Global Employment Taxes Newsletter December 2019 Edition Introduction

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 Tom Geppel income tax changes in Japan and Polish PIT rate updates as well as updates across the network on the treatment of Global Employment Tax non-residents. and Payroll Lead E: [email protected] 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.

Ken O’Brien

Global Employment Tax and Payroll Lead E: [email protected]

Global Employment Taxes Newsletter PwC | 2

PwC Contents

1 Europe and the Middle East

2 APAC

3 LATAM

4 NORAM

5 Africa

6 Eurasia

Europe and the Middle East

NORAM Eurasia

APAC

Africa

LATAM

PwC 1

Europe and the Middle East

PwC Europe and the Middle East

Belgium Finland

Control activities of the SPF Finances to The Finnish government’s new tax decisions verify compliance with the tax obligations relating to the state budget 2020

In 2019, the Belgian tax authorities will focus their The Finnish government has made the tax decisions control activities on individuals in the following relating to the 2020 state budget on Tuesday 17th situations: September 2019.

• The taxpayer is claiming a deduction for alimony Within the decisions it states the most important payments in the tax return, in particular if the contents from the viewpoint of global mobility, beneficiary of the payment is living outside of personal income taxation and payroll taxation are as Belgium; follows: • The taxpayer is claiming the deduction of actual professional costs (instead of the lump sum • The tax deduction of home loan interest will be professional costs); decreased in the upcoming years and abolished • If the income from the rental of real estate in wholly by 2023. Belgium has not been correctly reported when the • The deductible portion of home loan interest will real estate is used for business purposes by the be decreased by 10 percentage points to 15% in tenant. 2020 and 5 percentage points in each year from • If movable income (e.g. interest/dividend) of 2021 to 2023. foreign account(s) were not reported. • The maximum absolute amount of tax credit for • If no tax return was filed, despite the reminder household expenses will decrease from EUR 2,400 sent by the tax authorities (especially if it is not to EUR 2,250. the first time of non-filing of the tax return). • The proportional amount of the deduction will decrease from 50% to 40% in service bills and from Impact of FATCA & CRS communications for 20% to 15% in paid salaries. Belgian residents • The income taxation of low income earners and average income earners will decrease by EUR 200 million by increasing work income deduction, the FATCA (US legislation) and CRS (an OECD initiative basic deduction in municipal taxation and pension broadly inspired from FATCA) regulations aim to deduction in state and municipality taxation. tackle international tax evasion and fraud by creating • The all earned income tax levels will be corrected an automatic exchange of information in tax matters. with the income index. Further to the FATCA and CRS communication, PwC • The highest level of progressive earned income experienced that more and more (extensive) requests taxation, so called solidarity tax will be continued for information were sent by the Belgian tax to the end of the term of the government. authorities, especially when no movable income (e.g. interest or dividend) and/or foreign bank account The government will also propose to the Finnish were reported in the individual’s annual tax return. 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%.

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France

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.

Greece

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.

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Ireland

Company Cars Honorariums and one off lectures

Revenue revisited the guidance on company cars in Ebrief 161/19 updates Tax Duty Manual 05 05 11 and EBrief 094/19 which led to the Tax and Duty Manual sets out Revenue’s revised position in respect of 05 04 02 being updated. The key aspects of the update ‘honorariums’ or individuals who give a ‘Guest include: Lecture’ or one off lectures. The historic practice was • Consolidating previous guidance on company vans; that individuals who gave one off lectures (or no more • Providing a useful summary of the taxation of than two in a tax year) could receive the payment (or electric vehicles (i.e. exempt regardless of the open in some cases an honorarium) gross without market value of the vehicle for the period 10 deduction of tax/PAYE. Revenue’s view is now that October 2017 to 9 October 2018) the exemption effective from 1 September 2019, all payments to such remaining in place until the start of the 2021 tax individuals must incur PAYE under Real Time year. Reporting rules. This would apply to guest lecturers at • For electric cars provided by an employer post 9 third level institutions or companies. It is difficult to October 2018, an exemption applies to cars up to reconcile Revenue’s position, as in order to attract the value of EUR 50,000 and where the OMV PAYE in the first instance, there must be an office or exceeds this, then the excess is taxable under employment (as required under S112 TCA 1997). normal car BIK rules. Furthermore, this could have knock on consequences in respect of travel and subsistence expenses At odds with efforts to encourage the move to electric (historically paid without deduction of PAYE) in transport, from the recent 2020 budget, the instances where Revenue appear to be suggesting that Government has ended the EUR 3,800 grant for an employment exists and therefore the normal place business purchasing electric cars or plug-in hybrids. of work being that where the services are provided. The changes apply to all applications received 23 October 2019. The grant will continue for companies Tax Treatment of expenses of travel and purchasing electric vans. subsistence to office holders and employees

Carbon Tax EBrief 149/19 highlights the updates to Tax and Duty Manual 05 01 06 and collates Revenue's guidance on A new tax based on vehicle’s nitrogen oxide emissions the tax free reimbursement of expenses. The following will be applied to new car purchases and used imports are covered: from 1 January 2020. In addition, an increase of carbon tax on diesel and • The reimbursement of tolls (i.e. home to work tolls petrol to the value of EUR 6 per tonne will likely add 2 are taxable); cent to a litre of diesel and 1.7 cent to a litre of petrol. • 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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Ireland cont. Italy

