Global Tax and Regulatory Update: March 2019


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This month’s update covers important information from Aruba to Singapore! We also have a feature on operating share plans post-Brexit.

 

 

   Aruba: Income tax changes

On December 3, 2018, the Government presented a fiscal reform plan which shall take place in 4 phases during a 2-year transitional period. The aim of this reform is to modernize and simplify the Aruba tax system as well as to generate additional revenue to reduce government debt.

For this purpose, the Aruba Parliament approved phase 1 of this tax reform bill last December 20, 2018. This bill involves among others, changes to the income and wage tax, effective January 1, 2019. These changes are as follows:

  • An increase of the tax-free amount to AWG 27,751
  • A decrease of the current 14 tax brackets to a 4 tax brackets system
  • A reduction of the progressive tariffs

The new progressive tax bands and rates are as follows:

Taxable Income (AGW)

Rates (%)

27,751.01 – 33,587 14
33,587.01 – 63,369 25
63.369.01 – 141,783 42
141,783.01 – 52

In addition, the Aruba government announced that the income tax tariff will be reduced from 25% to 10% on dividends received by individuals. However, this reduction has not been implemented yet.

Shareworks Global Compliance comment

We recommend companies review these change and amend their practices accordingly. Please contact us if you have any questions.

Our Global Compliance Network Law Firm, HBN Law, in Aruba would be happy to provide you with more information. For any further information feel free to reach out to Jeroen Eichhorn at jeroen.eichhorn@hbnlaw.com.

  Belgium: Tax reform approved – Update

In our previous newsletter, we informed you of significant changes that were expected to happen by January 1, 2019. The Belgian federal government had previously submitted a draft legislation to Parliament that introduced new salary tax withholding and reporting obligations for Belgian subsidiaries of foreign based group entities granting equity based incentives or other benefits in kind to employees of the Belgian subsidiary. At the time we published our previous newsletter, the draft bill had not been approved.

The bill was later adopted in Parliament on January 31, 2019. The text of the initial draft bill was substantially amended, with a new timetable for both reporting and withholding requirements as follows:

The anticipated reporting with respect to benefits granted or paid in 2018 was abolished, but reporting obligations for equity benefits will commence effective March 1, 2019.

Effective March 1, 2019, the local employer will also be required to withhold income tax on all employment-related income, including benefits under a share plan, regardless of its level of involvement with the administration of the share plan or the existence of a recharge agreement.

An exception applies to benefits that have been paid or granted during the period from January 1, 2019 until February 28, 2019; however, these benefits must be reported by the Belgian employer on a fiscal slip that is to be filed before March 1, 2020 (this special form is not yet available), but no withholding tax obligation applies to these benefits assuming no recharge or local subsidiary involvement with the share plan.

This new measure will not impact companies who are already recharging in Belgium and therefore withholding and reporting income tax in due course.

Our Global Compliance Network Law Firm, Argo Law, in Belgium would be happy to provide you with more information. For any further information feel free to reach out to Tillo Dumont at tillo.dumont@argo-law.be

Shareworks Global Compliance comment

We recommend companies review these change and amend their practices accordingly. Please contact us if you have any questions.

  Congo D.R.: Submission of the draft Finance Bill 2019

The Finance Bill 2019 was submitted to the National Assembly and published in the Official Gazette of December 21, 2019 introducing several changes in the tax law.

Effective January 1, 2019 the income bands were reduced from 10 bands to 4. The annual taxable income table for 2019 is set forth below:

Annual Taxable Income (CDF)

Rate (%)

0 – 1,944,000 0
1,944,001 – 21,600,000 15
21,600,001 – 43,200,000 30
43,200,001 – 40

Shareworks Global Compliance comment

We recommend companies review these change and amend their practices accordingly. Please contact us if you have any questions.

  Macedonia: New law on personal income tax

A new law on Personal Income (“PIT Law”) came into effect on January 1, 2019 replacing the previous 10% flat income tax rate and introducing a progressive personal taxation system aiming for greater fairness in the taxation regime. The main changes of this PIT Law are as follows:

Tax brackets

All income exceeding MKD 90,000 per month will be subject to a new tax rate of 18%. Any income up to MKD 90,000 will continue to be taxed at 10%.

The tax brackets are as follows:

Annual Tax Base (MKD)

Monthly Tax Base (MKD)

Rate (%)

0 – 1,080,000 0 – 90,000 10
1,080,001 – 90,001 – 18

It is important to note that the above will be applicable to earnings from employment as well as income from pensions, independent activities and royalties.

Income from capital

Income from dividends will now be taxed at a flat rate of 15%, an increase from the prior rate of 10%.

Additionally, capital gains from sale of shares, which are not currently subject to tax, will become taxable effective January 1, 2020.

