Global Employment Tax and Compliance Newsletter. 6th Edition. June 2023

Press Release from Acumen International: Global EOR/PEO

Welcome to the June Edition of the Global Employment Tax Compliance Newsletter.

At Acumen International, we pride ourselves on being your trusted partner, providing comprehensive solutions to simplify your global employment operations. We are dedicated to helping you navigate the complex world of employment tax compliance and immigration regulations, allowing you to focus on what truly matters – driving success in your global endeavours.

In this edition, we bring you a wealth of expert insights and professional advice tailored to our clients, partners, accountants, global payroll and tax professionals, employment compliance and global mobility experts.

As the world adapts to new challenges, we understand the critical role immigration plays in global workforce management. Our newsletter also features expert advice and tips to ensure smooth immigration processes for your international employees.

We invite you to delve into this edition of our newsletter, where knowledge meets excellence. Stay informed, stay compliant, and stay ahead of the curve with Acumen International.

European Council Advances on Platform Workers' Rights: Negotiations Set to Begin

The European Council has unanimously agreed on its position and is poised to negotiate with the European Parliament to establish a groundbreaking law extending employment rights to millions of gig workers.

The platform economy has experienced a phenomenal surge in recent years, with revenues soaring from an estimated €3 billion to approximately €14 billion between 2016 and 2020. Projections indicate that platform workers will reach 43 million by 2025.

While digital platforms have yielded benefits for businesses and consumers alike, they have created a grey area regarding employment status for many platform workers. The European Commission estimates that around 5.5 million individuals currently classified as self-employed are, in reality, engaged in de facto employment relationships with digital platforms, entitling them to the same labour and social rights granted to traditional employees under EU law.

Most of the EU's 28 million platform workers, such as taxi, domestic, and food delivery drivers, are officially classified as self-employed. However, many are subject to the same regulations and constraints as traditional employees, indicating an implicit employment relationship that warrants the labour rights and social protections guaranteed by national and EU laws.

The European Council's primary objective is to rectify misclassification instances and streamline reclassifying these workers as employees. Under the Council's general approach, a digital platform will be legally presumed to employ workers (instead of considering them self-employed) if their association with the platform meets at least three out of seven specified criteria.

These criteria include 1) income limitations, 2) work refusal restrictions, and 3) regulations governing appearance or behaviour. In cases where the legal presumption applies, digital platforms will bear the onus of proving, in accordance with national law and practices, that no employment relationship exists.

The proposed directive introduces two crucial enhancements: accurately determining the employment status of individuals engaged in platform work and establishing pioneering EU guidelines for using Artificial intelligence in the workplace.

Furthermore, the directive addresses concerns regarding transparency by mandating that workers be informed about the implementation of automated monitoring and decision-making systems. These systems must be supervised by qualified personnel safeguarded against discriminatory treatment, and account suspensions will require human oversight.

Albania Implements Sweeping Changes to Income Tax: Impacts on Corporate, Individual, and Withholding Tax

Albania's new income tax law, Law No. 29/2023, was published on May 2, 2023, and will take effect on January 1, 2024, replacing the current law from 1998. This new law introduces significant changes to corporate income tax, individual income tax, and withholding tax, including a broader definition of tax residence, stricter requirements for the dividend participation exemption, extended limitations on interest deductibility, specific provisions for long-term contracts, the introduction of an exit tax, and more.

Here are some key changes to Individual Income Tax under the new law.

  1. The new law defines tax residence based on whether an entity is established in Albania or has its place of effective management and control in the country during the tax period. The criteria for management and control in Albania include decision-making, board membership or directors' residency, and ownership by Albanian residents. In contrast, the current law only considers entities resident in Albania if they have their head office or place of effective management in the country.

2. A revised tax rates system for employment income is introduced, with a top marginal rate of 23%.

3. Controlled foreign company (CFC) rules are introduced, which will subject the income of CFCs to IIT (Individual Income Tax) in Albania, even if the income is not distributed to the Albanian resident shareholder.