: Signed the renewal of the NCLA applied to Tax Treatment of expenses of travel and executives belonging to the industrial sector: subsistence to office holders and employees supplementary pension schemes, lifelong cont. learning and contractual regulation in the • Guidance previously included in IT54 is now spotlight included in the Tax Duty Manual. One point to note is that Revenue’s view is that travel and subsistence On the 30 July 2019 Confindustria and Federmanager may only be reimbursed tax free where the signed the agreement for the renewal of the NCLA individual has 3 months service with the Irish (dated 30 December 2014) for executives belonging to employer prior to going on assignment; the Industrial sector. The agreement, running on the 1 January 2019 up to the 31 December 2023, achieves a • Incidental duties’ in the context of members of non considerable reversal trend in respect to the previous commercial bodies. In this particular context regulatory outlook, including several amendments and Revenue view attendance at conventions or updates. On the economic side, new annual salary meetings as delegates of the body as permissible minima are set forth starting from year 2020 (basis and ‘incidental’ as individuals should generally EUR 69.000), while regarding the executives already undertake their work at the periodic meetings of employed at the 1 January 2015 the previous amounts the bodies. This will be relevant to sports remain applicable if more favourable. Moreover, if organisations, trade unions and other voluntary annual paid holidays exceeding the legal minimum bodies/groups. threshold are not used within 24 months after the end of the accruing period, they will result in no longer The most fundamental addition to the tax and duty being usable nor eligible for compensation if the manual highlighted by the Ebrief relates to travel and employer has expressly invited the executive to use subsistence expenses by intermediaries (i.e. travel and them within that period. Where not reported, or in subsistence for employees of service companies). cases where agreed by both parties, the employer will Typically these arrangements arise where an be obliged to pay the respective compensation individual sets up their own services company and are indemnity, within the first month following the employees of that company. The service company then deadline. contracts to provide services to an end user (typically Furthermore: another corporate). The updated guidance highlights • The so called “Manager association”, has been that: introduced, financed through the payment of an annual amount of EUR 100,00 for each executive • The facts of each case will be reviewed to determine by the employer; whether there is an implied contract of • the increase from EUR 150.000 to EUR 180.000 employment, which in turn permits Revenue to of the upper limit for the calculation of fund find that an individual is an employee of the end Previndai (Integrative Pension Scheme) user. contribution, confirming the overall limit of 8% (4% employer charge, 4% employee) calculated • Revenue consider the individual’s normal place of on the TFR basis, together with the grant to the work to be that of the end user/organisation employer to borne a portion of contribution in benefitting from the services and not the charge of the executive up to the 3% (leaving a individual’s employer’s location, thereby denying residual 1% to the employee); in the end the tax free reimbursement of travel and • starting from the 1 January 2022, the minimum subsistence expenses in respect of travel and Previndai contribution in charge of the employer, attendance at the end user’s premises. fixed at EUR 4.800 per year, will be due without any minimum seniority required.

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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. Decreto Dignità (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).

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Lithuania Poland

Stock Options New Income Tax Threshold for EEs up to age 26 Starting from 1 February 2020, employee stock According to the new amendment to the Polish options exercised at no cost or for lower than their fair Personal Income Tax Act, which was introduced on 1 market value price not earlier than 3 years following August 2019, income earned by the individuals under their grant date will be treated as non-taxable income age 26 are exempt from personal income tax. The for personal income tax purposes meaning that exemption is limited and applies to revenues not taxation should only arise at the time of sale in the exceeding the first threshold of the tax scale, which is form of capital gains tax. This relief will apply to stock PLN 85 528. In 2019 the exemption limit was reduced proportionally (as binding for 5 months only) to PLN options granted in 2020 and later years. 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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Poland Portugal

Lower tax rate and increased deductible costs Non-Habitual Residents (NHR) Regime

A further amendment adopted by the Parliament Published in the Official Gazette of 23 July 2019, relates to lowering the PIT rate in the first tax bracket the Decree no. 230/2019, amending Decree no. from 18% to 17%, increasing the tax-deductible costs 12/2010 of 7 January, namely in what regards to and changes in the calculation of the tax-free amount. the list of high value-added activities under the Most changes will enter into force in October 2019. Non-Habitual Residents Regime.

• Lower tax rate In addition to the update of the activities covered Adopted changes in the PIT Act contain the reduction by the regime, the new list of high value-added of the tax rate from 18% to 17%, while the tax rate of activities is based on a new model that has direct 32% for income above PLN 85,528 remains correspondence with the Portuguese Classification unchanged. of Jobs ("Classificação Portuguesa de Profissões"), Lowering the tax rate will apply to all taxpayers who which will also be used to clarify interpretative receive income taxed according to the general rules, queries that may arise regarding the scope and the including employees, pensioners, as well as extension of those activities. The new list shall entrepreneurs who have not chosen a flat rate income enter into force from 1 January 2020 and it will tax or lump sum taxation. apply to taxpayers who are registered under the Non-Habitual Residents Regime as from 2020. • Tax deductible costs For taxpayers who are already registered as Non- The bill also provides a two-fold plus increase in Habitual Residents or who will be registered in the deductible costs for employees. Monthly deductible regime with effects as from 2019, the list currently costs due to one employment increases from month in force will continue to apply. However, these PLN 111.25 to PLN 250. The annual limit of tax costs taxpayers may also benefit from the new list of from one employment currently cannot exceed PLN high value-added activities once it has entered into 1,335, and after the amendment it will increase to PLN force. 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 advances Lowering 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.

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Russia

Changes in Currency control legislation: The third wave of capital amnesty Russian citizens will enjoy a less stringent Amnesty declarations can be filed from 1 June 2019 to regime for using foreign accounts 29 February 2020. The third stage appears to be more stringent than the previous two. Applicants will not The changes introduced by the Law affect both legal just declare their foreign assets and foreign bank entities and individuals. The Law will come into force accounts – they will also need to repatriate their on 1 January 2020. It will consist of: capital to Russia by:

● Less stringent regime for using a foreign bank ● Re-domiciling the declarer’s CFC to a special account (lifting of restriction on crediting cash administrative district (all declared CFCs to foreign bank accounts in certain instances. must be registered as multinational As defined by the Law, foreign bank accounts companies based in SADs); belonging to individual residents can be used ● Transferring funds from foreign bank to credit cash without any restrictions, accounts to accounts in eligible Russian banks provided that the bank is located in a foreign (the situation regarding accounts that were state that is an OECD or FATF member and already closed is unclear); the foreign state exchanges information with ● Providing additional information when Russia under the CRS) and abolishing cash declaring foreign accounts (e.g. cash flow flow statements in certain instances (the total statements for accounts (deposits) and cash credited to an account / saved on the account (deposit) transaction statements). account in the reporting period may not exceed RUB 600k or the equivalent in foreign The individual can file a special declaration during the currency); third stage even if he had already filed a declaration ● New grounds for crediting funds to a foreign during the first or second stages (a one-time bank account (income from the sale of declaration is allowed at every stage). precious metals in case if the income may not be directly credited to a Russian account and On the website of the Federal Tax Service of the return of a cash amount that was earlier Russia, you can now pay taxes by foreign bank transferred by an individual for asset card management to a non-resident asset manager). The Federal Tax Service of Russia has launched the service “Payment of taxes by a foreign bank card”. Tax legislation: New situation with the sale of With it, you can pay taxes if the payer constantly lives real estate by non-residents. and works abroad, and he does not have a Russian bank card. The service is designed for all categories of In April 2019, there was approved law to which the users and is available in two languages - Russian and provisions of paragraph 17.1 of Art. 217 and paragraph English. 1 of article 217.1 of the Russian Tax Code are to be The service is as automated as possible and allows you applied by non-residents in relation to property, to pay property taxes in a single tax payment or enter regardless of the date of its acquisition. an index if you have a payment document. In addition, with the help of this service, foreign electronic service These updates allow non-residents to sell real estate providers can pay VAT, as well as other taxes, fees and acquired before 2016, which they have owned for at duties, by filling out all the necessary details of the least 5 years, without tax consequences in Russia. 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 Global Employment Taxes Newsletter intended for payment of taxes by cards of foreign PwC banks. 12 Europe and the Middle East

Sweden

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.

