Switzerland approves increasing VAT rates in 2024
As from 1 January 2024, the following new VAT rates will be applicable in Switzerland (including Municipality of Liechtenstein):
- New standard rate: 8.1% (+0.4)
- New reduced rate: 2.6% (+0.1)
- New accommodation rate: 3.8% (+0.1)
Current and new VAT rates: When to apply them?
The publication of the SFTA confirms that the fundamental principle to determine the tax point regarding the applicability of the current or new VAT rates is the date or period of the supply and not when an invoice is issued, or a payment is made (art. 115 para. 1 Swiss VATL). Thus, supplies rendered (entirely) by 31 December 2023 are subject to the current rates while the new rates will apply to supplies rendered as from 1 January 2024.
When invoices cover supplies rendered during both 2023 and 2024, the date or period and the amount relating to each period must be mentioned separately and split between the applicable rates. If this allocation is not made on an invoice, all supplies will be subject to the new VAT rates.
Based on the above principle, the VAT info includes guidelines on how to treat partial payments and invoices, prepayments and invoices for such prepayments, continuous supplies (e.g. subscriptions, maintenance contracts) partly rendered after the VAT rate increase, diminution of the consideration (e.g. rebates), volume discounts, returns of goods, acquisition tax, import VAT, specificities for the hotel and restaurant sector, VAT deduction, etc.
Partial payments / partial invoices / advanced payments
Partial payments for supplies rendered before 31 December 2023 are subject to the current VAT rates and can be invoiced under the current rates. Similarly, partial payments for supplies rendered as of 1 January 2024 must be invoiced with the new VAT rates (note that the SFTA has announced that the Q3 2023 VAT return form will already cater for the new rates).
Periodic respectively continuous supplies
Periodic supplies across both the current and new VAT rate periods must be allocated and split according to the pro rata temporis principle. This would be the case, for example, for a 3-years maintenance contract covering 2023, 2024 and 2025. The portion relating to 2024 and 2025 must be invoiced with the new rates.
It is important to note that ancillary supplies follow the VAT treatment of the main supply.
Reduction of consideration, returns & cancellation of supplies
Rebates, volume and/or cash discounts related to supplies taxed at the current VAT rate are also to be granted with the current VAT rate and vice versa. For example, in the case of credit notes for volume discounts issued in 2024 in relation to supplies before 1 January 2024, the current VAT rates will apply (i.e. the date or period of the underlying supplies are decisive).
The above outlined principle also applies to returns and cancellation of supplies. The VAT rate applicable at the time of the supply determines the VAT rate applicable to the return or cancellation of the supply.
Input VAT deduction
As a general principle a taxable person can deduct the Swiss VAT invoiced in the frame of its entrepreneurial activity. Thus, so-called VAT differences invoiced as a correction of the initially wrongly applied VAT rate (by the supplier) should generally be deductible.
Implications for your organisation – next steps
In view of the above, the following adaptations may notably be required:
- Review inbound, such as acquisition tax, as well outbound transactions (e.g. leasing and rental contracts, commission arrangements) in your organisation that could be subject to the VAT rate change.
- In the case of lump sum tax returns, validate the new applicable lump sum rates with the SFTA.
- Determine additional tax codes to manage both the supplies subject to the current VAT rates and those subject to the new ones.
- Review guidelines to compliance teams to adapt the VAT compliance process to align with the new VAT return including the new VAT rates (available as from Q3 2023 or 2nd semester 2023 for taxpayers applying the flat rate method).
- Review invoice templates, contracts, etc. to reflect the new rates as from 1 January 2024 and attention must be paid to prepayments, continuous supplies, etc.
With these guidelines, businesses should generally be in a position to assess the impacts of the upcoming new VAT rates on their organisation and take the necessary actions.
Deloitte | Source
UAE: 565 firms fined up to Dh100,000, facing legal action for fake Emiratisation
About 565 companies were found to have hired a total of 824 UAE nationals in bogus Emiratisation jobs since mid-last year, the Ministry of Human Resources and Emiratisation (MoHRE) has announced. The Ministry said that “the necessary legal and administrative action against them” has been initiated.
“Fake Emiratisation is a clear violation of Emiratisation-related decisions and the regulations of the Nafis programme,” MoHRE said in a statement on Wednesday.
“Legal and administrative procedures have been taken against violating establishments, including degrading their categorization within MoHRE’s systems, imposing fines ranging from Dh20,000 to Dh100,000, and potential referral to the Public Prosecution, based on the level of the violation.”
The Ministry has ceased Nafis payments from nationals proven to have been involved in fake Emiratisation and recovered previous financial support.
This move is in accordance with the UAE Cabinet Resolution No. 44 of 2023, which modifies some provisions of the Cabinet Resolution No. 95 of 2022 on penalties and administrative fines related to Emirati Talent Competitiveness Council’s (Nafis) initiatives and programmes,” MoHRE explained. “We are committed to enforcing Emiratisation policies and tracking violations that aim to undermine its objectives.
What is bogus Emiratisation?
Emiratisation is considered fake when it is confirmed that a UAE national works in a nominal job without real tasks to meet the establishment’s required Emiratisation targets, and/or when an Emirati is rehired in the same establishment with the aim of circumventing data and benefiting from the relevant benefits of Emiratisation.