Our Global Compliance Network Law Firm, Schoenherr, in Macedonia would be happy to provide you with more information. For any further information feel free to reach out to Andrea Radonjanin at a.radonjanin@schoenherr.rs and Magdalena Petreska at m.petreska@schoenherr.rs.

Shareworks Global Compliance comment

We recommend companies review these change and amend their practices accordingly. Please contact us if you have any questions.

  Netherlands: Changes in social security contributions

The following changes to social security contributions in The Netherlands became effective as of January 1, 2019 as follows:

The employee social contribution rate remains at 27.65%, subject to a cap of EUR 34,300 (an increase from the prior cap of EUR 33,791).

Employer social contribution increased to 18.29%, subject to a cap of EUR 55,927 (this is an increase from the prior rate of 17.75%, subject to a cap of EUR 54,614).

Our Global Compliance Network Law Firm, Wieringa Advocaten, in The Netherlands would be happy to provide you with more information. For any further clarification feel free to reach out to Maartje Oliemans, Employment Law expert, at oliemans@wieringa.nl

  United Kingdom: Operating share plans post-Brexit – The Prospectus Directive

The United Kingdom’s (UK) exit from the European Union (EU) is due to take place on March 29, 2019 (“Brexit Day”).

In the UK, the EU Withdrawal Act 2018 is already in place and intends to copy and paste EU law into domestic law on Brexit Day. In addition, the UK and the EU had agreed the terms of the UK’s withdrawal (the “Withdrawal Agreement”)which provides for a “transition period” that will run from Brexit Day until December 31, 2020. However, the UK parliament had rejected the Withdrawal Agreement; the agreement is currently being re-negotiated, and will require ratification by the UK parliament. If the agreement is not ratified prior to Brexit Day, the UK will leave the EU with no deal and no transition period unless Brexit Day is deferred.

The impact of the UK leaving the EU on the operation of share plans throughout the European Economic Area (EEA) will depend on whether a form of Withdrawal Agreement is in place, or whether the UK leaves on the March 29, 2019 with no deal.

The UK is currently transitioning from the current EU prospectus directive (“EUPD”) to the EU Prospectus Regulation (“EUPR”). The EUPR will apply in full from July 21, 2019. The new regulation will extend the current exemption from issuing a prospectus for employee share plan offers to all companies, regardless of where they are headquartered or listed. Until July 21, 2019, only companies headquartered or listed in the EEA can rely on the specific employee share plan exemption contained in the EUPD.

What happens following Brexit Day?

The EU Withdrawal Act 2018 incorporates the existing EUPD into UK law on Brexit Day. The Act does not cover the new regulation, but legislation is being put in place to ensure that the new EUPR regime will apply from July 21, 2019, meaning that, from July 21, 2019, companies can rely on the broader employee share plan exemption when making offers into the EEA under employee share plans, regardless of where they are headquartered or listed. 
 
The legal position between Brexit Day and July 21, 2019 will depend on whether the UK leaves the EU with a deal in place.

If a Withdrawal Agreement with a transition period is in place at Brexit, there should be no immediate change to the laws applicable to employee share schemes. UK headquartered or listed companies will continue be able to rely on the existing EUPD share plan exemption as the UK will continue to be treated as an EU member state for the purposes of EU law during the transition period.

In contrast, if the UK leaves the EU without a deal, from Brexit Day, UK issuers will not be able to rely on the EUPD share plan exemption. Further, the UK will no longer be part of the EEA for the purposes of issuers seeking to make share offers in the UK. For the period between Brexit Day and July 21, 2019, companies in this position may therefore need to rely on a separate exemption, for example the de-minimis exemption (in respect of offers not exceeding a value of EUR 1 million in 12 months, or as otherwise increased (up to a maximum of EUR 8 million in 12 months) by individual member states), or for offers made to fewer than 150 people per EU member state. If no exemption is available, affected companies will need to publish a prospectus unless the offer can be delayed until July 21, 2019.

In general, offers of non-transferable options (including options offered under SAYE or Sharesave schemes) or free shares are not caught by the EUPD.

It is also important to note, that current non-EEA headquartered companies who have a FCA approved prospectus passported into other EU member states will no longer be able to use that prospectus across the EU after Brexit Date. If no exemptions are otherwise available, the prospectus would need to be approved in a new EU/EEA member state.

Our Global Compliance Network Law Firm, Pinsent Masons, in the United Kingdom would be happy to provide you with more information. For any further information feel free to reach out to Fleur Benns at fleur.benns@pinsentmasons.com

Shareworks Global Compliance comment

We recommend companies speak with their share plan administrators and review upcoming offers. Please contact us if you need assistance with this regard.