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UK

HMRC consultation on cross-border tax PAYE RTI penalties – continuation of the risk- disclosure rules based approach to charging penalties

From 1 July 2020 an EU directive known as DAC 6 will Following a review, HMRC has decided to continue require taxpayers and their advisers to report details of the risk-based approach to PAYE late filing and late certain cross-border arrangements that could be used to payment penalties throughout the 2019/20 tax year. avoid or evade tax to HMRC. The aim of the consultation This means that late filing and late payment penalties is to clarify HMRC’s intended approach for businesses, as will be considered on a risk assessed basis rather than it moves to finalise the regulations, which will be being issued automatically. Penalties for 2019/20 will implemented regardless of the outcome of Brexit be issued from September 2019. negotiations. The consultation also looks at definitions of HMRC will not charge late filing penalties a ‘relevant taxpayer’ and the circumstances that would automatically for 2019/20 provided a FPS is filed trigger a reporting event. within 3 days of the payment date. Where there is a The draft regulations will require promoters, pattern of persistent late-filing within three days of intermediaries and taxpayers to report details of certain the statutory filing date, employers will be reviewed types of cross-border arrangements to HMRC, where and may be charged a filing penalty as part of HMRC’s those arrangements meet certain hallmarks or criteria risk-based approach. (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.

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.

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UK

HMRC consultation - Good Work Plan: Proposals Independent review of loan charges to support families Chancellor Sajid Javid has commissioned a The Government has launched a new consultation on review to consider whether the policy is an high-level options and principles to enable parents to appropriate way of dealing with disguised balance the gender division of parental leave. The remuneration loan schemes used by individuals consultation asks whether Statutory Paternity Leave for who entered directly into these schemes to fathers and same sex partners should be changed and for avoid paying tax. suggestions on ways in which the Shared Parental Leave The Treasury has asked Sir Amyas Morse, Policy, introduced in 2015, could be improved. former Comptroller and Auditor General and The consultation also sets out a proposal for a new Chief Executive of the National Audit Office Neonatal Leave and Pay entitlement, for parents of (NAO), to report back by mid-November, giving premature and sick babies who need to spend a taxpayers certainty ahead of the January Self prolonged period in neonatal care following birth. Assessment deadline. Parents would receive one week of Neonatal Leave and The review will focus on the impact on those Pay for every week that their baby is in hospital, subject individuals who were using the schemes to certain conditions which form part of the consultation. directly, reflecting the main concerns that have This would be available to mothers, fathers and been raised by MPs and campaigners about the partners. Loan Charge. HMRC has been challenging the The Government is also consulting on whether use of disguised remuneration loan schemes for employers should publish: more than 20 years, and the government introduced targeted anti-avoidance legislation • family related leave and pay; in 2011 to shut them down. • flexible working policies; and, While the review is under way the Loan Charge • whether there should be a requirement for employers remains in force. The review will not affect to consider advertising jobs as flexible. taxpayers who have already disclosed and settled, are in the process of settling, or are in The consultation ends on 29 November 2019. the process of finalising their disclosure. However, HMRC have also acknowledged that some taxpayers may want to wait for the Parental Bereavement Leave and Pay government’s response to the review before finalising their settlement – HMRC will release The Government is working to bring forward the further updates to guidance for these secondary legislation necessary to implement Parental individuals, setting out next steps if potential Bereavement Leave and Pay. The Government intends to liabilities change as a result of the government’s introduce the new right from April 2020. response. 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.

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UK

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.

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.

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Ukraine

Update on Subsistence and Mileage SEPA Payments Roll Out in Ukraine

Based on the Taxes Code of Ukraine the employees' In 2019 Q3 starting from August 2019 the new format expenses due to business reasons are not taxable in cases of bank accounts (IBAN) is being implemented in where they are supported with documents properly. Ukraine. Effective 1 November 2019, the use of IBAN Mileage reimbursements in case of trips by company- will be mandatory for all Domestic payments made provided vehicle can be treated as the tax-free in case if within Ukraine and therefore all domestic payments the employee provides the company with supporting must quote the beneficiary account in IBAN format documents confirming purpose of trip, with itinerary, only. 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.

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APAC

PwC APAC

Australia

Individual Tax Employment Law

Single Touch Payroll Reporting for Black economy legislation update Expatriates From 1 July 2019, new law prevents a deduction for Prior to 30 June 2019 employers are granted payments to employees or service contractors where the automatic exemptions to Single Touch Payroll (STP) payer has failed to withhold any PAYG withholding for inbound expatriate employees. The exemption was amount or did not notify the Commissioner of Taxation of granted if the employee was employed by an overseas the amount withheld. Since the distinction between entity while being seconded to Australia, all, or part, of employee and contractor is often difficult, the measure the employee's salary was paid by an overseas entity will not apply where the payer has complied with the no- and there was a shadow payroll arrangement in place. ABN withholding rule. This law comes as part of the It has now been announced, as of 1 July 2019, ATO's black economy review. employers will now need to report payments made to inbound employees under STP - with a one month When the Black Economy Taskforce issued its report in extension for filling to reflect the fact that information October 2018, the estimated impact of undisclosed cash is coming from an overseas payroll. payments in Australia was over AUD 30 billion, resulting Comparatively, for outbound employees, if they have in understated business income and wages, as well as broken Australian residency, it is assumed they should underpayments of superannuation. From this we are not have Australian tax withholding obligations, so seeing authorities be more aggressive, arguing that they do not need to be reported under STP. contractors should be treated as employees, and this is Alternatively, if all employees are being reported showing in the current level of activity in the courts. 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.

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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.

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China

Individual Tax Public Notice Issued by the MOF and the SAT Regarding the IIT Policies for Non-residents and Guangdong-Hong Kong-Macao Greater Bay Area Residents without Domicile to implement the revised IIT (Individual Income Tax) Law and its DIRs China’s Ministry of Finance on 16 March 2019 (Detailed Implementation Regulation), the MOF released new policies about tax incentives for overseas (Ministry of Finance) and the SAT (State (including Hong Kong, Macau and Taiwan) high-end Administration of Tax) issued the Public Notice to talents and urgently-needed talents in the clarify the IIT Policies for non-residents and residents Guangdong-Hong Kong-Macau Greater Bay Area without domicile (hereinafter as the individuals (GBA), allowing related talents to receive subsidies for without domicile) as follows: individual income tax. • The regulations on the sources of several types of This means that permanent residents of Hong Kong income include: wages and salaries, bonus and will pay the same tax rate in other GBA cities as they equity incentives, remuneration for directors, do in Hong Kong. Hong Weimin, Chief Liaison Officer supervisors and senior executives, as well as of Hong Kong Affairs of the Qianhai Administration, manuscripts income; said the policies will attract high-end talents from Hong Kong and Macau to start a business or work in • The regulations on calculating the income of wages other GBA cities. and salaries of the individuals without domicile, including non-residents, residents and senior The policy is applicable to the municipalities of executives; - The regulations on calculating the IIT Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, payable amount of individuals without domicile, Dongguan, Zhongshan, Jiangmen and Zhaoqing in including non-residents and residents; Guangdong Province. The Notice is valid from 1 January 2019 to 31 December 2023. • 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.