4. Employers will withhold the tax on a monthly basis and remit it to the tax authorities by the 20th day of the following month for entities or by the 20th day of each three-month reporting period for self-employed individuals.

5. To facilitate this process, a new form called the "statement on personal status" will be introduced, requiring signatures from both the employer and employee. The employer indicated on the form will calculate the tax due on employment income and deduct 1/12th of the relevant personal allowance from the monthly tax base based on the annual income level. In cases where an employee holds multiple employments, the second employer will apply the progressive tax rates without deducting any personal allowances.

During the transitional period between June 1, 2023, and December 31, 2023, progressive tax rates will apply to employment income. These rates are as follows:

Income earned by self-employed individuals engaged in professional activities will be classified as employment income. These conditions are:

  • At least 80% of the total income generated is obtained directly or indirectly from a single customer.
  • At least 90% of the total income generated is derived directly or indirectly from no more than two customers.

However, it is important to note that if the professional services are exclusively provided to nonresident clients, the income generated will be treated as business income, regardless of the abovementioned conditions.

Bulgaria Introduces New Minimum Wage Regulations: Implications for Employers

New regulations on the minimum wage in Bulgaria have been established. The Council of Ministers determines the national minimum salary for each calendar year. By September 1, 2023, the national minimum salary for the upcoming calendar year will be determined.

It will be set at a level equivalent to 50% of the average gross wage over 12 months, considering the last two quarters of the previous year and the first two quarters of the current year. It is crucial to note that the national minimum salary cannot be lower than the rate set for the previous year.

Employers and payroll professionals should be aware of the potential economic impacts of the minimum wage increase. Additionally, they may need to adjust standard employment documents referencing the minimum wage to align with the new regulations.

Czech Republic: Changes to Czech Labour Code: Simplifying Remote Work Agreements and Cost Reimbursement

The Czech parliament is currently discussing a draft amendment to the Labour Code, which the Czech government has approved. The amendment introduces changes related to remote work, including the requirement for written agreements addressing remote work and reimbursement for remote work costs. The bill has undergone significant modifications since its initial publication last autumn. The final wording of the amendment will be determined after the legislative process is completed, and the bill is expected to come into effect in September 2023.

The revised rules for working from home are highly advantageous for employers. The revised rules make mandatory remote working agreements simpler than the original draft and reduce the obligation for employers to reimburse employees for costs associated with working from home. Additionally, employers can now agree with employees not to reimburse these costs, which helps reduce administrative burdens.

Mandatory remote work agreements are expected to be simplified compared to the original draft. The employer's obligation to accommodate employees caring for children to work from home has been significantly alleviated.

Regarding the entitlement to work from home, employees caring for children under 15 or other dependents and pregnant employees no longer have an automatic right to work from home. Instead, they have the right to apply for remote work, and employers must provide written reasons for refusing their request. The age limit for children cared for by employees has been lowered to children under nine years old.

Under the draft amendment, written agreements for remote work will still be required, but the extensive list of mandatory conditions has been reduced. The agreement should cover communication, work assignments and monitoring, cost reimbursement, and occupational health and safety rules, as Czech law currently lacks regulations for remote workers.

Reimbursing employees' costs related to working from home has been a contentious issue. The amendment now provides three options: reimbursement of actual costs, provision of a lump sum for increased energy costs determined by a Ministry of Labour decree, or an agreement that limits or excludes cost reimbursement. This change is positive for employers, as it addresses administrative and financial burdens associated with remote work.

Slovakia – New Bilateral Agreement with Austria on Tele-Work and Social Security

Slovakia and Austria have signed a bilateral agreement on telework and social security that allows teleworkers to work up to 40% of their total employment from their home country while maintaining social security coverage in their employer's country.

The Framework Agreement, signed by the Ministries of Labour in both countries, came into force on June 1, 2023. This agreement addresses the challenges faced by cross-border workers and provides clarity on social security liabilities. It applies to Slovakia and Austria, with specific conditions and requirements. Employers and teleworking employees must stay updated on applicable social security laws and consult professional tax advisers for guidance.

