Tax Measures to Ensure and Bolster Employment
This paper focuses on the tax measures concerning employment adopted by BRITACOM jurisdictions that consist of 36 Council Member Tax Administrations and 30 Observers. The aim is to provide suggestions for tax administrations in their consideration of tax measures to ensure employment and create new jobs. The information in this paper is mainly selected from the official websites of the OECD, the IBFD and the tax administrations of the BRITACOM jurisdictions.
Countries across the world reacted to the COVID-19 pandemic by adopting strict containment measures, which effectively limited the spread of the virus, but led to sharp contractions in economic growth and increasing unemployment rate. According to the new OECD report, the pandemic is resulting in a job crisis far worse than the 2008 recession. In response, BRITACOM jurisdictions that consist of 36 Council Member Tax Administrations and 30 Observers are putting in place or considering various tax policies to ensure and bolster employment growth.
1. Tax policy
March 30. Government contributes 20% to the mandated minimum wage paid to workers and employee who are working for hotels, guesthouses, restaurants and Travel Agencies operating in Phnom Penh, Siem Reap, Sihanouk, Kep, Kampot, Bavet and Poipet.
March 27. The increase in the special contribution for the General Healthcare System is suspended for three months. The suspension will apply for the months of April, May and June 2020. For the month of March 2020, the increased contribution rates will apply.
April 30. Exemption from personal income tax（PIT） withholding for 4 months for firms who keep paying employee salaries despite not being able to operate due to COVID-19.
Employers will receive state subsidies for every retained job (i) For six months, salaries of up to 750 GEL will be fully exempt from income tax; (ii) For salaries of up to 1,500 GEL, 750 GEL will be exempt from income tax.
April 9. The Federal Ministry of Finance published a circular according to which additional benefits paid to employees by their employer between March 1 and December 31, 2020 due to the COVID-19-pandemic are tax free up to 1,500 EUR.
June 30. Several tax measures entered into force to manage the effects of the COVID-19 pandemic (“Corona-Steuerhilfegesetz”). The bill comprises VAT and income tax measures, inter alia certain payments made by the employer as a supplement to the reduced hours compensation benefit (so called Kurzarbeitergeld) are exempt from income tax for the time period March to December 2020.
1.6 Hong Kong China
The Government will provide wage subsidy to eligible employers to retain the latter’s employees. Employers have to undertake that they cannot implement redundancy.
Business registration fees will be waived for 2020-21, benefitting 1.5 million business owners at a cost of 3 billion HKD. Company registry fees for annual tax returns will be waived for two years to benefit 1.4 million firms at a cost of 212 million HKD.
March 18. Modified social security rules shall be applied for the period of March-June 2020 to the following sectors: Hospitality and tourism; Entertainment, film industry, performing art; Sport services; Event organization; Gambling. The rules for SSCs in the above sectors have been amended as follows: Employers will not be liable to pay their part of SSCs (17.5%+1.5%) with respect to employment income provided by them in the March-June 2020 period.
April 6. The prime minister announced a temporary job retention program, where the state assumes 70% of wage costs of furloughed workers for up to 3 months for companies that lost 15-75% of their revenues as a result of the COVID-19 epidemic.
April 7. Employer’s SSC tax rate will decrease by 2 percentage points from 17.5% to 15.5%.
April 22. Social Contribution exemption and increased financial envelope for preferential fringe benefits provided by employers. The exemption is temporary, until the end of 2020.
May 16. Employers’ SSC and payroll taxes will not be charged on businesses in the aviation industry.
For 2020, through company-level or local collective bargaining agreements, employer associations and trade unions can implement specific agreements to, among other things, redefine working hours, organizational and production needs and allocate a number of working hours to training courses. The costs of training courses, including the related social security and welfare contributions, will be covered by a special fund called the “New Skills Fund”, set up at the National Agency for Active Labour Policies.
The National Social Security Fund grants wage subsidies, channeled through firms to employees of Micro, Small, and Medium Enterprises(MSMEs) on unpaid leave (42,500 KZT a month, or 95 USD), until the end of the emergency situation. As of April 27, this has already benefited 4.25 million workers. The payment has been extended to the second month of the quarantine.