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China

Social Security Cooperating with MNCs - new incentives in Shanghai to attract MNC regional China and Japan have signed the social headquarters security agreement which has been launched since 1 September 2019 On 13 August 2019, the Shanghai Municipal Government issued the Opinions on Promoting the This can help further exempt the pension in the other Development of Regional Headquarters (RHQs) by country if the qualified individual has participated in a Multinational Corporations (MNCs) in Shanghai pension plan and made contribution in his/her home (Circular Hufugui [2019] No. 30, hereinafter the country. The exemption can be applied provided the “Opinions"). The Opinions put forward 30 specific certificate of coverage can be obtained in his/her measures in the following four areas: enhancing home country and the relevant record filing would be efforts to encourage the establishment of RHQs in duly performed. The exempted period would be up to Shanghai, providing more convenience for MNCs to 5 years and for any period that is more than 5 years, make investments, supporting free flow of funds and the extension application with the in charge authority facilitating trade and logistics, so as to speed up the should be duly performed. clustering of RHQs of MNCs in Shanghai. The Opinions was effective from 1 September 2019 to 31 China: IIT reform is impacting immigration August 2024. applications The Opinions relax the criteria for establishing RHQs Payment arrangements under the Individual Income and China holding companies, support free flow of Tax (IIT) Law that was fully implemented on 1 funds, and provide policies regarding trading, January 2019, are having an increasingly significant research and development (R&D), logistics and impact on China work permit applications. The new supporting facilities of RHQs, in order to help MNCs IIT reform increases the standard basic deduction and deal with difficulties encountered in operation. The further clarifies tax policy regarding non-resident implementation of these policies will facilitate their individuals. These factors have affected the calculation business in China and may even develop into a new of monthly tax. As a result, it has become more investment and operation model. For MNCs that have complicated for employers to decide if they should not yet entered China or are planning to do so, they apply for a China work permit for foreign employees can consider optimising their business arrangements under the salary ‘undertaking’ approach. by taking into account the new policies.

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China

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 China To 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.

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Hong Kong

Individual Tax To counter the challenging external and local economic From the year of assessment 2019/20, taxpayers are environment, the Financial Secretary announced a entitled to tax deductions under salaries tax and package of measures to support enterprises, especially personal assessment for their premiums paid to small and medium enterprises (SMEs), to safeguard jobs qualifying deferred annuities and contributions made and relieve people's financial burden. to tax deductible Mandatory Provident Fund (MPF) voluntary contribution accounts. The maximum tax- The proposed supportive package includes one tax deductible limit is HK$60,000 each year per measure, to increase the reduction of salaries tax, tax taxpayer. under personal assessment and profits tax for year of assessment (YOA) 2018/19 from 75% as originally A taxpayer can claim tax deductions for deferred proposed in the 2019/20 Budget to 100%. The reduction annuity premiums covering his or her spouse as joint ceiling of HK$20,000 remains unchanged. annuitant, or either the taxpayer or the taxpayer's spouse as a sole annuitant. A couple can also allocate Amendments to Inland Revenue (Amendment) (Tax tax deductions for deferred annuity premiums Concessions) Bill 2019 will be proposed in October 2019 amongst themselves in order to claim the total when the Legislative Council resumes meetings to deductions of HK$120,000, provided that the implement the enhanced tax concession. deductions claimed by each taxpayer do not exceed the individual limit. Tax demand notes for YOA 2018/19 will be issued by the IRD upon the passage of the above-mentioned bill by the Tax deductible MPF voluntary contributions are Legislative Council. subject to "preservation requirements", meaning that the accrued benefits can be withdrawn only upon reaching the age of 65 or based on statutory grounds. India In addition, to counter the challenging external and local economic environment, the Financial Secretary Individual Tax Black Money Act announced a package of measures to support enterprises, especially small and medium enterprises As per the India tax laws, individuals qualifying as RORs (SMEs), to safeguard jobs and relieve people's (Resident and Ordinarily Resident) are required to report financial burden. 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 The proposed supportive package includes one tax under the BM (Black Money) Act. measure, to increase the reduction of salaries tax, tax under personal assessment and profits tax for year of The BM Act has severe implications from penalty and assessment (YOA) 2018/19 from 75% as originally prosecution standpoint in case of non-disclosure of proposed in the 2019/20 Budget to 100%. The foreign assets. In fact, the Government of India had reduction ceiling of HK$20,000 remains unchanged. 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 Amendments to Inland Revenue (Amendment) (Tax penalty. Concessions) Bill 2019 will be proposed in October 2019 when the Legislative Council resumes meetings The Indian tax authorities have started enforcing the BM to implement the enhanced tax concession. Act to ensure strict compliance regarding disclosure of overseas assets. Tax demand notes for YOA 2018/19 will be issued by In its recent judgement, the Calcutta High Court has the IRD upon the passage of the above-mentioned bill clarified that prosecution can be initiated against by the Legislative Council. 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 Global Employment Taxes Newsletter Act. PwC 24 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 to all 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).

