On 27 October 2023, U.S. Citizenship and Immigration Services' (USCIS) temporary final rule that increased the automatic extension period for employment authorization and Employment Authorization Documents (EADs) up to 540 days for certain renewal applicants reverts back to a maximum 180-day automatic extension for new applicants [USCIS, Handbook for Employers M-274, Section 5.1].

The extension only applies to certain renewal applicants who file Form I-765, Application for Employment Authorization. The temporary final rule is effective from 4 May 2022 through 15 October 2025.

Automatic Extensions
Noncitizens in certain employment eligibility categories who file Form I-765 to renew their employment authorization and/or EADs may receive an automatic extension while their renewal applications are pending. To qualify for the automatic extension, applicants must be renewing their EAD in the same work authorization category. They also must file Form I-765 before their current EAD card expires (or within the applicable filing period for Temporary Protected Status applicants), and the work authorization category must not be dependent on another benefit.

Applicants who file their applications on or before 26 October 2023, may receive an extension of up to 540 days. Applicants who file their applications after 26 October 2023, may receive an extension of up to 180 days. The extension begins on the "card expires" date on the front of the EAD and generally continues for up to 540 or 180 days (based on the application date), unless USCIS denies the renewal application earlier.

Eligible Applicants
The temporary final rule applies to three groups of applicants:

1. Renewal applicants eligible for the automatic extension who have a pending renewal Form I-765 application as of 4 May 2022, as long as their EAD has not expired or the 180-day automatic extension has not lapsed
   
   
2. Renewal applicants who file Form I-765 after 4 May 2022, but on or before 26 October 2023
   
   
3. Renewal applicants who already are experiencing a gap in employment authorization and/or EAD validity. Under the temporary rule, employment authorization and/or validity of these applicants' EADs will resume beginning on 4 May 2022, and continue for a period of up to 540 days from the date their employment authorization and/or EAD expired.

A renewal Form I-765 should be filed no earlier than 180 days prior to the expiration date of the EAD. After 26 October 2023, automatic extensions of employment authorization and EAD validity will return to the previous up to 180-day period for eligible applicants who file renewal Form I-765 applications.

Calculator for EAD Expiration Date
To assist employers and employees with determining the EAD expiration date for eligible employees, USCIS created an EAD Automatic Extension Calculator. The calculator does not replace an employer's responsibility to determine the eligibility of employees for the automatic extension.

Note: Employers and employees (new, current, and rehired) have to follow a few steps when completing Form I-9, Employment Eligibility Verification, for employees with EADs that have been automatically extended.

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Jyme Mariani, Esq., is Senior Manager of Payroll Information Resources for PayrollOrg.

 

U.S. Citizenship and Immigration Services (USCIS) has changed how receipts are issued for L-1 nonimmigrant intracompany transferees (executives, managers, or specialized knowledge professionals) under a previously approved blanket L petition [USCIS, USCIS Updates Receipts Process for Form I-129S, 3 August 2023].

USCIS said the change will provide petitioners with faster, more organized, and more secure processing of Form I-129S, Nonimmigrant Petition Based on Blanket L Petition, by eliminating the need for the agency to print, stamp, sign, and annotate the paper form.

What Is an L-1A, L-1B Visa?
The L-1A nonimmigrant classification allows a U.S. employer to transfer an executive or manager from one of its affiliated foreign officers to one of its offices in the U.S. It also allows a foreign company that does not yet have an affiliated U.S. office to send an executive or manager to the U.S. with the purpose of establishing one.

The L-1B nonimmigrant classification is similar and applies to a professional employee with specialized knowledge relating to the organization's interests (e.g., a lawyer, physician, engineer).

Two Notices Will Be Provided
Petitioners who file Form I-129S with Form I-129, Petition for a Nonimmigrant Worker, will now receive two notices: the receipt notice and the approval notice (if approved). Petitioners will no longer receive a stamped and signed Form I-129S in conjunction with the Form I-129 approval. Petitioners now will receive a separate approval notice for the Form I-129S, which serves as their endorsement.

