This article examines HR and international tax issues that have arisen, as affecting boardroom pay, in recent weeks.

(An earlier version of this article appeared in the April edition of Executive Compensation Briefing, sister news service to this one.) 

Ceri Ross and the team at EY bring us the latest from around the world.

Ireland
Ireland announces Temporary Wage Subsidy Scheme On 24 March 2020, the Irish government announced several enhanced measures to ease the financial impact of the current COVID-19 crisis on certain employers and their employees. 

Like the special unemployment payment announced the previous week, these schemes will be administered by the Revenue and they have now issued their guidance on how the scheme will operate. These new payments take effect from 26 March 2020 and are set to run for 12 weeks, although the method for delivery will change from April and the Revenue have yet to issue guidance on the April payments. 

The enhanced payments announced on 24 March were: 

1, An increase of the COVID-19 Pandemic Unemployment Payment from €203 ($220.3) to €350 for laid-off employees. 2. An increase of the COVID-19 Pandemic Illness Benefit from €203 to €350. 3. A new Temporary Wage Subsidy Scheme. This will refund qualifying employers up to a maximum of €410 per each qualifying employee Temporary Wage Subsidy Scheme The new Temporary Wage Subsidy Scheme is effective from 26 March. 

2, Revenue’s guidance states that a qualifying employer can pay a non-taxable amount equal to the employee’s net take home pay or €410 whichever is the lesser from 26 March. The TWSS will move to a subsidy payment based on 70 per cent of the weekly average take home pay from April for each employee up to a maximum of €410. 

Key features of the TWSS:

• Income tax, Universal Social Charge and employee pay related social insurance will not apply to the TWSS payment. 
• Employer’s PRSI will not apply to the TWSS payment and a rate of 0.5 per cent will apply to any top-up payment.
• Employers pay the TWSS through the normal payroll process as a non-taxable payment. 
• Employers will then be reimbursed for amounts paid to employees and notified to the Revenue via the payroll process, usually within two days of receipt by the Revenue of the payroll submission. 
• Any tax refunds generated to the employee can be reim bursed through payroll. Qualifying criteria The TWSS only applies to employees for whom a payroll submission has already been made to the Revenue in the period from 1 February 2020 to 15 March 2020. 

In addition, an employer must: 

• Be experiencing significant negative economic disruption due to COVID-19
• Be able to demonstrate, to the satisfaction of Revenue, a minimum of a 25 per cent decline in turnover 
• Be unable to pay normal wages and normal outgoings fully 
• Retain their employees on the payroll.

Penalties for abuse
The Revenue has stated that penalties will apply to any abuse of the TWSS by self-declaring incorrectly, not providing funds to employees or non-adherence to the Revenue, and any other relevant, guidelines. In addition, the names of all employers operating this scheme will be published on the Revenue’s website in due course, after the scheme has expired. Ireland issues guidance on working from home and PAYE In response to the COVID-19 outbreak in Ireland, the government has asked people to take measures to reduce the spread of the virus and, where possible, individuals are being asked to work from home. 

Following the initial action by both employers and employees to facilitate this, employers may start to receive queries from their staff about reimbursement of equipment obtained in the initial response and whether other expenses can be claimed as everyone settles into the new routine of working from home. 

E-workers and home workers 
The Revenue has defined e-working to be where an employee works: 

• At home on a full or part-time basis
• Part of the time at home and the remainder in the normal place of work
• While on the move, with visits to the normal place of work 

The guidance goes on to state that e-working involves: 

• Logging onto the employer’s computer system remotely
• Sending and receiving email, data or files remotely
• Developing ideas, products and services remotely
• There is a formal agreement in place between the employer and the employee under which the employee is required to work from home. 
• An employee is required to perform substantive duties of the employment at home.
• The employee is required to work for substantial periods at home. The revised guidance on e-working arrangements clarifies that where an employee works part-time in the office and part-time at home, the normal place of work will remain as the office. The revised guidance does not elaborate what a “formal agreement” is between the employer and employee, i.e., a clause in the employment contract or an agreement in writing such as an email between the employee and the person they immediately report to. It is recommended that businesses will need to consider putting a formal structure in place for any verbal agreements with employees looking to avail of the e-worker relief in the future. 

The revised guidance also does not define what the Revenue considers to be “substantive duties of the employment” and “substantial periods” the employee is required to work outside their normal place of work. However, the guidance specifically confirms that e-working arrangements do not apply to individuals who in the normal course of their employment bring work home outside normal working hours. 