Quoting of Aadhar Deduction for interest on housing loan Aadhaar has been given its due importance now wherein With the mission of providing home for all, Aadhaar can be quoted interchangeably with Permanent under the affordable housing scheme, a new Account Number (PAN) for filing individual income tax return section has been inserted under section or for any other income-tax related transactions. 80EEA of the Income-tax Act, 1961 (the Act) wherein an individual would get an Levy of surcharge additional INR 1.5 lakhs deduction towards The tax burden has increased for the super-rich by hike in interest payout on housing loan in addition to surcharge for income from INR 2 Crores to INR 5 Crores at 25% the INR 2 lakhs deduction already available of taxes and at 37% of taxes for income above INR 5 Crores for self-occupied property subject to the resulting into the maximum effective tax rate as below: following conditions:

Income slab Surcharge rate - The stamp duty value of the house should Maximum effective tax rate not exceed INR 45 lakhs. Above INR 5,000,000 to INR 10,000,000 10% - The individual should not be owning any 34.320% other residential property on the date of Above INR 10,000,000 to INR 20,000,000 15% sanction of loan 35.880% - The loan must be taken during the period 1 Above INR 20,000,000 to INR 50,000,000 25% April 2019 to 31 March 2020 39.000% Above INR 50,000,000 37% 42.744%

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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

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Indonesia

Individual Tax Update on Transfer Pricing Documentation submission requirement Expansion of the tax concession for interest on bonds The DGT has redistributed Regulation No. PER- 02/PJ/2019, which changes the Transfer Pricing Documentation requirement for CITR submission. On 12 August 2019, the government issued The redistributed version now only requires: the Government Regulation No.55 Year 2019 (GR-55) Summaries of the Master File and Local File, and regarding income tax on bond interest. GR-55 the receipt of either the Country-by-Country represents a second amendment to Government Report (CbCR) Notification or CbCR submission in Regulation No.16 Year 2009 as lastly amended by the DGT online system. Government Regulation No.100 Year 2013. Employment Law Indonesia – Serbia tax treaty comes into force. The tax treaty between Indonesia and Serbia was ratified by Presidential Regulation Interest on bonds is generally subject to 15% final No. 75 Year 2018 on 17 September 2018, and will withholding tax (WHT) when paid to resident affect income paid or credited on or after 1 taxpayers and a 20% WHT (before treaty relief) January 2019. when paid to non-residents. Concessionary WHT rates of 5% up to 2020 and 10% from 2021 New tax facilities for industries with onwards apply for interest payments to mutual certain features funds operating under a collective investment contract (Kontrak Investasi Kolektif/KIK). The Government issued Regulation No.45 Year 2019 (GR-45) that introduces new tax facilities for Under GR-55, the applicability of these industries with certain emerging features. This concessionary rates is expanded to Infrastructure facility is hereinafter referred to as “Super Investment Funds (Dana Investasi Deduction”. GR-45 amends GR No.94 Year 2010 Infrastruktur/DINFRA), Real Estate Investment (GR-94) that serves as the main implementing Funds (Dana Investasi Real Estat/DIRE), and regulation of the Income Tax Law. GR-45 is dated Asset-Backed Securities (Efek Beragun Aset/EBA) and effective from 26 June 2019.GR-45 only as long as they operate under a KIK. stipulates key features of this Super Deduction facility, where details on each type of facility will Corporate Tax be regulated further in a Minister of Finance (MoF) regulation which may cover the type of New rules related to filing tax returns eligible labour-intensive industries, the duration The DGT has issued Regulation PER-02/PJ/2019 of the facility period, more detailed requirements. (PER-02), dated and effective from 23 January 2019. PER-02 stipulates that companies registered In summary, the facilities are as follows: in the following tax offices must now submit their Corporate Income Tax Return (CITR) through e- ● Facility for labour-intensive industries:- A Filing: reduction in net income of 60% of the amount invested in the form of tangible • Tax office for medium-sized taxpayers (Madya); fixed assets (including land utilised for • Jakarta Khusus tax offices include: • Tax offices for foreign investment companies main business), spread throughout a (Penanaman Modal Asing/PMA); certain period. • Tax offices for foreign companies and ● Facility for human resources development foreigners (Badan dan Orang Asing/Badora); in certain competencies:- A reduction in • Tax offices for listed companies (Perusahaan gross income of up to 200% of the amount Masuk Bursa/PMB); and 3. Tax offices for large spent for this activity. taxpayers (Large Tax Office/LTO). ● Facility for certain research and Additional documents that need to be attached to development activities in Indonesia:- A the CITR is the Transfer Pricing Documentation reduction in gross income of up to 300% (TPD). of the amount spent for this activity, Global Employment Taxes Newsletter spread throughout a certain period. PwC 27 APAC

Indonesia

Tax relaxation on luxury residences Preliminary tax refunds – an update

Luxury residences are subject to LST at 20%. On 19 August 2019, the Minister of Finance (MoF) PMK-86 has updated the minimum threshold for issued Regulation No.117/PMK.03/2019 (PMK- the imposition of LST on luxury residences as 117) as an amendment to MoF Regulation follows: 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”.

In addition to Value Added Tax (VAT) and LST, PMK-117 adds the following taxpayers to the Article 22 Income Tax also applies to the purchase category of Low-Risk VAT-able Entrepreneurs: of luxury residences. PMK-92 has updated the - Certain pharmaceutical wholesalers; minimum threshold for the imposition of Article - Certain distributors of medical equipment; 22 Income Tax on luxury residences as follows: - 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 The Article 22 Income Tax rate on the purchase of and attach the documents as stipulated in PMK- these very luxury residences has also been reduced 117. to 1% from the previous 5%. This tax constitutes a prepayment of the buyer’s income tax liability for the current year.

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Japan

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

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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, The Ministry of Economy and Finance (MOEF) part-time or hourly-paid workers as well as released the government’s tax reform proposals foreign workers, regardless of employment for 2019 on July 25, 2019. The amendment type or nationality, shall also be eligible for the minimum wages. proposals encompass some key focus areas, including the burden relief for submission of a • Expansion of Compensation Included in payment statement, strengthening taxation of Minimum Wage - A certain percentage of executive retirement income etc. bonuses paid regularly once or more than once a month and fringe benefits paid in cash or Burden Relief for Submission of a Payment cash equivalent has been included in calculating the minimum wage. In 2019, both Statement the bonus exceeding 25% of monthly minimum wage and the fringe benefits ● Extension of submission date for a exceeding 7% of monthly minimum wage will statement of payment - For submission be taken into account when calculating the made after January 1, 2020, the due date minimum wage to determine whether for the submission of a payment statement employers comply with minimum wage for compensation for employment regulations. received on a daily basis has been • Increase of Childcare Leave Allowance - extended from the 10th of the month From 1 January 2019, childcare leave following the last month of the quarter to allowance paid during the next 9 months after 15th of the month following the last month the first 3 months has been increased to 50% of the quarter. Therefore the deadline for of ordinary wages (maximum KRW 1,200,000 first quarter would be April 15, second and minimum KRW 700,000 per month). quarter would be July 15, third quarter Additionally, the employees who have been taking childcare leave before 1 January 2019 would be October 15, and the last quarter will be entitled to receive the increased would be January 15, etc. childcare leave allowance from 1 January ● Adjustment to the income range for 2019. submission of a simplified payment statement for wage and salary income • Increase in Upper Limit of Maternity Leave Benefits – The upper limit of maternity leave benefits supported by the Amendments to retirement pay for government has been raised from KRW executives 1,600,000 to KRW 1,800,000 per month. The executives’ retirement income limit in Korea is Based on the 90 days, it has been raised from calculated as "3-year average salary before KRW 4,800,000 to KRW 5,400,000. retirement * 1/10 * years of service since 2012 * Additionally, the employees who have been multiple payments". It is proposed that the taking maternity leave before 1 January 2019 "multiple payments" is reduced from 3 times to 2 will be entitled to receive the increase maternity leave benefits from 1 January 2019. times for the income made after January 1, 2020.