The approval notice will serve as evidence that the beneficiary is eligible for L-1 status based on an approved blanket L petition and also constitutes an endorsement of Form I-129S. Beneficiaries will be provided a copy of the approval notice that should be included with their visa and/or admission papers.

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Jyme Mariani, Esq., is Senior Manager of Payroll Information Resources for PayrollOrg.

The European Union approved a directive on adequate minimum wages in the EU in 2022. The deadline for the 27 member states to implement the directive is 15 November 2024. While the directive does not establish a specific minimum wage or require its implementation, it sets out guidelines and procedures to establish and update statutory minimum wages where they already exist [ Directive (EU) 2022/2041, 19 October 2022].

Updating Minimum Wages
To ensure that minimum wages keep pace with changing economic realities, member states are required to update them at least every two years. In cases where automatic indexation mechanisms are in place, the update period is extended to four years.

The directive recognises the importance of engaging social partners, such as trade unions and employers' associations, in setting and updating minimum wages. Member states must involve these stakeholders in decision-making to ensure a balanced and comprehensive approach.

Strengthening Enforcement, Dispute Resolution
To guarantee compliance with minimum wage regulations, member states must adopt effective measures such as robust labour inspectorates, penalties for noncompliance, and easily accessible information on minimum wage rates. The directive also emphasises the importance of establishing efficient dispute resolution mechanisms, ensuring that workers have access to fair procedures to address conflicts related to minimum wages.

Expanding Collective Bargaining
Additionally, the directive seeks to promote collective bargaining to extend its coverage to a more significant number of workers. Member states with excess collective bargaining coverage below 80% must develop action plans that outline specific measures and timelines to expand coverage. By encouraging a higher level of collective bargaining, the directive aims to strengthen workers' ability to negotiate fair wages.

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Nathan North is Director of Strategic Initiatives for PayrollOrg.

The United Kingdom has recently passed legislation to improve workers' and families' rights and protections. These new laws include carer's unpaid leave, neonatal leave and pay, redundancy protection for new parents, and EU-derived worker rights.

Carer's Unpaid Leave
Under the Carer's Leave Act 2023, employees in the U.K. may take up to one week of unpaid leave annually to care for a dependant with long-term care needs, such as an elderly or disabled relative. While the precise timeframe for implementing this leave has yet to be announced, it is expected to come into force by April 2024. Neonatal Paid Leave
To support parents of premature babies, the Neonatal Care (Leave and Pay) Act 2023 provides up to 12 weeks of neonatal leave and pay. This will be available to parents whose babies require neonatal care for at least seven days within the first 28 days after birth. Implementing this new leave is anticipated in April 2025 and will supplement existing statutory paternity and maternity rights.

Protection from Redundancy for New Parents
Effective 24 July 2023, the Protection from Redundancy (Pregnancy and Family Leave) Act 2023 expands the protection against redundancy during maternity, adoption, and shared parental leave. Previously, employees in these circumstances had to be offered a suitable alternative vacancy if available. The new legislation extends this protection from when an employee notifies their employer of their pregnancy until 18 months after the child's birth. It also covers parents on adoption or shared parental leave and mothers who experience a miscarriage before notifying their employer of their pregnancy.

Post-Brexit Employment Reforms
The Retained EU Law (Revocation and Reform) Act 2023, commonly known as the REUL Act, has received Royal Assent. While this legislation includes measures to revoke or reform retained EU law, no significant changes are related to employment law. However, the U.K. government has separately proposed changes regarding holiday entitlement and employee rights on business transfers as part of its post-Brexit employment reforms.

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Nathan North is Director of Strategic Initiatives for PayrollOrg.

The advisory council at Japan's Ministry of Health, Labour, and Welfare has passed guidelines for increasing the national average minimum hourly pay. As approved, these guidelines push the rate above 1,000 yen ($7.08) for the first time in the country's history. The panel seeks to raise the rate by 41 yen, which translates to a 4.3% increase for the current fiscal year. This is the most significant increase since the government adopted hourly pay as a benchmark in 2002.