Companies indulging in bogus Emiratisation are penalized for their violations. Besides imposing financial penalties, violating companies are downgraded to the lowest category within the classification system of private sector establishments registered with the ministry. This step comes with several consequences for private companies, including higher fees for Mohre services.
“The efficient tracking by the Ministry’s digital and field monitoring system, which was specifically designed to ensure that private sector establishments are meeting their commitments related to the Emiratisation decisions, has proven these violations,” MOHRE added.
Highest number of Emiratis in private sector
Over 17,000 private establishments employ Emiratis, with the total number of nationals working in the private sector exceeding 81,000. This is the highest number of Emiratis working in the private sector in the country’s history.
The Ministry appreciated the “commitment to the targeted Emiratisation targets,” shown by most private sector establishments, saying that the public-private partnership “strengthens the country’s economic development objectives.”
MoHRE has called on members of the community to report any violations by contacting the call center at 600590000 or using the Ministry’s smart app and website.
Khaleejtimes | Source
Russia suspends double tax treaty with Cyprus and 37 other ‘unfriendly countries’
The Russian President, Vladimir Putin, has signed an executive order to suspend specific provisions of tax agreements with several countries that Russia has designated unfriendly. These include conditions within Double Tax Agreements (DTA) and Tax Evasion treaties made with Albania, Australia, Austria, Belgium, Bulgaria, Canada, Croatia, Czech Republic, Cyprus, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Iceland, Italy, Japan, Lithuania, Luxembourg, Malta, Montenegro, New Zealand, Norway, North Macedonia, Poland, Portugal, Romania, Singapore, Slovakia, Slovenia, South Korea, Spain, Sweden, Switzerland, United Kingdom and the United States.
The document immediately suspends the provisions of specific articles within the international treaties signed with Russia. The intention is to ensure the adoption of measures aimed at reducing the impact on the economy of Russia of the consequences of the suspension of the provisions of these treaties.
Most of the changes are far-reaching and suspend all DTA benefits for businesses from any of these countries operating within Russia, which includes withholding tax provisions, property income in Russia, dividends, interest, royalties, pensions and other relief.
Both individuals and businesses with performing assets or operations in Russia should pay strict attention to this decree and the relevant articles described, as it takes immediate effect and will increase taxable liabilities for these operations in many cases.
Russia’s regulations state that decrees like this are active and in effect from the moment of their “publication”. It now goes to the Duma; however, for all intents and purposes, it is now in effect.
Of note is the suspension of articles in treaties signed with previously Russian-friendly offshore tax havens, including Cyprus, Luxembourg, Malta, and Switzerland. The result officially stops any cooperation between Russia and most of the European Union, the European Free Trade Association and the United States and Canada concerning the details of any funds held or transferred between these countries and Russia.
It is also likely to push Russian capital held overseas into new jurisdictions, particularly into Dubai and, to some extent, Hong Kong and Mauritius.
Japan to launch new system to expedite the employment of foreign IT professionals
Overview:
The Japanese government is creating a new framework that may enable eligible companies to employ foreign IT professionals within one month.
The new system is expected to go into effect in late 2023.
Background:
Currently, foreign nationals who are employed by IT companies in Japan are required to apply for a Certificate of Eligibility (CoE) and work permit before entering Japan.
In general, the time taken to complete the CoE application process for companies that hire foreign nationals for the first time is at least three months. This processing time includes a check by Japan’s Immigration Services Agency to confirm that the host company meets all requirements.
Key changes:
Once the new system is implemented, regional authorities may conduct pre-assessments of eligible companies and provide prior approval for hiring foreign IT professionals, which will reduce the immigration processing time once these companies employ eligible individuals.
The government is expected to initially introduce the new system in 13 National Strategic Special Zones, beginning with Fukuoka City.
Impact on Employers:
The new system will streamline the process of hiring international talent for Japanese businesses, especially small and medium-sized companies and startups.
Host companies will be required to complete additional processes to demonstrate that they meet the relevant criteria.
More information will be made available as it is released.
EY | Source
Netherlands: Introduction Of Uniform Minimum Hourly Wage As Of 1 January 2024
Overview:
On 1 January 2024, the Minimum Wage and Minimum Holiday Allowance Act (in Dutch: “Wet minimumloon en minimumvakantiebijslag” and hereinafter “the Act”) will change. From then on, a uniform minimum hourly wage will apply to employees aged 21 and older in all sectors. A youth minimum hourly wage will apply to employees aged between 15 and 20.
The applicable minimum hourly wage will be indexed on 1 January and 1 July each calendar year.
Background:
In the Netherlands, as with other countries, the extent of full-time employment can vary depending on the sector (e.g., 36, 38, or 40 hours per week).
Under the current system, the same minimum monthly wage applies in all cases (regardless of the number of hours worked). In practice, this means that an employee with a 40-hour/week employment contract actually has a lower minimum hourly wage than an employee with a 36-hour/week employment contract.
What will change?:
For employees earning the minimum wage who have a full-time employment contract of more than 36 hours per week (i.e. 38 or 40 hours), the introduction of the statutory uniform minimum hourly wage will effectively result in a wage increase. This is because the level of the statutory minimum hourly wage will be derived from the current minimum monthly wage for full-time employment of 36 hours.
In many cases, the introduction of the statutory uniform minimum hourly wage means that collective bargaining agreements and employment contracts will have to be adapted to the new legal system. In many cases, payroll systems will also need to be adapted.
Business.gov.nl | Source