March 27. A comprehensive set of fiscal measures for consideration has been proposed by the cabinet to protect vulnerable household and businesses and to support the economy. These include: exemptions on corporate income tax (CIT), PIT, and SSCs until the end of September.
August 5. Companies and individual insurers will be exempt from SSCs for a period of six months from April 1 to October 1, 2020. This measure will be partially continued until the end of 2020 as a “discount” on payment. The SSCs will be 10 percent; five percent to be paid by the employee and five percent by the employer.
March 18. The Ministry of Planning, Finance and Industry(MoPFI) plans to provide a 10% non-refundable tax credit on the incremental wage bill and incremental investments on capital requirements. In addition, a deduction equal to 125% of wages paid and a one-time increase in depreciation equal to 125% of current year depreciation will be allowed.
1.12 New Zealand
May 14. The COVID-19 Response and Recovery Fund (CRRF) announced on May 14 included 1.6 billion NZD fund for boosting trades and apprenticeship training, which aims to retrain about 10,000 hospitality and aviation sector workers for construction, agriculture, and manufacturing sector jobs, as well as also for health, counselling and care works.
June 10. Where businesses have suffered a 50% decline in revenue in the 30 days immediately prior to making an application (when compared to the closed period in the previous year), a bulk payment will be made to the employer calculated at 585 USD for an FTE(Full Time Employee) and 350 USD for part time over 8 weeks. An application cannot be made for an employee until their 12 week original wage subsidy period (March 17, 2020 - June 9, 2020) has finished. Similar to the original wage subsidy, the amount must be passed onto employees, employees must be retained throughout the duration of the subsidy period with employers doing their best to pay them at least 80% of normal pay. An employer cannot receive more than one payment for the same employee at the same time. And active steps must be taken to mitigate the impact of COVID-19 on the business.
Wage subsidies available for all employers that are significantly impacted by COVID-19 and are struggling to retain employees as a result.
The Commissioner has issued a new temporary COVID-19 related determination for payments between March 17 and September 17, 2020 to reimburse additional work from home(WFH) costs. This allows: An additional 15 USD per week, per employee, to be exempt income for “other” WFH expenditure. A tax-exempt payment for use of furniture or equipment when WFH to reimburse the depreciation of the item. The payment will typically be for the cost of the asset and the payment will still be deductible to the employer.
An “Emergency Economic Stimulus Bill, 2020” was passed by the House of Representatives (HOR) to: Grant a tax rebate of 50% of the actual amount due or paid as pay-as-you-earn tax, to Nigerian companies who retain all their employees from March 1, 2020 to December 31, 2020.
March 26. Wage subsidy paid to the employer equal to 35% of the payroll for workers with salaries of up to approximately 428 USD.
1.15 Saudi Arabia
Human Resource Development Fund has allocated 5.3 billion SAR to support private sector enterprises to hire and train nationals.
April 4. Reimbursement of VAT credits in order to provide companies with liquidity. Tax rebates will be granted to companies that guarantee to keep their workers in business for the duration of the crisis or pay more than 70% of the wages of employees laid off.
April 4. Suspension of the collection of outstanding tax and duty payments for the most affected companies. This measure will be granted to companies that guarantee to keep their workers in business for the duration of the crisis or pay more than 70% of the wages of employees laid off.
February 18. Enabling employers to retain and reskill workers by enhancing the support under the “adapt and grow initiative” for 2020. This will include extending the funding period for reskilling from three months to a maximum of six months, specifically for the tourism, aviation, retail, and food services sectors.
March 26. Government will pay 75% of April wages for every worker in employment, capped at 4,600 USD. Wage support levels will be differentiated by sector for remaining qualifying months (75% wage support for aviation, accommodation, and tourism sectors, 50% for food services sectors, and 25% for all other sectors). Eligible union members will receive a one-off relief of up to 300 USD.
The Inland Revenue Authority of Singapore(IRAS) will allow certain expenses relating to working from home (e.g. Utility expenses) as deduction against employment income. Proper records should be kept to support the claim for such expenses. For practical reason, the IRAS is prepared to accept claim of utility expenses based on the electricity bills before and after working from home.