There are a total of 47 prefectures in Japan. The guidelines only exceed ¥1,000 in eight prefectures (Aichi, Chiba, Hyōgo, Kanagawa, Kyoto, Osaka, Saitama, and Tokyo), while it is more than ¥950 in some nearby prefectures. Based on the guidelines, the council will decide the actual amount of the increase for each prefecture, with the new minimum wages coming into effect around October 2023. Each of the 47 prefecture councils will release the minimum wage for their jurisdiction.

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Nathan North is Director of Strategic Initiatives for PayrollOrg.

Decree-Law 4 May 2023, no. 48, published 4 May 2023 in the Official Gazette of the Italian Republic introduces a new income support measure known as the "Inclusion Allowance" starting 1 January 2024. The Inclusion Allowance seeks to combat poverty and social exclusion of vulnerable groups through work, training, education, active policy, as well as social inclusion by providing employers with substantial social security contribution discounts. Employers that hire individuals benefiting from the Inclusion Allowance will be entitled to certain advantages. Employers must adhere to the terms and conditions outlined in the legislation to benefit from the social security discounts fully.

For employees hired with an open-ended employment or apprenticeship contract, employers will receive a 100% discount on social security contributions, up to €8,000, for up to 12 months. This discount is a significant incentive for employers to provide stable job opportunities to those in need. In the event of dismissal of the employee who is a beneficiary of the inclusion allowance within 24 months from the hiring date, the employer must return the incentive used plus civil penalties unless the dismissal takes place for just cause or for justified reason.

In the case of fixed-term contracts, employers can benefit from a 50% discount on social security contributions, up to €4,000, for a maximum period of 12 months. This discount is applicable if specific conditions are met. By offering this incentive, the government aims to encourage employers to provide short-term employment opportunities while ensuring the financial stability of low-income employees.

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Nathan North is Director of Strategic Initiatives for PayrollOrg.

 

Law No. 2101 of 2021, which entered into force July 15, 2021, signalled a significant shift in work practices with a focus on reducing the number of weekly working hours. Before the enactment of this law, the Labor Code allowed for a maximum working schedule of eight hours a day, distributed over six days for a total of 48 hours per week. Alternatively, the employer and the employee could agree to condense the 48 hours into five working days, permitting Saturday as a rest day, without the extended hours being considered overtime.

Under Law 2101, the weekly work hours are reduced from 48 to 42. The reduction, however, is being made gradually over a four-year period. The first reduction in weekly work hours from 48 to 47 took effect two years after the law entered into force, i.e., July 15, 2023. On July 15, 2024, the weekly work hours are reduced to 46 and on July 15, 2025, the weekly work hours drop to the target of 42. The allocation of these hours over the week will remain flexible, with the option to distribute them over five or six days. Under the law, the reduction in the working day is not to result in a reduction in salary or benefit remuneration, nor the value of the ordinary working hour, nor does it exonerate workers from obligations.

Additionally, the Labor Code permits unique work schedules under the following conditions:

• The shift work schedule allows an employee to work more than eight hours a day or 48 hours a week, provided the average does not exceed 48 hours in a three-week period.
• A 36-hour per week schedule can be adapted for night shifts, absolving the employer of night surcharges, given that no overtime work is involved.
• There is also an option for maximum weekly hours to be divided flexibly over a maximum of six days a week, with one mandatory rest day. An employee may work on Sundays for a minimum of four continuous hours and up to nine hours a day, with no surcharge applicable by the employer, as long as the total weekly working hours within the usual daily schedule are not surpassed.

The reduction in maximum working hours will also affect these special work schedules, starting July 15th, 2023, except for the 36-hour weekly schedule.

Overtime work is capped at two hours per day or 12 hours per week and requires authorization from the Ministry of Labor unless in force majeure situations. An employee cannot choose to opt out of these restrictions or limitations.

The enactment of Law No. 2101 signals a trend towards shorter work weeks. Its provisions could lead to a shift in work-life balance, giving employees more personal time while still fulfilling their work responsibilities. As the law takes effect and the working hours gradually decrease over the next few years, it will be interesting to see its broader impact on productivity, job satisfaction, and overall workforce morale.

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Nathan North is Director of Strategic Initiatives for PayrollOrg.