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Malaysia

Tax Exemption on Rental Income from a Tax exemption for women returning to work Residential Property after a career break

The exemption of 50% is available for statutory Effective from Y/A 2018 to 2020, approved female income from residential property rented out for any period from 1 January 2018 to 31 December individuals* returning to work after a career break are 2018. The monthly rental shall not exceed exempted from payment of income tax in respect of RM2,000. This rental income is due to be the gross employment income for a period up to 12 reported in the Y/A 2018 tax return by 30 April consecutive months. The approved individual can opt 2019 (without business income) or 30 June 2019 for the exemption period to commence either:- (with business income).

Employers required to contribute social i. in the Year of Assessment (YA); or security for foreign employees ii. the following YA in which she commenced her employment. Effective 1 January 2019, all Malaysian employers must register their foreign employees working in *Please note that there are requirements/ criteria to Malaysia (excluding domestic servants) with the qualify as an approved individual and as a qualifying Malaysian Social Security Organisation (SOCSO) employer. and contribute to the Employment Injury Scheme (EIS). Incentives for payment of education loan on Manual Form CP39 and MTD Payment not behalf of employee and income tax exemption accepted at IRB Counters for employee** The Malaysian IRB will no longer be accepting manual submission of Form CP39 and will An employer is allowed a tax deduction for the amount discontinue Cash and Cheque payments for MTD of PTPTN educational loan paid on behalf of his at all IRB Counters effective from 1 September employee during the period 1 January 2019 to 31 2019. Consequently, for MTD for the month of December 2019 (ie. effective YA 2019 and YA2020). August 2019 and subsequent months, employers The government has also granted the employee an are required to: income tax exemption for the amount of PTPTN educational loan paid on behalf by his employer ● Submit the Statement of MTD or during the mentioned period (ie. YA 2019). employees MTD data via e-PCB, e-Data PCB or e-CP39; and ** There are conditions to be met by both employer ● Make the MTD payments via e-payment. and employee to qualify for the incentives or tax exemption.

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New Zealand

Non-Resident directors’ fees Employment Law

The Inland Revenue has released an Interpretation Tax Working Group Final report Statement IS 19/01 for the application of schedular payment rules to non-resident directors' fees, together Following the Interim Report released in September with an accompanying operational position statement. 2018, the Tax Working Group’s final report was released on 21 February 2019. It made the following The Interpretation Statement considers the situations key recommendations with regards to the New in which tax must be withheld from directors’ fees Zealand tax system: paid to non-residents. This includes a discussion of when directors’ fees paid to non- residents are • Capital gains tax: Extend the existing coverage considered to have a New Zealand source. The of taxing capital gains. Eight of the 11 members of Interpretation Statement then goes on to consider the TWG favoured a broad capital gains tax that when and how much tax must be withheld and paid to would apply at full income tax rates, on realisation the Commissioner, if withholding is required from (sale or other disposal) of an asset and with no directors’ fees paid to a non-resident. allowance for inflation. Modernising tax administration bill The Taxation (Annual Rates for 2018–19, Modernising • Environment taxes: In the short term, expand Tax Administration, and Remedial Matters) Bill the coverage and rate of the Waste Disposal Levy, passed its third reading yesterday, and will come into strengthen the Emissions Trading Scheme (ETS) effect on 1 April 2019. and advance the use of congestion charging. Among several important improvements to the Tax Administration and Income Tax Acts, the Bill • Personal income tax: Consider raising the simplifies how tax is assessed for Individuals by bottom income tax threshold (currently NZD 0 - issuing tax refunds automatically. Around 750,000 NZD14,000) to NZD 20,000 or NZD 30,000, and extra taxpayers will likely get a refund. These new potentially combining this with an increase in the processes, when implemented, will particularly benefit second marginal tax rate (currently 17.5%) to 21%. those who work extra jobs and have paid too much secondary tax during the year. • Retirement savings: Encourage greater participation in Kiwisaver for low-income earners The new legislation also adds two new employee through various measures, including refunding the contribution thresholds to KiwiSaver (6% and 10%), ESCT for KiwiSaver members earning less than and opens the scheme up to over 65s. NZD 48,000, increasing the member tax credit Corporate Tax R&D tax incentive proposed bill from 0.50 to 0.75 per NZD 1 of contribution and The Taxation (Research and Development Tax reducing the PIE rates for KiwiSaver funds. Credits) Bill is being considered by Parliament’s Finance and Expenditure Committee. This Bill • Digital services tax: Be ready to implement a proposes a new tax incentive for businesses digital services tax if a critical mass of other conducting research and development. Inland countries move in that direction and New Zealand’s Revenue has released draft guidance, based on the Bill export industries are not materially impacted. 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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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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New Zealand

FBT, GST, and income tax treatment of Consultation on taxing employer-provided employee contributions to fringe benefits travel from home to a distant workplace Inland Revenue released QB 19/12 discussing “What Inland Revenue has released the draft operational is the fringe benefit tax, GST and income tax statement ED0217 “Employer-provided travel from treatment of an employee contribution to fringe home to a distant workplace – income tax (PAYE) and benefit?” In summary, Inland Revenue considers that fringe benefit tax” for consultation. The deadline for the answer depends on whether the employee makes a feedback was 6 September 2019. This statement is full or partial contribution to the value of fringe intended to clarify and simplify the tax rules around benefits, and who the employee makes the payment employer-provided travel to distant workplaces. It to. intends to make it easier to tell when this kind of employer-provided travel is exempt from income tax Draft determination on employee use of telecommunication tools and usage plans (PAYE) or fringe benefit tax (FBT). issued Proposed changes to Kiwisaver Act 2006 - Inland Revenue has released draft determination Early access “ED0219: Employee use of telecommunications tools and usage plans in their employment” for The Minister of Commerce and Consumer Affairs, the consultation. The deadline for comments is 20 Hon Kris Faafoi, released (SOP) No 293 proposing September 2019. The draft determination provides changes to the Taxation (KiwiSaver, Student Loans, employers with the option of applying certain and Remedial Matters) Bill (158-1). Changes are percentages to make an allocation between business proposed to the KiwiSaver Act 2006 to allow a person use and private use for usage plans related to who has a life-shortening congenital condition to telecommunication tools. This option will reduce withdraw their savings early in order to spend a business compliance costs. 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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New Zealand

