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Argentina - tax on
foreign exchange
Since the last Worldwide Wrap-Up, we have had
more information on the 30% tax on foreign exchange transactions
in Argentina. The tax was imposed from 23 December 2019 and is
due to stay in place for five years. As outlined in our January
newsletter (here)
the tax applies to the USD200 monthly foreign exchange limit,
further affecting the ability of employees in Argentina to
purchase shares under an incentive plan.
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Tapestry comment
The purpose of
the tax is to provide a disincentive for people to buy foreign
currency without a 'specific purpose’ and it was hoped that,
although the wording was very broad, it would not capture FX
transactions for share plans. Unfortunately this has not proven
to be the case and the impact is to further limit the ability of
employees in Argentina to participate in a global share plan
which requires employee contributions.
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Canada - proposed cap
on deductions for stock options
The Canadian budget, which was due to be
released on 30 March, has been postponed during the COVID-19
emergency. As a result there is no further information on the
proposal to limit the tax reduction currently available for
holders of stock options (see the January Worldwide Wrap-Up for more detail).
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Tapestry comment
Nothing new to report but it is a
case of when, rather than if, this change will come into force,
and it is likely to have a major impact on the value of stock
options for employees in Canada. We will continue to monitor
developments.
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Chile - tax reform law
Chile published new tax rules on 24 February
2020. Amongst other changes, the law introduced a new 40% top tax
rate for individuals and modified the definition of tax resident,
bringing Chile into line with the OECD definition. The changes,
including the new individual tax rate, were backdated to 1
January 2020.
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Tapestry
comment
The new tax rules which have been
under discussion for eighteen months, represent a major overhaul
of the tax system in Chile. Companies will need to assess the
impact of the changes on share plans operating in Chile.
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Global tax rates for
2020
With several countries starting the 2020 tax
year in March and April, or new rates being announced since our
last webinar, we will look at where rates have changed. Our
international advisors provide us with new rates to update our
database as quickly as they become available. In this Wrap-Up we
take a brief look at some of the changes.
Chile
- top rate of individual tax increased from 35% to 40%
India
- new 5% tax on foreign exchange
Scotland
- tax bands revised
UK
- increase in CGT annual exemption
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Tapestry comment
We
will discuss the detail of these changes during our 6 May
webinar.
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India - 2020 budget
Taking effect on 1 April, the Indian
government has introduced a new tax on outward remittances under
an approved FX scheme called the Liberalised Remittance Scheme
(or LRS). Under the new rules, any outward remittance under the
LRS for INR700,000 or more will be subject to a 5% tax at source.
The tax will be collected by the Authorised Dealer when the
remittance is made. Also applying from 1 April 2020, a tax
break is available for shares allotted by start-ups to their
employees in India under an ESOP.
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Tapestry
comment
We understand
that the new FX tax seeks to encourage Indian tax payers to file
a tax return, as the tax can be reclaimed, but only if they file
a tax return. The tax will impact employees who utilise the
LRS to make FX payments under an employee share plan.
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Poland - securities
filing obligation extended
Following the introduction of the EU
Prospectus Regulation in 2019, Poland has introduced additional
obligations for a company to notify the securities regulator (the
KNF) of an allocation of securities under an employee share plan.
The filing was previously only required for an offer to 150 or
more employees in Poland, but is now required for any offer,
irrespective of the number of offerees. Please see our
recent newsletter (here) which details the
filing obligations.
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Tapestry comment
For companies which have not previously had to
make a filing in Poland (because they fell under the 150 person
threshold), they will need to ensure compliance with the extended
notification requirement for all plans.
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Russia - sanctions
imposed under data localisation rules
‘Localisation’ rules require data operators to
store and process the personal data of Russian nationals in
databases which are physically located within Russia, although
'secondary' databases can be located outside
Russia. Regulations were introduced in December 2019
providing substantial fines (up to RUB18,000,000) for
non-compliance and the regulator, Roskomnadzor, has already
successfully taken action to impose fines on foreign companies
for failing to comply with the rules.
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Tapestry comment
It took
Roskomnadzor only two months to make use of the new sanctions
against foreign employers. As data protection rules become the
norm and regulators are given teeth to enforce those rules, we
expect to see more successful actions of this nature. Although
data protection is not a share plan specific issue, the global
nature of share plans means that it needs to be taken seriously
where companies are operating share plans internationally.
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Sweden - limits on
withholding amounts under new rules
In 2019, Sweden introduced new employer
monthly reporting for tax and social security withholding. Tax
rules do not permit the amount of tax withheld from an employee
to be greater than the employee’s monthly cash salary income.
Therefore, if the employee receives equity income, which causes
the tax due in a month to be more than the amount of cash salary
income received in that month, this could result in the amount of
tax due exceeding the monthly income.
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Tapestry comment
Under the
annual reporting system, employers could ensure that the average
amount withheld over 12 months did not exceed the permitted
amount. Since the introduction of monthly reporting, employers
have had to review how they operate withholding to ensure
compliance with the law. Unfortunately there does not appear to
be any interest at official level to adapt the rules to avoid
what seems to be an unintended consequence of the change to
monthly reporting.
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UK - off-payroll
working in the private sector - delayed
In the January edition of the Worldwide Wrap-Up, we
reported that the UK was set to see an extension of the
off-payroll working rules (known as IR35) to include the private
sector from April 2020. Due to the ongoing COVID-19 emergency,
the extension of the off-payroll rules has been delayed until
April 2021.
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Tapestry comment
The extension of
the off-payroll rules was already controversial, so it is not
surprising that it has been put to one side during the current
crisis. It will be interesting to see if it is further delayed or
whether further amendments are introduced to limit the impact on
what is already likely to be a fragile employment market.
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COVID-19 - global
impact
COVID-19 is having an impact on the
implementation of rules and regulations in every sector and in
every part of the globe. We cover COVID matters in standalone
webinars, but we will highlight key features in the Wrap-Up
Webinar on 6 May.
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Tapestry comment
Although this
webinar aims to focus on non-COVID updates, as the elephant in
the room, it is impossible to ignore the impact of the pandemic.
We will talk about how to keep up-to-date with share plans
related COVID news.
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