 

Introduction
Spain has recently implemented a new labor reform to provide employment flexibility and stabilization. The critical aspect of this reform is the introduction of the RED Mechanism (Reducción de Empleo por Despidos) for Employment Flexibility and Stabilization. The Royal Decree 608/2023, published on 11 July 2023, establishes the framework for the RED Mechanism and brings significant changes to the regulations governing collective layoff procedures.

Modalities of the RED Mechanism
The RED Mechanism may be activated in either cyclical or sectoral modalities. The cyclical modality occurs due to a general macroeconomic environment that warrants additional stabilization instruments. In contrast, the sectoral modality occurs when permanent changes are observed in specific sectors that necessitate worker retraining and career transition processes. The activation of the RED mechanism requires a resolution by the Council of Ministers after informing the most representative labor union and employers' organisations at the national level. This legislation came into force on 13 July 2023, the day after its publication in the Official State Gazette (Bolétin Oficial del Estado).

Applicable Measures
Once the RED Mechanism has been activated, employers can voluntarily request measures to reduce working hours or suspend employment contracts. Suspension of employment contracts applies when the termination of the worker's activity affects entire days, consecutively or alternatively, for at least one ordinary working day. Reduction of working hours involves a temporary reduction in employment activity, calculated on a daily, weekly, monthly, or annual basis. Measures for reduction of working hours are prioritized over suspensions, whenever feasible.

Procedure
The procedure for implementing the RED Mechanism includes several essential aspects. The company management must duly notify workers or their representatives about the intention to commence the procedure, leading to the formation of a representative committee. The negotiating committee's establishment and operation are governed by the provisions of the Workers' Statute, with specific provisions outlined in the Royal Decree. The consultation period, during which negotiations take place, has a maximum duration of fifteen days but can be shortened to seven days for companies with less than fifty employees.

Employee Protection
Workers affected by the RED Mechanism can collectively request benefits provided for in the General Social Security Law. They are considered a priority group for accessing training initiatives to enhance their occupational skills and employability.

Benefits in Relation to Social Security Contributions
Employers implementing measures under the RED Mechanism benefit from exemptions from Social Security contributions, subject to certain conditions and requirements. These exemptions are contingent upon maintaining the employment of the affected workers for six months after the authorized period of the RED Mechanism.

Training Activities Linked to Extraordinary Benefits for Employers
During reductions of working hours or suspensions of employment contracts, employers must conduct training activities for the affected workers to enhance their occupational skills and employability. Certain exemptions are linked to the performance of training activities.

Limits Relating to Overtime, Recruitment, and Outsourcing
During the actual application of the RED Mechanism, overtime work is prohibited, and new outsourcing or recruitment arrangements are only allowed if the affected employees have the necessary qualifications or can perform the newly assigned tasks. Training contracts can still be entered into if they do not involve the functions or tasks usually performed by the affected workers.

Regulations Governing Procedures for Collective Layoff and Suspension of Contracts
The regulations governing procedures for collective layoffs and temporary employment regulation procedures have been amended. Employers intending to close work centres must provide at least six months' notice to the labor authority and the Ministry for Labor and Social Economy. The labor authority will ensure access to the administrative file and share the report from the Labor Inspectorate.

Entry into Force
The new legislation came into force on 13 July 2023 and applies to procedures initiated after that date. Any ongoing collective layoffs or temporary employment regulation procedures initiated before 13 July 2023 are governed by the regulations in force when they were initiated.

Conclusion
Spain's implementation of the RED Mechanism for Employment Flexibility and Stabilization represents an effort to address labor market needs and provide mechanisms for employers and workers to navigate economic challenges. The reforms aim to balance employment flexibility and worker protection, facilitating adaptations in changing economic circumstances.

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Nathan North is Director of Strategic Initiatives for PayrollOrg.

 

On 7 December 2022, the U.S. Department of the Treasury announced that the U.S. and Croatia have signed an income tax treaty. The new tax treaty is the first of its kind between the two countries.