Public rulings on treatment of crypto-assets Not Ordinarily Resident (“NOR”) scheme

Inland Revenue has released a series of Public Rulings BR Access to global talent to complement our local talent is key to maintaining Singapore’s competitiveness and PUB 19/01 - 19/04 that consider the income tax and FBT driving our economic growth. The NOR scheme was treatment of crypto-assets, including: introduced in Budget 2002 with the objective of attracting talent with regional and global ● Crypto-assets paid as salary and bonuses responsibilities to relocate to Singapore. ● Employer issued crypto-assets provided to an employee The NOR scheme will lapse after the Year of Assessment (“YA”) 2020 (calendar year 2019). The ● Application of employee share scheme rules to last NOR status will be granted for YA 2020 and employer issued crypto-assets provided to an expire in YA 2024. employee Individuals who come under the NOR status will Use of money interest rates amended continue to be granted NOR tax concessions until their NOR status expires, if they continue to meet the The Taxation (Use of Money Interest Rates) Amendment conditions of the concessions. Regulations 2019 (LI 2019/153) amend the Taxation (Use of Singapore will continue to build a conducive Money Interest Rates) Regulations 1998 to: environment to attract and retain highly skilled - increase the taxpayer’s paying rate of interest on unpaid individuals. This includes a competitive tax regime, tax from 8.22% to 8.35% per annum, and stable political, economic and social environment, - decrease the Commissioner’s paying rate of interest on strong regional connectivity and high standards of overpaid tax from 1.02% to 0.81% per annum. healthcare, housing and education.

Rebate for tax residents The Regulations apply on and after 29 August 2019 and were notified in the New Zealand Gazette on 4 July 2019. 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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Philippines

Tax Amnesty Act of 2018 Highlights of the TAD are as follows:

On 14 February 2019, the President signed into law • Covers all national internal revenue taxes for Republic Act No. 11213 or the Tax Amnesty Act. As taxable year 2017 and prior years, for taxpayers Package 1B of the Comprehensive Tax Reform who have pending criminal cases with the Program, the tax amnesty is meant to complement Department of Justice; delinquent taxpayers and Republic Act No. 10963 or the TRAIN Law. In the those currently being assessed by the tax authority; approved bicameral version of the bill, the program taxpayers with tax cases already elevated to the covered estate tax amnesty, general tax amnesty and courts; and those withholding agents who withheld amnesty for delinquencies. Although on the approved taxes but failed to remit such taxes to the tax bill, the general tax amnesty provision was vetoed and authority; as such, the only remaining provisions are the estate • The tax amnesty rates range from 40% to 100% of tax amnesty (ETA) and the tax amnesty on the basic tax being assessed, depending on the delinquencies (TAD). status of the taxpayer’s assessment or tax case; and The approved act covers unpaid internal revenue • Taxpayers who avail of the TAD and have paid the taxes due for taxable year 2017 and prior years for amnesty tax will have their criminal case and its estate tax and tax on delinquencies. corresponding civil or administrative case considered settled and will be terminated, and the Highlights of the ETA are as follows: taxpayer shall be immune from all suits or actions.

• It shall cover the estate of decedents who died on or before 31 December 2017, with or without In addition, some items were vetoed by the President: assessments issued; The entire Title III on the grant of a General Tax • Grants the estate an amnesty tax rate of 6% based Amnesty, and its related sections; Section 6 on one- on the decedent’s total net estate at the time of time declaration and settlement of estate taxes on death; properties subject of multiple unsettled estates and • Taxpayers who avail of the ETA will enjoy Section 7 on the conclusive presumption of immunity from the payment of all estate taxes correctness of the ETA returns. arising from the failure to pay such tax from 2017 and prior years, and from all appurtenant civil, While the President vetoed the entire provision of the criminal, and administrative cases and penalties; General Tax Amnesty, he requested the House of • A minimum estate amnesty tax of P5,000 shall be Representatives (lower chamber) to pass another paid if the allowable deductions at the time of general tax amnesty bill which would include the death exceed the value of the gross estate. 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.

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Philippines

Revenue Memorandum Circular (RMC) No. Estate Tax Amnesty 17-2019 / 19-2019 / 37-2019 RMC No. 68-2019 was issued last 1 July 2019 to In conjunction with the implementation of the provide the list of clarifications on certain issues changes to income taxation for individuals under the relative to the Estate Tax Amnesty under Republic Act Tax Reform for Acceleration and Inclusion (TRAIN) No. 11213. Law, the Bureau of Internal Revenue (BIR) issued the above circulars prescribing the used of the revised BIR Forms. The estate of a decedent who died on or before December 31, 2017, who is not covered by the • BIR Form 1701A – applicable for individuals exceptions enumerated under Section 3 of Revenue earning purely from business/professions who Regulations (RR) No. 6-2019, is qualified to avail of availed of the graduated income tax rates with tax amnesty. Optional Standard Deduction (OSD) as mode of deduction or those who opted to avail of the 8% flat income tax rate. Taxpayers may refer to the RMO for the full details of the clarifications provided on the Estate Tax Amnesty. • 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

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

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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Singapore Thailand

Removal of tax non-resident election Tax refund for individuals concession With effect from 2020, the IRAS will be removing the The tax refund will be returned via prompt pay (e- concession allowing Singaporeans who are away from Payment system) for individuals with Thai citizen Singapore for at least 6 months in the calendar year to identification number. elect to be regarded as a Non-Resident for tax purposes. 2019 will be the last year that residents of However, in case of an expatriate, the tax refund slip Singapore can make a Non-Resident election under will be sent to the individual's mailing address as the concession. designated on his/her annual tax return form (PND 90/PND 91). Following on from this, individuals working overseas Upon presenting the tax refund slip to any Krungthai who have travelled to Singapore on business will be Bank, the bank will deposit the tax refund into the subject to tax on income attributable to the individual's Krungthai bank account. employment period in Singapore. There is no de minimis exception applicable. The overseas employer If the individual does not have a Krungthai Bank would need to prepare a Form IR8A to declare the account, Krungthai Bank will generate an e-money relevant income. 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 New pilot scheme to facilitate hiring of foreign refund processing on his/her behalf. 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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LATAM

PwC LATAM

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.

Brazil

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.

