 2019 will be the last year that residents of Singapore can make a Non-Resident election under the concession.

Following on from this, individuals working overseas who have travelled to Singapore on business will be subject to tax on income attributable to the employment period in Singapore. There is no de minimis exception applicable. The overseas employer would need to prepare a Form IR8A to declare the relevant income.

New pilot scheme to facilitate hiring of foreign

talent in tech firms

The Economic Development Board (EDB) and Enterprise Singapore (ESG) have announced plans for an immigration pilot programme called Tech@SG to help technology companies grow in Singapore and expand in the region. Under this programme, qualifying companies will have Employment Pass (EP) applications of core workers facilitated to help them get the talent they need to set up teams in Singapore. These teams include professionals equipped with skills in frontier technology such as data science, artificial intelligence, cybersecurity and internet of things. Detailed guidance has yet to be announced.

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Argentina

Argentina Provides Individual Tax Changes

The Argentine Government published the Decree 561/2019 on 15 August 2019, which provided individual tax changes measures, as follows:

• 20% increase on the “Non taxable gain” and the “Special Deduction” concepts for the 2019 tax year with immediate effect, including that tax withheld so far for 2019 is to be adjusted accordingly and the excess tax withheld refunded;

• 50% reduction on advance payments due in October and December 2019 for self-employed individuals; and

• Federal subsidy for employee social security contributions for August and September 2019 equal to up to ARS 2,000 per month for employees with monthly gross salary not exceeding ARS 60,000.


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Social Security agreement between Brazil and Switzerland is approved

The Legislative Decree approving the Social Security Agreement between Brazil and Switzerland (Legislative Decree 54/2019) was published on 19 June 2019.

The main objective of the instrument is to enable workers who contributed to pension systems to sum up the contribution periods in accounting for the minimum time required to obtain benefits.

The Agreement approaches age and disability retirement and death pensions and covers Swiss federal legislation on old-age and survivors insurance, as well as disability insurance.

In totalization, when the insurance period completed under Swiss legislation alone does not meet the time requirement for entitlement to old-age, survivors and disability insurance, the competent institution shall add the insurance periods completed under Brazilian law, provided that they do not overlap with periods completed under Swiss law.

However, no entitlement to benefits will be granted for any period prior to its entry into force.

This Agreement aims to correct injustice situations when there is loss of invested funds in one of the systems and adding, in years, the minimum contribution time needed to obtain benefits.

Brazil

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LATAM

Brazil

House of Representatives concludes voting the Social Security reform

The House of Representatives concluded on the 7 August 2019 the second-round vote on the proposal for Social Security reform (PEC 6/19). The bill is now with the Senate for further discussion and voting for approval.

Bill proposes rules for cryptocurrencies

A bill introduced by the Senate proposes to regulate the cryptocurrency market in Brazil and criminalizes fraud by specialized brokerage firms, the "exchanges".

If approved, the text can significantly change the virtual currency business, such as Bitcoin. Among other novelties, the Bill 3,825/2019 establishes the competence of the Central Bank and the Brazilian Securities Commission (CVM) to monitor this matter.It also reiterates the legitimacy of the Brazilian Tax Authorities to tax transactions with cryptocurrencies and makes crimes punishable by heavy penalties any embezzlement and financial pyramids organized through crypto assets.The bill also provides the authorization to breach clients and exchange agencies confidentiality in case of investigations and also requires commercial advertisements to report the risks of trading virtual currencies.

Please note that the topics above are still being discussed and no changes have been implemented yet.

Government Tax Reform proposal should be presented soon

Economy Minister Paulo Guedes said that the government should present its proposal for Tax Reform soon. "Our proposal is practically ready. We will launch a conciliatory reform, preferably in a mixed committee of the National Congress."

Without the government's proposal, two other texts are already in Congress for discussion. The government wants the Tax Reform to be approved in 2020.

The President sanctions Economic Freedom ActLaw 13,874/2019, which has already entered into force on the 20 September 2019, establishes the Declaration of Economic Freedom Rights and establishes free market guarantees.

The purpose of the new law is to reduce bureaucracy in economic activities and to facilitate the opening and operation of companies.