The treaty closely adheres to the U.S. model income tax treaty. Key aspects of the treaty include:

• Prevention of cross-border income taxation of salaries, wages, and other similar compensation in many instances
• Elimination of withholding taxes on cross-border payments of dividends paid to pension funds and on payments of interest
• Reductions in withholding taxes on cross-border payments of dividends other than those paid to a pension fund, as well as royalties
• Anti-abuse provisions intended to prevent instances of non-taxation of income as well as treaty shopping
• Dispute resolution mechanisms that include mandatory binding arbitration
• Standard provisions for the exchange of information to help the revenue authorities of both nations carry out their duties as tax administrators

The new tax treaty will enter into force after the U.S. and Croatia notify each other that they have completed the ratification procedures for their country.

Edward Kowalski, Esq., is Manager, Payroll Information Resources, for the American Payroll Association

 

On 7 November 2022, the government of the Hong Kong Special Administrative Region of the People's Republic of China (Hong Kong) announced that it signed a comprehensive avoidance of double taxation agreement (CDTA) with the government of Mauritius. The CDTA will come into force after the completion of ratification procedures by both jurisdictions.

Under the CDTA, Hong Kong companies will avoid double taxation on income by allowing those companies a credit from Hong Kong against income tax payable in Hong Kong on the same income for which income tax was paid in Mauritius.

With respect to Hong Kong residents, the CDTA applies to the profits tax, salaries tax, and property tax, regardless of whether the tax is charged under personal assessment. The agreement caps withholding rates on interest and royalties for Hong Kong residents at no more than 5%. Also, profits from international shipping transport earned by Hong Kong residents will not be taxed by Mauritius.

The complete Hong Kong-Mauritius CDTA is on the Hong Kong Inland Revenue Department (IRD) website. Information about the other tax treaties to which Hong Kong is a party can also be found on the IRD website. The government of Mauritius maintains information about its tax treaties on the Mauritius Revenue Authority website.

Edward Kowalski, Esq., is Manager, Payroll Information Resources, for the American Payroll Association

Effective 1 December 2022, final regulations require private employers to provide employees with 10 days of paid sick leave. The final regulations implement 2021 legislation amending the Canada Labour Code that was further amended in June 2022 [Canada Minister of Labour, News Release, 7 November 2022].

The legislation and implementing regulations affect nearly one million workers in Canada's federally regulated private sector. Under the legislation and regulations, covered employees can use paid sick leave for:

• medical appointments during work hours
• personal illness or injury
• quarantine of the employee
• organ or tissue donation

Paid sick leave is being implemented in stages. As of 31 December 2022, employees continuously employed for at least 30 days will have access to their first three days of paid sick leave. As of 1 February 2023, employees will acquire a fourth day and will continue to accumulate one day a month up to a maximum of 10 days per year. Employers will be able to request a medical certificate if an employee is absent for five or more days in a row.

Edward Kowalski, Esq., is Manager, Payroll Information Resources, for the American Payroll Association

 

The U.S. Internal Revenue Service (IRS) announced the foreign earned income exclusion amount will be $120,000 for 2023 [Rev. Proc. 2022-38, 18 October 2022]. The foreign earned income exclusion is $112,000 in 2022.

Internal Revenue Code (IRC) §911 allows U.S. citizens and resident alien employees working outside the U.S. (i.e., expatriates) who qualify for the foreign earned income exclusion to exclude the first $120,000 of foreign earned income in 2023 from their gross income. Employees who qualify may also exclude certain housing cost amounts from their gross income.

To qualify for the foreign earned income or housing cost exclusion, an employee must have foreign earned income and a "tax home" in a foreign country. The employee must also meet either a bona fide residence or physical presence test that proves the employee is not living in the U.S. during the year in question.

An employer need not withhold federal income tax from any wages paid to a qualifying employee it reasonably believes will be excluded from income under the IRC §911 exclusions.

Foreign Housing Cost Exclusion
In addition to the foreign earned income exclusion, employees who have a foreign tax home and qualify under the bona fide residence or physical presence test can take an exclusion for a limited amount of reasonable foreign housing expenses exceeding a base housing amount.

The base housing amount is 16% of the maximum foreign earned income exclusion, figured on a daily basis, multiplied by the number of days during the year the employee met the bona fide residence or physical presence test.