1.18 Slovak Republic
April 27. The due date for social insurance contributions（SICs） and health insurance prepayments that selected employers must pay for March 2020 is extended until July 31, 2020, provided the employer reported a decrease in net turnover (revenues from the sale of products, goods, and services net of discounts) due to a critical situation caused by COVID-19 of at least 40% for March 2020. Employers that in April 2020 were forced to close their operations under the law (e.g. in line with the Regulation of the Public Health Authority of the Slovak Republic) for at least 15 days, will be exempted from payment of SSCs for April 2020.
1.19 South Korea
Relaxing the condition of employment retention subsidy and raising for six months (from February to July 2020) the level of subsidy that companies can claim if they keep their employees on paid-leave or leave-of-absence programs, from half to two thirds of the wage paid for large companies, and from two thirds to three quarters of the wage paid for SMEs. The government decided to further increase the level of subsidy for three months (from April to June) up to 90 percent of the wage paid for SMEs.
March 30. Entrepreneurs have been exempted from having to pay social contributions in March and April.
2. Tax administration
April 4. The return declaration and payment dates with regard to salaries tax for the months of January, February, and March 2020 are postponed to May 20, 2020. Similarly, the due date for the declaration with regard to “professions libérales” for the months of February, March, and April 2020 is postponed to May 20, 2020. For other taxpayers, the deadline for the annual declaration of results is postponed to June 30, 2020.
April 5. Extension of the payment deadlines for the employer's share of SSCs to the Caisse Nationale des Assurances Sociales (CNAS) for the month of April to May 30, 2020, instead of the legal deadline of April 30, 2020.
April 22. Deferral of payment of SSCs due by employers (8%), regarding the 2nd quarter of 2020, to be paid in 6 instalments (July to December), interest free. Enacted by the Presidential Decree 98/20.
March 27. Liabilities to social insurance related funds for which a repayment plan was active by March 1 2020 in the context of the Settlement of overdue contributions to Social Insurance Funds Law 2016 to 2018: the payment of the installments for the months of March and April 2020 has been suspended and the deadline for settlement is extended by two months.
April 15. The deadline for Social Security payments due in March, is extended to April 25, 2020, without interest.
June 15. The deadline for Social Security payments due on May, is extended to June 25,2020 without interests. The deadline for Social Security payments due in April, is extended to May 25,2020 without interests.
June 22. Employers that can not resume their activities and have not paid the SSC on March, April, May and June 2020, can pay them without generating interest, fines neither other charges. Facilities in payments will be provided.
March 25. In a press release of March 25, 2020 the National Association of Statutory Health Insurance Funds (“GKV-Spitzenverband”) has recommended that all statutory health insurance funds should temporarily facilitate the deferral of SSCs; this should enable companies and self-employed persons who have understandably got into financial difficulties due to the Coronavirus crisis to pay SSCs later for a limited period of time. The measures are initially limited in time until April 30, 2020 and will only take effect once other relief arrangements have been exhausted. The measures have been extended until May 31, 2020. From June 2020 onwards the regular deferral procedures are to be applied and deferrals can be granted in the single case with some facilitations until September 2020.
March 11. Suspension of SSC payments due by the end of March until October 31 for businesses, self-employed persons and sole proprietorships affected by the coronavirus crisis based on specific Nomenclature of Economic Activities（NACE） codes. Suspended payments will be paid in 4 installments of equal amount without interest and surcharges.
Social contributions payments and tax obligations due in March have been postponed by 4 months for the affected companies/businesses (had to suspend their operation). The suspension of social security and tax obligations are conditional on no layoffs.
There is a respite period for the payment of withholding Tax (WHT) on the pay of employees and equivalent workers, VAT, social security and welfare contributions, and Istituto Nazionale Assicurazione contro gli Infortuni sul Lavoro (INAIL） insurance premiums. Payments falling due in April and May 2020 can be paid in a lump sum by June 30, 2020, or in five instalments starting from June, without any interest or penalties.
The duration of social safety nets, which was originally granted for a maximum period of 9 weeks between February 23 and August 31, 2020, has been extended by the Relaunch Decree for a further 5 weeks for employers who have used up the 9-week period.
Deferral of all tax and social payments for SMEs until 1 June.
The Public Institution for Social Security(PIFSS) has announced the implementation of the decision of His Excellency the Minister of Finance and Chairman of the Corporation’s Board of Directors to postpone some of the SSCs payments for a period of six months starting from April 1, 2020. This is for employer contributions only, and will not affect employee contributions which should be calculated as normal. Repayment of the postponed contributions will be repaid over a 24 month period, starting from October 2020.