The government hopes that the changes will facilitate and give businesses more legal certainty and stimulate job creation. By the accounts of the economic team, the measure can generate, within ten years, 3.7 million jobs and more than 7% of economic growth.


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Chile

Changes on Social Security exemption rules for foreigners

Current Chilean legislation, under the Law 18.156, allows foreigners to be exempt from contributing to the Chilean Social Security system under certain conditions that must be met. One of the benefits, in addition to maintaining their social security contributions abroad, is that it allows the individual to consider the contributions made abroad as a tax deduction upon their monthly taxable base.

In line with a recent interpretation published by the Chilean Tax Authorities, it is now confirmed that the deductible cap amount rises up to UF 79,2 which will be adjusted annually according to the information published by the National Institute of Statistics.

The conditions below must be met in order to allow the application of Law 18.156:

• To have kept affiliation to a Foreign Social Security System while on assignment in Chile which provides benefits at least equal to the minimum benefits provided by the Chilean social security system, which covers for illness, disability, retirement and death; and

• To declare their intention to keep affiliation to the foreign Social Security system within the respective Chilean employment contract; and

• To have a technical or professional degree, which is backed up with the corresponding documentation. For these purposes, a person with a technical or professional degree is someone who has knowledge of a science or art, which can be accredited by supporting documents of specialized or professional courses, duly legalized and officially translated by the Ministry of Foreign Affairs. It is important for the Chilean employer to have the required copies of the above mentioned documents, duly legalized, in case of an audit by the Chilean Tax Authorities.

• Finally, it is important to note that the above is separate from the Social Security treaties in place between Chile and other countries. These treaties are still applicable and will allow the foreign assignee to be exempt from contributing to the Chilean Social Security system.

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Mexico

The Executive branch of Mexico’s Federal Government presented, on 8 September 2019, the 2020 Budget to Congress. The 2020 Budget includes proposed changes to the Income Tax Law, the Value Added Tax Law (VATL), the Excise Tax Law (IEPS) and the Federal Fiscal Code (FFC), among others. The House of Representatives has until 20 October 2019 to discuss and approve the 2020 Budget.

Both the House and Senate then have until 31 October 2019 to align and approve the final 2020 Budget.

The proposed changes to the tax law include significant new provisions, including a focus on aligning obligation for reportable transactions.

Please note that the topics above are still being discussed and no changes have been implemented yet.


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Canada

Federal

Bill C-97, Budget Implementation Act Passes Legislation on Salary Overpayments

On 21 June 2019, Bill C-97, Budget Implementation Act, 2019 passed legislation on salary overpayments. Employers can proceed with the new rules, except for the CPP (until consent with the provinces has been achieved).

Employee Stock Options

On 17 June 2019, federal Finance Minister Bill Morneau tabled a Notice of Ways and MeansMotion that contains proposed changes to the tax treatment of employee stock options thatwere initially announced in the 19 March 2019, Federal Budget (See Q1 Newsletter). TheNotice of Ways and Means Motion outlines the various provisions that will be contained in thenew structure for stock options. Key components include:

• A new CAD 200,000 limit on the amount of stock options that may be vested for an employee in a year to continue to be eligible for the deduction. The CAD 200,000 limit will apply to stock options granted by the employer and any other corporation or mutual fund trust that is related to the employer.

• Shares that vest in any calendar year are based upon the value of the shares at the time the shares are granted;• The changes will apply to all stock options granted on or after January 1 2020.

Employer deduction

The employer may be able to claim a deduction on the portion of the benefit that does not qualify for the 50% stock option deduction as a result of the CAD 200,000 limit. This corporate deduction will only be available if the stock options would have otherwise qualified for the 50% deduction.

Ontario

Ontario Ministry of Labour Releases Employment Standards Self-service Tool The Ontario Government recently released its ES Self-Service Tool.

The tool is designed to help employees and employers in Ontario understand some of their rights and whether the amount paid to an employee meets certain minimum standards of the ESA. The tool will assist employers by addressing various topics, including:

• Monetary Standards• Minimum Wage & Overtime• Public Holiday Pay• Termination & Severance of Employment

Please note the ES Self-Service Tool currently does not calculate termination and severance.