The maximum amount of the foreign housing cost exclusion will be $16,800 in 2023 ($15,680 in 2022).

Rayna Alexander, Esq., is Editor, Payroll Information Resources, for the American Payroll Association

As people, we spend a lot of time thinking about, planning for, and anticipating the future. And yet, despite our best intentions and attempts at foresight, we often aren't ready for what lies ahead.

Is payroll any different? Are the payroll systems, methods, and professionals of today truly prepared for tomorrow? We aimed to find out with Ceridian's "Future of Payroll Survey," conducted in partnership with the APA and the Global Payroll Management Institute (GPMI).

From the survey's 882 respondents, we learned that many organizations aren't ready for what's next. The data revealed that despite recent technological advancements, payroll practitioners still face conventional challenges and rely on legacy solutions.

When we asked survey respondents about their biggest payroll pain points, the top three responses were compliance challenges (42%), managing the complexities of multijurisdictional payroll (34%), and inefficient processes (27%).

Technology can help resolve those challenges so organizations can focus on the future. But 85% of respondents reported having problems with their payroll technologies and 69% have issues with their payroll data.

These survey results indicate that organizations must prepare their payroll functions for the future. Being unprepared is always cause for concern, but here's why payroll leaders should pay particular attention now:

1. The future of payroll may look very different. Organizations today are under increasing pressure to work strategically and more efficiently. But payroll has been largely overlooked as a driver of value. As businesses realize the advantages of modernizing payroll and shedding their traditional approaches, payroll will become more of a strategic business partner than a back-office function. It's a sizable change that requires preparation from payroll leaders.

2. Payroll has a new role in the employee experience. Payroll's contribution to the employee experience is evolving beyond paying employees on time and accurately. Our "Future of Payroll Survey" data shows organizations are making strides in this area. But it also reveals a divide between the pay practices employees want and what employers are planning to provide, which could hinder talent retention and acquisition. Without a mindset shift, organizations won't be ready for an increased focus on employee experience.

3. New skills will be needed. Seventy-eight percent of our survey respondents said if their job duties were to change as payroll technology becomes more sophisticated, they would want to adapt to their new job duties and stay in their current role. But the data also reveals that employers must do more to prepare payroll professionals for the future. Upskilling and reskilling take time, making now the perfect time for payroll leaders to initiate skill development within their teams.

Download your copy of the "Future of Payroll Survey" report for the full research findings and tips for how payroll leaders can fill the gaps in payroll's future readiness.

Lisa Weckman is VP of Product Management for Dayforce Global Payroll, Tax and Payments, and Workforce Management at Ceridian.

On 23 September 2022, the Chancellor of the Exchequer of the United Kingdom announced a proposal for wide-ranging tax cuts. A complete description of the proposed tax cut and growth plan is available on the government's website. Barely a week after announcing its proposal, BBC News reported an announcement by Chancellor of the Exchequer Kwasi Kwarteng that the government was abandoning its proposal.

One feature of the proposal that generated controversy was a plan to eliminate the highest income tax bracket of 45% on annual income above £150,000 for taxpayers in England, Wales, and Northern Ireland. According to BBC News, the elimination of the top tax bracket would have accounted for approximately £2 billion out of the proposed £45 billion in tax cuts.

The proposal also called for a reduction of the basic income tax rate to 19% in April 2023, which would be one year earlier than planned and was estimated to result in 31 million people getting on average £170 more per year. The plan would have scrapped a planned increase in the corporation tax rate, which would thus remain at 19%. It also included measures to reduce the stamp duty and cancel a scheduled 1.25% increase in the National Insurance levy.

Edward Kowalski, Esq., is Manager, Payroll Information Resources, for the American Payroll Association

HM Treasury's Office of Tax Simplification (OTS) is conducting a high-level review on trends and tax implications of hybrid and distance working in the United Kingdom [Call for Evidence: Review of Hybrid and Distance Working, 31 August 2022]. OTS is requesting employers' help in outlining their experiences and plans relating to hybrid and distance working.