April 9. The Parliament of Mongolia enacted the Law on the waiver of Penalties and Fines for Employers contributing Social Insurance. If legal entities that submitted social and health insurance reports during February 1 to April 1, 2020, fail to pay the applicable SICs due to hardship, the applicable penalties and late payment interest will be waived.
April 9. The Economic Monitoring Committee has suspended payment of employer SSCs until June 30, 2020 for companies, Very Small, Small and Medium-Sized businesses and independent professions facing difficulties.
Employers and self-employed workers who are experiencing a significant drop in activity due to the COVID-19 pandemic can contact the SSCs Collection Office to request staggered payment of their contributions. The request will be handled on a case-by-case basis.
April 10. Taxpayers can apply for postponement of monthly advance corporate income tax payments, PIT and SSCs on salaries for March, April and May 2020, until the final filing of tax return for corporate income tax for 2020. Payment (now due next year) can also be made in instalments (up to 24 equal monthly instalments) with no interest charged. This measure can be used by resident micro, small, medium and large legal entities, entrepreneurs, branches and representative offices of foreign legal entities, under the condition that, starting as of 15 March have not reduced the number of employees by more than 10% (not including employees whose employment contracts on definite period, concluded before 15 March, expire during that period). Measure does not apply to banks, insurance companies, voluntary pension funds, leasing companies and other payment and e-money institutions, as well as to public funds beneficiaries.
2.13 South Korea
In March the government decided to expand SSC relief with three-month payment deferrals and 30% contribution rate deductions for small business and low-income households. Small businesses are granted up to a 9-month extension for filing of the tax return, and up to 1 year extension for filing and paying local taxes.
2.14 UAE (United Arab Emirates)
April 1. The General Pension & Social Security Authority (GPSSA) and the Board of Directors of the Abu Dhabi Retirement Fund have announced that all subscribing private sector companies will be able to defer payment of monthly employer subscriptions (i.e. Social Security and Pension contributions) in relation to their staff, starting with payments due in respect of March 2020 and running initially for a three month period (i.e. covering payments due up to May 2020). This three month grace period may be extended based on an updated assessment of the situation towards the end of the grace period. If an employer chooses to postpone payments, a catch up payment for all months will be due when payments resume (currently June 2020).
April 2. The period for not applying penalties for late payment and late reporting is extended until May31, 2020. The moratorium for documentation audits of USC is extended until May 31, 2020; audits in process are stopped till May 31, 2020. The term for considering complaints of USC-payers received before May 31, 2020 excludes the time period till May 31, 2020. The term for submitting complaints with the deadline between March 18 and May 31, 2020 is set as May 31, 2020. Individuals registered as private entrepreneurs, freelancers or farmers are exempt from the mandatory payment of USC for the periods from March 1 to 31 and from April 1 to 30, 2020. Late payments and late reporting during March 1 - April 30, 2020 are not penalized.
April 3. Sole-tax taxpayers, sole-proprietohips and cooperatives with up to 10 employees included in the Industry and Commerce regime, will be beneficiaries of the following measures:(i) exemption of 40% of employer and employee SSCs corresponding to the ownership of the company and partners for the months of March and April; (ii) possibility to defer the 60% pending in six installments from the month of June.
3. Main features
3.1 In order to provide companies with liquidity, many jurisdictions grant exemption or reduce the rate of the employer’s share of SSCs or SICs, extend the payment deadlines， allow installments and waive penalty or interests. Several jurisdictions also postpone the audit of documents for SSCs.
3.2 Targeted at protecting labor and employees from the possibility of losing their job, some tax incentives are only applied to employers who commit to keeping their workers or not reducing the number of employees by more than a certain proportion.
3.3 Targeted at guaranteeing the income of employees, some tax incentives are only applied to employers who commit to paying the salaries or extra bonus while some of the tax incentives are based on wages paid by employers.
3.4 To reduce the wage costs of employers, many jurisdictions provide direct support with different level of subsidy to employers.
3.5 Some jurisdictions set up new funds to support training of workers to improve their skills, using tax policy as supporting measures such as related SSCs will be borne by the government.