In addition, examples included in the guidance illustrate cases where the employee chooses to work at home instead of the office where there is adequate space, or in the absence of a formal agreement, or where substantive duties are completed elsewhere, the individual will not qualify as an e-worker. This suggests that where there is an occasional and ancillary element to work completed from home, the e-working provisions will not apply. Finally, the guidance does provide an example where the government recommends that employers allow their workforce to work from home for national health objectives, such as the COVID-19 outbreak, where the employees will meet the conditions to qualify for e-worker relief. This provides welcomed clarity to the current working arrangements many employers and employees find themselves in over the coming weeks. 

United States
US - COVID-19 impact on business travel and immigration 

Starting 20 March, the US Department of State has temporarily suspended routine visa services at all US embassies and consulates worldwide. At this time, the DOS is unable to provide a specific date and time for when routine visa services will once again become available. Standard work/study/visitor visa processing is on hold, so any travellers who do not already have a valid US visa in their passport will not be able to enter the US until the US consulates begin to reopen for regular processing. 

Additionally, employees already in the US who intended to renew their status through a visa application at a US consulate abroad may be forced to extend their status with USCIS in-country instead.

Denmark introduces legislation in response to COVID-19  
The Danish Parliament is introducing measures aimed at reducing the adverse economic consequences of COVID-19.

Some measures have already passed Parliament whereas others are still proposals. The Danish government will continue to consider further measures to mitigate the consequences for Danish businesses and employees. The payment deadlines for A-tax and labour market contributions have been extended by four months for the three upcoming monthly rates (April, May and June payments). The extension took effect on 17 March 2020. Accordingly, the amendment regarding labour market contributions and A-tax - both collected as withholding taxes of personal salary income - will be applicable as of the 30 April 2020 payment for large businesses and as of the 11 May 2020 payment for SMEs. 

It is important to note that the monthly reporting and compliance obligations to the tax authorities, regarding both labour market contributions and A-tax, remain the same even though the payment obligation is extended.

Wage compensation (private companies)
The measure covering 75 per cent wage compensation may be utilised by businesses considering making at least 30 per cent or a minimum of 50 employees redundant. The wage compensation works as an alternative to making employees redundant. Business owners with a stake of more than 25 per cent in the business, who are employed by the business, do not qualify for the incentive. 

It is a precondition that the business does not make employees redundant in the compensation period due to financial causes. The incentive covers full-time employees and part-time employees. It does not cover employees performing work in the business in the compensation period as well as employees hired later than 9 March 2020. The employee is entitled to his or her entire wage during the compensation period, irrespective of the compensation being lower than the actual wage. Accordingly, this includes pensions and bonuses, etc. that are part of the regular wage. 

Compensation will amount to 75 per cent of the businesses’ wage liabilities towards their employees per month (a maximum of DKK23,000 (about £2,700) per employee). Following the expiration of the compensation period, a spokesperson with the business must attest that the employee has not worked in the business during the compensation period. Further, it must be documented that the employee was hired by the business before 9 March 2020. Finally, an auditor’s statement must be provided. The incentive is open for applications. Applications must be submitted no later than 30 June 2020.

Refund of sickness benefits  
Employers may be entitled to a refund of wages or sickness benefits from day one, if the employee is either not able to perform his or her work due to being infected with COVID-19, or the individual is quarantined based on the recommendation from the health authorities. In addition, the regular conditions of the Danish Sickness Benefit Act must be fulfilled. Furthermore, self-employed individuals may be entitled to refund of sickness benefits subject to the same conditions. Refunds will be provided for the period from 27 January 2020 through 1 January 2021. The incentive is open for applications.
 

Panama
Panama issues decree to allow companies to request the temporary suspension of employment contracts due to COVID-19.

Panama has published Executive Decree Law 81 of 2020, which establishes that employment contracts temporarily suspended because of COVID-19 fall under the causes of temporary suspension in numeral 8 of Article 199 of the Panamanian Labour Code. The decree went into effect on 21 March 2020.

Employment contracts with companies that have closed because of the preventative measures taken by Panama’s government to stop the spread of COVID-19 are considered suspended (for “employment effects”) from the date on which closure was ordered. The General Directorate of Labour or the competent regional authorities, however, must authorise the closure.

The decree establishes that suspending the “employment effects” of employment contracts means that employees are not required to provide their services and employers are not required to pay wages.

However, the suspension of contracts does not imply their termination and will not affect the seniority of the employees. Employees whose employment contracts are suspended as a result of COVID-19 will be included in the lists of beneficiaries of the programmes established by the executive branch to mitigate the lack of regular income while the suspension lasts.