For the review, OTS is using these definitions:

• Hybrid working is where the terms of engagement require workers to spend some of their contracted hours in their employer's workspace but allow flexibility for where they work the remainder of their contracted hours.
• Distance/home working is where the terms of engagement allow a worker to perform their duties in an agreed location of their choosing (usually their home). With distance/home working, either there is no requirement to work from an employer's workspace, or no employer workspace is available.

The main focus of the review will be trends in employees of U.K. companies working overseas and employees of overseas companies working in the U.K. (not on formal expatriate assignments), hybrid and distance or home working in the U.K., and the impact of self-employed practices.

Consultation Questions
OTS has 21 questions in the review, but employers do not have to respond to all questions. OTS said it will accept responses to any or all of the questions listed as well as any general or specific comments relating to any areas covered by the review.

The questions ask employers to explain what is currently happening with employees and how things have changed since the COVID-19 pandemic. Employers are also asked to answer questions about changes in their policies and procedures due to the pandemic.

Responses Due 25 November
Employers must email their responses by 25 November 2022 to [email protected]. To arrange for an online or in-person meeting, contact the OTS by 31 October 2022 at [email protected].

OTS also has a survey for employees and self-employed individuals who wish to participate in the hybrid and distance working review.

Rayna Alexander, Esq., is Editor, Payroll Information Resources, for the American Payroll Association.

 

On 15 July 2022, the U.S. Department of the Treasury announced it notified the government of Hungary on 8 July of the upcoming termination of the tax convention between the U.S. and Hungary, effective 8 January 2023. The convention, known as the Convention between the Government of the United States of America and the Government of the Hungarian People's Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion With Respect to Taxes on Income, has been in effect since 1979.

The official end date of the convention will be 8 January 2023. However, as specified in the tax convention, for taxes withheld at source, the tax convention will cease to have effect on 1 January 2024. With respect to other taxes covered by the convention, the convention will also cease to have effect with respect to taxable periods beginning on or after 1 January 2024.

Since the convention went into effect in 1979, the existing and proposed tax structures in both countries have changed. Hungary lowered its corporate tax rate to 9%, making it one of the lowest corporate taxes in the world. Meanwhile, the U.S. has been trying to raise its corporate tax rate and has lobbied other nations to impose a global corporate minimum tax rate, a position rejected by the Hungarian government. Some groups, such as the American Chamber of Commerce in Hungary, have expressed concern about the move and urged the leaders of the two countries to resolve their differences.

Totalization Agreement Remains in Effect
The U.S. has a social security totalization agreement with Hungary that has been in force since 1 September 2016. U.S. totalization agreements eliminate dual social security taxation, which occurs when a worker from one country works in another country and is required to pay social security taxes to both countries on the same earnings. Totalization agreements help fill gaps in benefit protection for workers who have split their careers between the U.S. and another country. The U.S.-Hungary totalization agreement is not affected by the Treasury announcement and remains in force.

Edward Kowalski, Esq., is Manager, Payroll Information Resources, for the American Payroll Association

The tax authority of the government of Finland has issued two sets of guidance related to the double taxation of cross border workers.

Revised guidance published 27 April 2022 was issued to clarify instructions in Section 3.3 concerning reverse crediting and Section 3.4 regarding the exemption method used under the treaty. The guidance also implements a decision of the Finland Supreme Administrative Court in April 2021 providing that income derived from services to international bodies, such as the United Nations, must be excluded when determining the gross income of an employee.

Guidance published 28 April 2022 addressed changes to the Nordic Tax Treaty on cross-border commuters from Finland, Denmark, Norway, and Sweden. These updates are effective from 1 January 2022 until further notice.

The guidance of 28 April revises the provisions of Section 6 of the treaty making changes to the rules on how health insurance contributions are paid. An update to Section 8.2 reflects changes to the tax treatment of cross-border commuters' other income. Also, a new Section 8.3 allows the tax authorities of Denmark, Finland, Iceland, Norway, and Sweden to transfer taxes among themselves, making it easier for cross-border workers to have tax payments credited to their country of residence.