The Framework Agreement specifically applies to Slovakia and Austria, with the employer's registered office in one country and the employee's residence in the other. It defines "habitual cross-border telework" as regular employment carried out by the employee in both the employer's country and their country of residence, using information technology to fulfil assigned tasks. Additional employment or self-employment activities are not permitted, and no third-country element should be involved.

Similar framework agreements have been signed between Austria and the Czech Republic and Germany.

Uzbekistan Joins OECD/G20 Framework to Combat Tax Evasion and Address Digital Economy Tax Challenges

Uzbekistan has recently joined the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS), demonstrating its commitment to fight against tax evasion and address the tax challenges posed by the digital economy. As a member, Uzbekistan will collaborate with other nations on an equal footing to implement the comprehensive BEPS package, comprising 15 measures to curb tax avoidance and promote tax transparency.

Participating in the two-pillar plan, uz will contribute to achieving a fairer distribution of taxing rights for multinational enterprises under Pillar One. This will entail allocating taxing rights on an estimated annual profit of USD 200 billion to market jurisdictions. Implementing Pillar One is expected to yield global tax revenue gains ranging from USD 13-36 billion annually, with developing countries benefiting more than advanced economies.

Pillar Two introduces a global minimum corporate tax rate of 15% for companies with revenue surpassing EUR 750 million. This measure is projected to generate approximately USD 220 billion in annual global revenue gains, equivalent to around 9% of global corporate income tax revenues. Beyond financial benefits, Pillar Two aims to enhance tax stability and certainty for taxpayers and tax administrations.

Sweden - New Work-Permit Application Process

Sweden is revamping its work permit certification scheme with a new process that prioritises applications into four categories. This initiative aims to streamline and expedite the processing of work permits, particularly for highly-skilled workers from outside the European Union. The new system replaces the existing certification scheme and introduces specific criteria for each category. Let's take a closer look at the four priority categories:

The Swedish Migration Agency is actively implementing this new process and establishing new entities within the authority. They are expected to report back to the government by 4 September 2023, with the changes set to become operational by the end of the year. This revamped system aims to enhance efficiency and flexibility, enabling businesses to meet their labour needs more effectively and attract highly qualified talent outside the European Union.

The Impact of the German Whistleblower Protection Act on UK-Based Companies Operating in Germany

The German Whistleblower Protection Act, also known as "Hinweisgeberschutzgesetz" or "HinSchG," came into effect on 2nd July 2023. This act implements the requirements of the EU Whistleblower Directive (Directive (EU) 2019/1937) and introduces mandatory regulations for whistleblower protection in companies with a minimum of 50 employees.

German companies with at least 250 employees and German subsidiaries of internationally active groups are now required to implement internal reporting systems and channels for reporting whistleblowing or breaches. Companies must act promptly and thoughtfully to ensure compliance, as penalties for non-compliance will be enforced starting from 1st December 2023.

Smaller companies have additional time to comply with the act. Companies with 50 to 249 employees are not obligated to adhere to the requirements until 17th December 2023.

Denmark: Transparent and Predictable Working Conditions

New legislation has been enacted to implement the EU Directive on transparent and predictable working conditions for employees, leading to important modifications in employment practices. This legislation expands the scope of employee classification, adjusts the timeframe for providing written information, enhances the disclosure requirements for working conditions, and establishes new minimum standards.

Noteworthy updates include:

  • Granting employees the right to pursue additional employment unless the employer can provide valid justifications for prohibiting it.
  • Allowing employees to request alternative types of employment and receive written explanations for the employer's decision.
  • Introducing regulations for training during employment.
  • Ensuring employees receive information about guaranteed working hours when their schedules are unpredictable.

These changes became effective on July 1, 2023. Employers should proactively comply with the new rules by reviewing employment agreements, policies, and procedures. Existing employees employed before July 1, 2023, have the right to request updated employment agreements or additional documentation in line with the new requirements, and employers must respond within eight weeks.