For such purposes, the ministry will notify the workers union or the company’s representation for its employees of the request for suspension of employment contracts. Also, the ministry will authorise or reject the request for suspension of employment contracts within three days. If the suspension is granted, the company may receive notice electronically, in accordance with the provisions of Article 204 of the Labour Code.

The salaries of employees of companies that close without authorisation from the ministry or because of circumstances outside the scope of the decree will be covered by the companies until the ministry authorizes the suspension. Companies may request the economic benefits under the state of national emergency one month after the ministry authorises the suspension. In accordance with the provisions of Article 205 of the Labour Code, once the state of national emergency ends, workers will return to their jobs under the same conditions established in the employment contract in force at the time of the suspension.

India 
India’s Parliament proposes amendments to 2020/21 Budget.

The Finance Bill 2020 which was presented to the Indian parliament on 1 February has been passed in the lower house on 23 March 2020 with certain amendments affecting the taxation of income and internationally-mobile individuals. The proposed key amendments which would  impact individual tax payers and employers include:

• Changes in provisions for determining residence status including application of new residence rules only for those with income in excess of INR1.5 million (about £16,000); 
• Applicability of tax collected at source provisions on the remittance of funds outside India; and 
• Taxation of dividend income received by individuals: Taxation of dividend in the hands of taxpayers as per the amendments proposed by the Finance Bill 2020, all dividend income was made taxable in the hands of the recipient, because of the abolition of the dividend distribution tax. There was ambiguity on the exemption for dividends received during the transitional period, i.e. dividends declared on or before 31 March 2020 but received by shareholders on or after 1 April 2020.

However, as per the bill passed in the lower house of parliament, the dividend received on or after 1 April 2020 will continue to be exempt if DDT is paid by the dividend-paying domestic company and the additional tax at the rate of 10 per cent plus applicable surcharge and cess (if the dividend income is more than INR1 million) is paid by the shareholder, for the fiscal year 2019-20.

Change in the rate of surcharge on dividend income
In the Budget proposals for fiscal year 2020-21, income earned by way of dividend has been made taxable in the hands of the individuals at the applicable slab rates. Therefore, the differential rates of surcharge (10 per cent, 15 per cent, 25 per cent and 37 per cent) were applicable on the dividend income as well, which would be part of total income. However, as per the bill passed in the lower house of parliament, the rate of surcharge on such dividend income is restricted to 10 per cent if total income does not exceed INR10 million and 15 per cent if total income exceeds INR10 million. Further, in the case of non-residents, tax will be deducted at source at the rate of 20 per cent on the income paid by the way of dividend. This aligns with the final rate of tax payable by non-residents on such dividend income.

Action points
The proposed amendments may have significant impact for individuals as well as people who are on mobility programmes to or from India due to the changes in residence rules, taxation of dividend and the application of the TCS provisions. The provisions of the bill will not become law until these are approved by the upper house of the Indian parliament and receive the consent of the president of India. Once approved, these changes will apply for the Indian fiscal year 2020/21 (1 April 2020 to 31 March 2021). 

Kenya
Kenyan Government introduces tax measures in response to COVID-19

On 25 March 2020, the Kenyan president announced the following tax measures to help the Kenyan economy in response to COVID-19 and its impact on the local economy: 
• The government has proposed to extend 100 per cent tax relief to persons earning gross monthly income of up to KES24,000 (about £200). This will provide additional disposable income of approximately KES1,600 per month to the most vulnerable group in society.
• It will reduce the highest personal income tax rate (PAYE) by 5 per cent from 30 per cent to 25 per cent.

The implementation of the directive will require clarification of whether this will require an expansion of the tax bands or if income in excess of KES35,473 per month will be subject to PAYE at 25 per cent. It is not yet clear from the proposals whether people earning income between KES24,000 and KES47,059 per month will enjoy the tax relief other than the current normal tax relief. 

In our view, the lower income bracket can be increased to KES24,000 to which tax rate of 0 per cent will be applied and a reduction of 5 per cent applied to the tax rates imposed on the other income brackets. This will provide clarity and ensure that all individual taxpayers are covered.

Action points
In Kenya, presidential pronouncements do not effect changes in the tax law even though the pronouncement directed the Treasury to implement the directives. These pronouncements must be implemented through the required legal instruments in order to take effect. Moreover, these instruments would provide more detail (as indicated above) that is not set forth in the presidential pronouncement.

The legal instrument will most likely be a tax amendment bill, which would need Parliamentary approval and presidential assent before it comes into force.

Ceri Ross
Director, Ernst & Young LLP