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NORAM

Canada

Quebec, QPIP Rates to Decrease in 2020

The premium rate for the Québec Parental Insurance Plan (QPIP) will be decreasing by 6% on 1 January 2020 to 0.494 for employees.The QPIP insurable maximum for 2020 has yet to be announced

CNESST

The CNESST maximum assessable earnings will tentatively increase to CAD 78,500 for 2020.This will be confirmed towards the end of October 2019.

British Columbia

Prior to the new legislation, an employer was required to maintain employee records for two years after the employment terminated. Under the new proposed legislation, this will change to four years after the date that the payroll records were created.

Recovery of Wages

Bill 8 extends the period that an employee is able to recover owed wages from six to 12 months. This can increase to 24 months under special circumstances.New leaves

The government has introduced two new leaves:

• Critical illness and injury leave (in force) -Upon providing a certificate from a medical practitioner or nurse practitioner, employees will be eligible for up to 36 weeks of unpaid leave to provide care or support for a family member under 19 years of age. They will also be eligible for a leave of up to 16 weeks for family members 19 years old or older. Such a leave may be extended if the life of the family member remains at risk.

• Leave respecting domestic or sexual violence leave (in force) - An eligible person who experiences domestic or sexual violence can receive up to 10 non-consecutive days of unpaid, job-protected leave in each calendar year (to be taken in units of one or more days or in one continuous period) and up to 15 weeks of consecutive unpaid leave (to be taken as one unit of time, or more than one unit of time, with the employer's consent). If requested by the employer, the employee must provide reasonably sufficient proof of eligibility.


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NORAM

USA

Treasury & IRS introduce Redesigned Form W-4

In August, the Treasury Department and the IRS introduced a redesigned Form W-4 for tax year 2020. The re-designed form, while using the same underlying information, applies a “building block approach” to replace the former worksheets with questions intended to make it easier for employees in calculating estimated withholding.Employees, who have previously submitted a Form W-4 prior to 2020, are not required to submit a new form merely due to the redesign. Employers will continue to compute withholding based on the information from the employee’s most recently submitted Form W-4.The early release of Form W-4 is to allow employers and payroll processors time to learn about the new form and update their systems for 2020. In November, IRS will also release withholding tables with routine adjustments for inflation.


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New IRS Tax Withholding Estimator tool

In August, the IRS released a new Tax Withholding Estimator tool to replace the Withholding Calculator. Per IR-2019-139, the Estimator is an expanded, mobile-friendly online tool designed to make it easier for everyone to have the right amount of tax withheld during the year.Specifically, the new tool allows users to provide details about their estimated income from most sources (e.g., it is easier to enter wages and withholding for each job held by the taxpayer and their spouse, as well as separately entering pensions and other sources of income), tax credits and estimated itemized deductions. At the end of the process, the tool makes specific withholding recommendations for each job and each spouse and clearly explains what the taxpayer should do next.

CA – Worker Classification – Employee Likely if Services are Central to a Company’s Business

Under Assembly Bill 5 (AB5), which will take effect 1 January, Californians will be considered to be employees of a business unless an employer can show the work they perform meets a detailed set of criteria established by a California Supreme Court ruling last year. Under AB5, workers are far more likely to be deemed employees if they perform a function central to a company’s business.

IL – New Non-resident Withholding Rules Effective 2021

Under Public Act 101-0585 (Senate Bill 1515), effective 2021, Illinois non-resident employees will only be subject to state income tax if they spend more than 30 working days in Illinois. This is a significant change from current law that imposes tax on non-residents when their compensation is deemed “paid in” or “localized in” Illinois (except qualifying residents of Iowa, Kentucky, Michigan, and Wisconsin due to reciprocal agreements).This new 30-day rule is consistent with recent federal legislative proposals to standardize state income tax withholding for non-residents traveling and working in multiple states. Equally important, under this act, Illinois residents who pay tax to other states on income earned in other states (without regard to the 30-day rule) will now be able to claim a corresponding credit against their Illinois income tax liability.