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Brazil

House of Representatives concludes voting the If approved, the text can significantly change the Social Security reform virtual currency business, such as Bitcoin. Among other novelties, the Bill 3,825/2019 establishes the The House of Representatives concluded on the 7 competence of the Central Bank and the Brazilian August 2019 the second-round vote on the proposal Securities Commission (CVM) to monitor this matter. for Social Security reform (PEC 6/19). The bill is now It also reiterates the legitimacy of the Brazilian Tax with the Senate for further discussion and voting for Authorities to tax transactions with cryptocurrencies approval. and makes crimes punishable by heavy penalties any embezzlement and financial pyramids organized through crypto assets. Bill proposes rules for cryptocurrencies The bill also provides the authorization to breach clients and exchange agencies confidentiality in case A bill introduced by the Senate proposes to regulate of investigations and also requires commercial the cryptocurrency market in Brazil and criminalizes advertisements to report the risks of trading virtual fraud by specialized brokerage firms, the "exchanges". 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 Act Law 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 Mexico

Changes on Social Security exemption rules The Executive branch of Mexico’s Federal for foreigners Government presented, on 8 September 2019, the 2020 Budget to Congress. The 2020 Budget includes Current Chilean legislation, under the Law 18.156, proposed changes to the Income Tax Law, the Value allows foreigners to be exempt from contributing to Added Tax Law (VATL), the Excise Tax Law (IEPS) the Chilean Social Security system under certain and the Federal Fiscal Code (FFC), among others. The conditions that must be met. House of Representatives has until 20 October 2019 One of the benefits, in addition to maintaining their to discuss and approve the 2020 Budget. social security contributions abroad, is that it allows the individual to consider the contributions made Both the House and Senate then have until 31 October abroad as a tax deduction upon their monthly taxable 2019 to align and approve the final 2020 Budget. base. The proposed changes to the tax law include In line with a recent interpretation published by the significant new provisions, including a focus on Chilean Tax Authorities, it is now confirmed that the aligning obligation for reportable transactions. deductible cap amount rises up to UF 79,2 which will be adjusted annually according to the information Please note that the topics above are still being published by the National Institute of Statistics. discussed and no changes have been implemented yet. 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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NORAM

PwC NORAM

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 Means Motion that contains proposed changes to the tax treatment of employee stock options that were initially announced in the 19 March 2019, Federal Budget (See Q1 Newsletter). The Notice of Ways and Means Motion outlines the various provisions that will be contained in the new 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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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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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. 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. 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.

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.

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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 Violence Effective 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

PwC Africa

Egypt Kenya

Withholding Tax: Mileage and Subsistence

As per the last regulation issued by the Minister In Kenya, the Kenya Revenue Authority allows use of of Finance and the ETA which states that for market rates for mileage reimbursements and in FY19 Q3 Local Withholding tax for the period practice mileage rates provided by the Automobile starts from the 1 July 2019 till the 30 September Association (AA) are acceptable as market rates. 2019. It is obligatory to submit the form no.41 through the online portal to report this. The ETA AA publishes and updates the mileage rates for will stop accepting the hard copy form. various categories of vehicles on an annual basis and their mileage rates booklet is available for sale at their Additionally, further to the issuance of the offices. The vehicle mileage claims based on market ministerial decree 729 of 2018, which stated that rates is not a taxable benefit since it is considered a the tax registration number of Egyptian entities reimbursement of business expenses, but vehicle logs will be the only reference while dealing with the are required to record mileage for purposes of Egyptian Tax Authority, instead of the file reimbursement of mileage. However, where mileage number. The ETA has issued further allowance is provided this is taxable in full in the instructions, specifically directed to the entities month its provided. 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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South Africa

Payment of professional fees on behalf of Section 10(1)(o)(ii) - Foreign earnings expatriates exemption

The Supreme Court of Appeal has dismissed an There has been no further legislative update on appeal against a judgment of the High Court in which section 10(1)(o)(ii) of the Income Tax Act 58 of 1962 it was held that the payment of fees for the services of (“IT Act”). However, the foreign earnings exemption tax practitioners in assisting in the preparation and changes are still on track to be implemented from 1 filing of income tax returns for a company’s expatriate March 2020. There is significant uncertainty in this employees constitutes a taxable fringe benefit for the regard as there has been no clarity on how these employees. In light of this latest development, changes will be implemented practically. We employers who engage with service providers and pay anticipate that Treasury will provide guidance on the fees for tax compliance and related services for practical implementation of the changes to this expatriate employees are strongly urged to seek section on foreign earnings for South African tax advice as to the correct tax treatment of the payment residents working and residing abroad prior to March of such fees and, specifically, whether and to what 2020. In the meantime, we recommend that a check extent such fees could be regarded as a taxable fringe is conducted on each outbound expatriate to benefit for the employees concerned. determine their South African tax residency status and whether they may be affected by this. On Monday 8 September, the Supreme Court of Appeal (“SCA”) issued judgment in the matter Variable remuneration between BMW South Africa (Pty) Ltd (“BMWSA”) and the Commissioner for the South African Revenue In 2013, section 7B of the IT Act was introduced to Service (“SARS”). assist with the disparity between accrual and payment of various forms of remuneration to employees. Briefly, the facts in the matter were as follows. Section 7B requires certain amounts to be deemed to BMWSA, part of a worldwide group of luxury motor accrue to an employee and be incurred by the vehicle manufacturers, frequently requires the employer only when the employee receives this assistance of employees of other entities within remuneration. The amendments to section 7B have the BMW group. These employees are seconded from been proposed to widen the ambit to include other their home countries to work in South Africa on types of variable remuneration. The legislation short or medium-term contracts. BMWSA had currently applies to very specific payments while the engaged with providers of tax services in order to proposed wording is wider and instead attempts to assist these expatriate employees in complying with categorise types of payments that will fall within the their South African income tax obligations. definition. The changes are to be implemented from 1 At issue was whether the fees charged by the service March 2020. providers for the tax services (and paid by BMWSA) constituted a taxable fringe benefit in the hands of the expatriate employees. SARS assessed BMWSA to additional employees’ tax on the basis that BMWSA 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 and then 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.

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Eurasia

PwC Eurasia

Kazakhstan

Visa-free regime extended to 12 more countries According 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.

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Contacts

PwC Contacts

Europe and the Middle East

Ken O’Brien Aoife Reid Julian Sansum E: [email protected] E: [email protected] E: [email protected]

Karen Toora Ghislaine Demetriadis E: [email protected] E: [email protected]

Africa

Barry Knoetze Gavin Duffy E: [email protected] E: [email protected]

Africa

NORAM

Tina Schrob Tom Geppel Jerry Alberton E: [email protected] E: [email protected] E: [email protected]

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PwC 55 Contacts (cont’d)

APAC

Rohan Geddes Sakaya Johns Rani Grace Huang E: [email protected] E: [email protected] E: [email protected]

Rebecca Lai Crystal Lu E: [email protected] E: [email protected]

LATAMNORAM

Helena Fontenelle Flavia Fernandes E: [email protected] E: [email protected]

Eurasia

Anar Khassenova Alisher Zufarov E: [email protected] E: [email protected]

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