Failure to comply with the legislation may result in compensation payments. The compensation amounts will align with those outlined in the Danish Contracts Act, typically ranging from DKK 5,000 to DKK 10,000. In aggravating circumstances, compensation may reach up to 20 weeks' salary, while breaches deemed excusable and of minimal significance are subject to a maximum compensation limit of DKK 1,000.

Ensuring Compliance: Saudization Mandate for Sales Professions in Saudi Arabia

A new Ministerial Resolution has been issued in Saudi Arabia, imposing localization requirements on sales positions within establishments. Effective 24th December 2023, the resolution mandates that sales positions in establishments with five or more workers must be localized to 15%. This means that Saudi nationals must fill a certain percentage of these positions.

The resolution applies to specific sales roles, including sales managers, internal sales and customer services directors, and patent specialists. Employers operating in Saudi Arabia are advised to carefully review the requirements outlined in the resolution and take the necessary steps to comply with the localization obligations.

Failure to adhere to the localization requirements can result in financial penalties and potential restrictions on work license renewals. To mitigate these risks, employers should promptly adjust their employment practices to meet the localization quota and ensure continued compliance with Saudi Arabian labor law.

It is crucial for affected employers to familiarize themselves with the details of the resolution and make the required adjustments to their workforce composition. By doing so, they can ensure smooth operations within the Kingdom and maintain a positive relationship with the local authorities.

Lithuania's National Visa Procedure Overhaul: Key Updates from July 2023

Effective July 1, 2023, Lithuania has implemented changes to issuing national visas. The Migration Department will now handle this procedure, and all applications must be submitted through the Lithuanian Migration Information System (MIGRIS). However, certain categories of foreign nationals will no longer be eligible to apply for a national visa.

The significance of these changes lies in the simplification of the application process for national visas, which will resemble that of a residence permit. The new amendments eliminate the issuance of national visas based on work, with the exception of seasonal work, as well as other grounds that duplicate the reasons for granting a temporary residence permit in Lithuania.

What has changed is that from July 1, 2023, foreign nationals not in Lithuania will be required to apply for national visas through an external service provider designated by the Migration Department. Previously, such applications were accepted by Lithuanian diplomatic missions, consular offices, or visa centres abroad chosen by the Ministry of Foreign Affairs.

Additionally, a new legal act called the "Description of the Procedure for Issuing a National Visa" will come into effect on July 1, 2023. This law will outline the process for submitting documents, providing consultations, issuing or refusing national visas, as well as cancelling and revoking them.

Starting from July 1, 2023, all applications for national visas must be submitted through the Lithuanian Migration Information System (MIGRIS) via the website. The option to fill out applications through the Electronic Application Module (EPM) will no longer be available.

The grounds for granting national visas will also change. According to the Migration Department, as of July 1, 2023, national visas will no longer be issued to the following individuals:

  • Full-time students intending to study at higher education institutions registered and operating in Lithuania.
  • Teachers and researchers coming to work in higher education institutions under employment contracts.
  • Foreign nationals coming to work in professions listed as "missing professions."
  • Foreign national employees who possess a work permit issued by the Employment Service.
  • Citizens of Australia, the United Kingdom, the USA, New Zealand, South Korea, Canada who previously obtained national visas through a simplified process.
  • Foreign nationals who have applied to obtain or change an EU citizen's residence permit or a family member card.
  • Foreign nationals for whom the Migration Department has decided to issue a residence permit or a family member card of an EU citizen.

To legally enter and stay in Lithuania, foreign nationals falling under these categories will need to apply for a temporary residence permit instead of a national visa.

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Wrap Up

We hope the information shared will help you make informed decisions and stay compliant across multiple jurisdictions.

At Express Global Employment / Acumen International, we remain committed to providing unparalleled support as your trusted Global Employer of Record partner. As you continue your journey in managing a global workforce, we encourage you to stay connected with us for ongoing updates, industry news, and expert guidance.

Thank you for being a part of our valued network. We look forward to serving you in the future and wish you continued success in all your global endeavours.

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