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NORAM

USA

CA – Worker Classification – Employee Likely if Services are Central to a Company’s Business continued…

The bill provides for purposes of the labour Code, Unemployment Insurance Code, and wage orders of the Industrial Welfare Commission, a person providing labour or services for remuneration shall be considered an employee, versus an independent contractor, unless the hiring entity demonstrates that

• the person is free from the direction and control of the hiring entity pertaining to the performance of services, • the person performs services that is outside the usual course of the hiring entity’s business, and • the person is customarily engaged in an independently established trade, occupation or business.

The bill, notwithstanding this provision, provides that any statutory exception from employment status or any extension of employer status or liability remains in effect, and that if a court rules the 3-part test cannot be applied, then the determination of employee or independent contractor status will be governed by the test adopted in S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341 (Borello).

Connecticut—Legislation Creates Paid Family and Medical Leave Insurance

In June, Connecticut Governor signed legislation establishing a Paid Family and Medical Leave (PFML) program. Beginning 1 January 2021, employers will be required to withhold and remit employee contributions to the state. Then beginning 1 January 2022, covered employees can receive up to 12 weeks of leave during a 12-month period.The Paid Family and Medical Leave Insurance Authority Board will announce contribution rates, which cannot exceed 0.5% of an employee’s wages up to the federal social security wage base. The Board will have the discretion to reduce benefit amounts and delay certain types of leave based on the health of the trust fund.Covered employees will be able to receive PFLM for reasons allowed under the state's Family and Medical Leave Act (FMLA) and the family violence leave law. An additional two weeks of benefits will be available for a serious health condition resulting in incapacitation that occurs during a pregnancy. The new law expands the definition of a family member in the state FMLA to include grandparents, grandchildren, and individuals related to the employee by blood or affinity whose close association is akin to a family relationship.

New York— Enacts Time Off for Victims of Domestic ViolenceEffective 18 November 2019, employers are required to provide paid or unpaid time off and health coverage continuation during the absence of an employee who is a victim of domestic violence to:

• Seek medical attention for self or child, • Obtain services from a shelter or other program; • Obtain psychological counselling for self or child; • Participate in safety planning;• Obtain legal services. Employers are prohibited from discharging the employee or discriminating against the

employee in terms of compensation, employment conditions and privileges.

The employee must provide reasonable advance notice of an absence when feasible or provide a certification to the employer upon request. Employers are required to keep the employee's status as a domestic violence victim confidential.


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Africa

Egypt

Withholding Tax:

As per the last regulation issued by the Minister of Finance and the ETA which states that for FY19 Q3 Local Withholding tax for the period starts from the 1 July 2019 till the 30 September 2019. It is obligatory to submit the form no.41 through the online portal to report this. The ETA will stop accepting the hard copy form.

Additionally, further to the issuance of the ministerial decree 729 of 2018, which stated that the tax registration number of Egyptian entities will be the only reference while dealing with the Egyptian Tax Authority, instead of the file number. The ETA has issued further instructions, specifically directed to the entities subject to Withholding Tax to urge them all to approach the Central Department for Withholding Forms, with a copy of the business’ tax card to update their information at the ETA as the entity's number, which was the main reference in regards to withholding tax, will be replaced by the tax registration number as well. Accordingly, please consider updating your information at the ETA in order to mitigate any tax issue that may arise.


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Kenya

Mileage and Subsistence

In Kenya, the Kenya Revenue Authority allows use of market rates for mileage reimbursements and in practice mileage rates provided by the Automobile Association (AA) are acceptable as market rates.

AA publishes and updates the mileage rates for various categories of vehicles on an annual basis and their mileage rates booklet is available for sale at their offices. The vehicle mileage claims based on market rates is not a taxable benefit since it is considered a reimbursement of business expenses, but vehicle logs are required to record mileage for purposes of reimbursement of mileage. However, where mileage allowance is provided this is taxable in full in the month its provided.

PwC

Africa

South Africa

Section 10(1)(o)(ii) - Foreign earnings exemption

There has been no further legislative update on section 10(1)(o)(ii) of the Income Tax Act 58 of 1962 (“IT Act”). However, the foreign earnings exemption changes are still on track to be implemented from 1 March 2020. There is significant uncertainty in this regard as there has been no clarity on how these changes will be implemented practically. We anticipate that Treasury will provide guidance on the practical implementation of the changes to this section on foreign earnings for South African tax residents working and residing abroad prior to March 2020. In the meantime, we recommend that a check is conducted on each outbound expatriate to determine their South African tax residency status and whether they may be affected by this.