Upcoming Filing and Reporting Deadlines

  Germany: Wage tax certificate

February 28, 2019

Affects: Local company

German employers must issue a wage tax certificate (“Lohnsteuerbescheinigung”) containing information about the calendar year income, as well as information on social security contributions. The wage tax certificate which should include employee benefits must be sent electronically on an official form to the tax authority at which the employer is registered and a copy must also be provided to the employee. The deadline for filing is the last day in February after the end of the previous tax year (December, 31).

Our collaborating law firm in Germany (Haver & Mailaender ) is happy to assist, should you need any support with this.

  Singapore: Filing for former or posted employees

March 1, 2019

Affects: Local company

The local company must file a report on appendix 8B to the Inland Revenue Authority (IRA) of Singapore in respect of all Singaporeans and Singapore permanent resident employees who have ceased employment or are posted overseas, and derived gains from the vesting, exercise, assignment, release or acquisition of any rights derived under any employee stock option plan or employee share ownership plan which are taxable in Singapore.

The due date for both filings is March, 1 following the end of the tax year.

Our collaborating law firm in Singapore (Low Yeap Toh & Goon LLP) is happy to assist, should you need any support with this.

  Vietnam: Equity reporting for Vietnamese registered plans

March 31, 2019

Affects: Parent company

Companies that operate equity plans which have been approved by the State Bank of Vietnam must to file a report providing details of any awards granted or vested as well as any options that have been exercised in the previous calendar year. The due date for filing is March, 31 following the end of the tax year.

  Ireland: Equity reporting

March 31, 2019

Affects: Local company

Companies have to report to the Irish Revenue on Form RSS1 (filed electronically) by March 31 any unapproved options and other rights to acquire shares that were granted, assigned, released and/or exercised by employees and/or directors during the preceding year.

Separate reporting requirements apply for approved save-as-you-earn plans, approved profit-sharing plans and employee share ownership trusts. The forms are available for download on the Irish Revenue website.

Failure to comply with these mandatory filing obligations will result in a penalty and, in the case of any approved schemes, may result in the withdrawal of Revenue approval for approved schemes.

Our collaborating law firm in Ireland (McCann FitzGerald, Solicitors) is happy to assist, should you need any support with this.

  Japan: Equity reporting

March 31, 2019

Affects: Local company

The deadline for annual reporting in respect of offshore assets for Japanese employers is approaching. Japanese companies that are majority owned by non-Japanese companies and Japanese branch offices of non-Japanese companies must file an annual report to the tax authorities, using Form 9(3), if their employees have cash or equity awards that have vested or have been exercised in the previous tax year.

The due date for filing is March 31 following the end of the tax year. Form 9(3) is available on the website of the Japanese tax authority.

Our collaborating law firm in Japan (Anderson Mori & Tomotsune) is happy to assist, should you need any support with this.

  China: SAFE quarterly reports

April 3, 2019
Affects: Local company

Companies that have obtained SAFE approval for their equity plans in China are required to file quarterly reports with their local SAFE office within three business days of the end of the relevant quarter.

Our collaborating law firm in China (Martin Hu & Partners (MHP)) is happy to assist, should you need any support with this.

  Saudi Arabia: Quarterly equity reporting

April 10, 2019
Affects: Parent company

Companies offering share plans to employees in Saudi Arabia must notify the Capital Market Authority (“CMA”) on a quarterly basis of the total number and value of such offers. This notification can be made by an authorised person or by the company. The company should also review any plan amendments or changes to determine whether any additional filings with the CMA are required.

  Singapore: Equity reporting

April 15, 2019
Affects: Local company

Under the Qualified Employee Equity-Based Remuneration Schemes (QEEBR), qualifying employees may elect to defer payment of the tax due at exercise of stock options and vesting of share awards, including RSUs, for up to 5 years, subject to an interest payment. Under the tax deferral scheme, the applicant must meet certain criteria.

A plan that meets the applicable requirements of the QEEBR legislation is automatically qualified (i.e., no approval is required).

Employees must submit an application form to defer their tax gains to the Inland Revenue Authority of Singapore, and the employer must certify on the application form that the stock plan under which the stock option and/or share award is granted qualifies for the QEEBR Scheme. The form must be submitted to the Singaporean tax authorities by April 15.

Our collaborating law firm in Singapore (Low Yeap Toh & Goon LLP) is happy to assist, should you need any support with this.

  India: Indian employer tax filings

April 15, 2019
Affects: Local company

Indian employers are required to file Form 24Q with the Indian tax authorities on a quarterly basis. These quarterly returns report information on employment income paid to employees (including from share-settled awards) as well as taxes withheld.

The quarterly returns must be submitted by:

  • Quarter ending March 31: May 31
  • Quarter ending June 30: July 31
  • Quarter ending September 30: October 31
  • Quarter ending December 31: January 31

Our collaborating law firm in India (Little & Co.) is happy to assist, should you need any support with this.

 

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