Edward Kowalski, Esq., is Manager, Payroll Information Resources, for the American Payroll Association

On 17 May 2022, Council of Ministers of Spain announced its approval of proposed reforms to its law on sexual and reproductive health. The measure would reform the Organic Law 2/2010, of 3 March, on Sexual and Reproductive Health and the Voluntary Interruption of Pregnancy (Organic Law 2/2010). The changes proposed are wide-ranging and cover sexuality education and contraception, menstrual health, pregnancy, childbirth, abortion, and reproductive violence.

The modification of Organic Law 2/2010 would establish the right to menstrual health for the first time in Spanish law and make it part of the fundamental right to health care for women. The proposal would establish the right to monthly leave paid by the government for women who have painful and disabling periods.

If the changes to Organic Law 2/2010 are approved by the Spanish parliament, it would make Spain the first European country to provide paid menstrual leave for female workers. Menstrual leave is offered in only a handful of countries, such as Indonesia and South Korea.

Presently, the reform measure has only been approved by the Council of Ministers. Adoption of the proposal into law could take some months. It must be referred to the Congress of Deputies (one legislative chamber of Spain's parliament) and approved there. The bill would then go to the Senate (the other legislative chamber), which has the power to propose amendments or veto the bill.

Edward Kowalski, Esq., is Manager, Payroll Information Resources, for the American Payroll Association

In May, the U.S. Internal Revenue Service (IRS) issued guidance allowing donations of vacation, sick, or personal leave through a leave-based donation program to be made to charitable organizations to aid citizens and residents of Ukraine; individuals working, traveling, or currently present in Ukraine; or refugees from Ukraine, collectively referred to as "victims of the further Russian invasion of Ukraine" [Notice 2022-28, 5-19-22].

Treatment of Payments
Cash payments an employer makes to a charitable organization, described in Internal Revenue Code (IRC) §170(c), in exchange for vacation, sick, or personal leave that its employees elect to forgo will not be considered gross income or wages of the employees if the payments are: (1) made to the IRC §170(c) organizations for the relief of victims of the further Russian invasion of Ukraine; and (2) paid to the IRC §170(c) organizations before January 1, 2023.

Similarly, the IRS will not assert that the opportunity to make such an election results in constructive receipt of gross income or wages by employees.

Electing employees may not claim a charitable contribution deduction under IRC §170 with respect to the value of the forgone leave excluded from compensation and wages.

Employers do not need to include the cash payment in Boxes 1, 3 (if applicable), or 5 of Form W-2, Wage and Tax Statement.

Jyme Mariani, Esq., is Senior Manager of Payroll Information Resources for the American Payroll Association.

Ireland's Revenue Commissioners – also referred to simply as Revenue – issued a brief announcing concessionary treatment for tax year 2022, exempting income from Irish income tax and Universal Social Charge (USC) if earned by Ukrainians located in Ireland because of the war in Ukraine, so long as they continue to be employed by their Ukrainian employer while performing the duties of their employment remotely from Ireland [Ireland Revenue eBrief No. 090/22, 14 April 2022].

In the brief, Revenue makes it clear that such income earned for employment performed within Ireland is chargeable in Ireland to income tax and the USC, and is within the scope of the Pay As You Earn (PAYE) system of deduction of income tax that requires employers to withhold the tax from income earned.

However, by way of concession, Revenue will treat Irish-based employees of Ukrainian employers as not being liable to Irish income tax and USC on Ukrainian employment income that is attributable to the performance of duties in Ireland. Their Ukrainian employers also will not be required to operate the PAYE system on such employment income.

The concessionary treatment will apply for tax year 2022 if: (1) the employee would have performed his or her duties of employment in Ukraine but for the war there; (2) the employee continues to be employed by his or her Ukrainian employer while performing the duties of their employment remotely from Ireland; and (3) the employee remains subject to Ukrainian income tax on the employment income for the year.

Ukrainian employers and employees availing themselves of the concessionary treatment should keep any documents or other evidence – such as a record with the individual's date of arrival in Ireland – showing that it was due to the war in Ukraine that the individual came to Ireland and performed their work or duties there. Revenue may request copies of those documents.

Mavanee Anderson, Esq., is Editor of Payroll Information Resources for the APA.