Variable remuneration

In 2013, section 7B of the IT Act was introduced to assist with the disparity between accrual and payment of various forms of remuneration to employees. Section 7B requires certain amounts to be deemed to accrue to an employee and be incurred by the employer only when the employee receives this remuneration. The amendments to section 7B have been proposed to widen the ambit to include other types of variable remuneration. The legislation currently applies to very specific payments while the proposed wording is wider and instead attempts to categorise types of payments that will fall within the definition. The changes are to be implemented from 1 March 2020.


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Payment of professional fees on behalf of expatriates

The Supreme Court of Appeal has dismissed an appeal against a judgment of the High Court in which it was held that the payment of fees for the services of tax practitioners in assisting in the preparation and filing of income tax returns for a company’s expatriate employees constitutes a taxable fringe benefit for the employees. In light of this latest development, employers who engage with service providers and pay fees for tax compliance and related services for expatriate employees are strongly urged to seek advice as to the correct tax treatment of the payment of such fees and, specifically, whether and to what extent such fees could be regarded as a taxable fringe benefit for the employees concerned.

On Monday 8 September, the Supreme Court of Appeal (“SCA”) issued judgment in the matterbetween BMW South Africa (Pty) Ltd (“BMWSA”) and the Commissioner for the South African Revenue Service (“SARS”).

Briefly, the facts in the matter were as follows. BMWSA, part of a worldwide group of luxury motorvehicle manufacturers, frequently requires the assistance of employees of other entities withinthe BMW group. These employees are seconded from their home countries to work in South Africa onshort or medium-term contracts. BMWSA had engaged with providers of tax services in order toassist these expatriate employees in complying with their South African income tax obligations.At issue was whether the fees charged by the service providers for the tax services (and paid byBMWSA) constituted a taxable fringe benefit in the hands of the expatriate employees. SARS assessed BMWSA to additional employees’ tax on the basis thatBMWSA had failed to report the fees as a taxable fringe benefit. BMWSA’s objection to the assessment was disallowed, and its appeals to the Tax Court andthen the High Court were dismissed, with both courts finding in favour of SARS. The outcome of the final appeal to the SCA is the subject of this Alert.

PwCPwC

6Eurasia

PwC

Eurasia

Kazakhstan


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Visa-free regime extended to 12 more countriesAccording to recent amendments (clause 17, p. 3 of “The Rules for entry and stay of immigrants to Kazakhstan”), starting from 29 September 2019 citizens of the following countries will be eligible to enter Kazakhstan on a visa-free regime for up to 30 calendar days: Bahrain, Vatican City State, Vietnam, Indonesia, Colombia, Qatar, Kuwait, Liechtenstein, Oman, Saudi Arabia, Thailand, Philippines.

The purpose of travel should be business / tourism / private travel.

Registration of the passport is not required. However, it is mandatory to submit notification of arrival to the Migration Authorities within 3 calendar days from the arrival date. These changes simplify the process of entry for nationals of the countries concerned to Kazakhstan.

PwCPwC

7Contacts

PwC

Contacts


Ken O’BrienE: [email protected]

Aoife ReidE: [email protected]

Julian SansumE: [email protected]

Ghislaine DemetriadisE: [email protected]

Karen TooraE: [email protected]

Barry Knoetze


Africa

Gavin Duffy



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Africa

NORAM

Tom GeppelE: [email protected]

Tina SchrobE: [email protected]

Jerry AlbertonE: [email protected]

mailto:[email protected]









PwC

Contacts (cont’d)

Rohan GeddesE: [email protected]

Sakaya Johns RaniE: [email protected]

Rebecca LaiE: [email protected]

Crystal LuE: [email protected]

NORAM

Grace HuangE: [email protected]

LATAM

Helena FontenelleE: [email protected]

Flavia FernandesE: [email protected]

APAC

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Eurasia

Anar KhassenovaE: [email protected]

Alisher Zufarov E: [email protected]

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

© 2019 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity.

Please see www.pwc.com/structure for further details.

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