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Welcome to the Worldwide ERC® Mobility LawBlog, where Tax Counsel Pete Scott and Government Relations Adviser Tristan North share breaking tax and legal news, as well as compliance and risk management information of interest to global workforce mobility professionals concerned with U.S. domestic and worldwide assignments. Sign up to receive e-mail alerts so you don't miss an entry, or subscribe to the RSS feed for immediate delivery.

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MOZAMBIQUE - Major Changes to Work Permit Rules
Mozambique is making significant changes to its application processes of work permits for foreign nationals in the country. The changes, to be implemented November 29, bring new application document requirements and higher government fees.
Immigration in a Growing Mozambique
The two and a half decades since the end of the Mozambican Civil War in 1993 have brought many changes to the coastal southeast African republic. In 2015 the Republic of Mozambique held its fifth peaceful democratic election and installed its fourth president. While still primarily a rural, agricultural nation, and underdeveloped industrially, the Republic’s economy has seen average annual growth rates well above 7 percent for more than 20 of those years. With the recent discovery of rich oil and gas deposits and ongoing mineral mining, Mozambique is now attracting significant foreign investment, which - coupled with International Monetary Fund support - is leading to small but growing refining, construction, and manufacturing sectors.
However, with an unemployment rate still above 15 percent and a negative net migration rate, the demand for foreign labor in Mozambique is driven more by the particular skills needed in the oil and gas and mining sectors than by a need for a larger overall labor pool. As a result, the country’s immigration policy attempts to balance the need for those skills and the need for local employment. Mozambique’s labor immigration system provides for both short-term and long-term work authorization. The system for long-term employment of foreign workers essentially offers two routes: an authorization scheme where the foreign worker is performing a job in which there is insufficient qualified local labor, and a quota scheme based on the size of the company.
What's Changed?
New regulations governing both long-term and short-term work authorization for foreign nationals working in Mozambique will take effect November 29. These new rules implemented by Decree-Law 37/2016 are a significant change from past application practice and revoke the previous scheme under Decree-Law 55/2008. The changes apply to most foreign workers - with the major exception being those employed in the petroleum and mining sectors, who enjoy more liberal rules. The changes include higher government fees, additional process steps, and increased document requirements for work and residence authorizations. Employers should be prepared for a longer and more-costly process for work permits for their foreign employees and increased scrutiny and compliance monitoring by the Directorate of Labor.
These changes to the application processes are extensive, and more detailed process implementation guidance is still forthcoming. However, the changes include:
  • The initial validity period for short-term work permits will be lengthened to 90 days, an increase from the current 30-day validity with two possible 30-day renewals;
  • New government processing fees will apply for all short-term work permits;
  • Additional process steps and personal documents will be required for both quota and authorization work permit applications, including academic diplomas or certificates and an issuance of an equivalence certificate by the Ministry of Education for employment authorization applications;
  • Sponsoring employers must provide proof that they have no national social security arrearages;
  • Longer legislated timeframes will apply for processing of both short-term and quota work permits;
  • Employment agencies will no longer be permitted to sponsor work permits on behalf of companies needing foreign workers;
  • Additional requirements will be implemented under the employment authorization scheme to ensure that employers are attempting to hire local workers over foreign nationals unless there is insufficient supply of qualified local labor. It remains to be seen exactly how the Mozambican authorities will determine whether sufficient efforts were made to hire local workers over foreign nationals; however, it is possible the new processes may include some form of labor market testing and/or additional employer attestations;
  • Additional requirements that companies employing foreign nationals establish a training plan that guarantees the transmission of scientific and technical knowledge to local nationals and the gradual substitution of foreign labor with local labor will apply;
  • Employers who terminate local workers’ contracts must match the local workforce reduction with a proportional termination of foreign national employees’ contracts; and
  • Increased sanctions and enforcement for noncompliance with the regulations on foreign workers will be implemented, including a new penalty for employers who declare that they have hired local workers in order to increase their foreign worker quota but then fail do so.

In regards to the availability of permits under the quota work permit scheme, the numbers remain unchanged with quotas for foreign employees remaining at 5 percent of workforce for large enterprises, 8 percent for medium enterprises, and 10 percent for small enterprises.

The new regulations were published in the Mozambican Government’s Official Gazette on August 31.

How These Changes Affect You

These new changes to the immigration process in Mozambique are designed to strike a balance between the need for skilled foreign labor to support its growing industrial and manufacturing sectors with the needs of the local labor market. With mostly untapped natural resources and a growing economy, Mozambique presents significant opportunities for international business. However, the cost and complexity of the labor immigration process in the country are likewise increasing.

As these changes are extensive and government scrutiny and enforcement efforts appear to be being enhanced, Pro-Link GLOBAL encourages employers of foreign nationals in Mozambique to consult their immigration advisors and labor counsel to ensure that they are in compliance with the new processes and rules ahead of the November 29 implementation date.

Caveat Lector - Warning to Reader

This is provided as informational only and does not substitute for actual legal advice based on the specific circumstances of a matter. We would like to remind you that Immigration laws are fluid and can change at a moment's notice without any warning.

By: The Knowledge Management team at Pro-Link GLOBAL

Appeals Court Rules for PHH in Case Against CFPB
On October 11, the US Court of Appeals for the District of Columbia issued its judgment in the case of PHH Corporation v. Consumer Financial Protection Bureau (CFPB). The Court decided in favor of PHH.
The CFPB had taken enforcement action against PHH for alleged violations of Section 8 of the Real Estate Settlement Procedures Act (RESPA). Specifically, the Agency cited the captive mortgage reinsurance practices of the lender as problematic and subsequent reinsurance premiums as improper. An administrative law judge found in favor of the CFPB and levied a fine of $6.4 million against PHH for reinsurance premiums accepted on those loans, closed after July 2008, within the three-year statute of limitations. CFPB Director Cordray stated the statute of limitations did not apply in administrative proceedings and levied a total fine of $109 million to include premiums received prior to 2008.
PHH appealed the decision citing three principal arguments. First, the CFPB incorrectly applied Section 8 of RESPA. Second, the CFPB departed from past interpretations by Department of Housing and Urban Development. Lastly, the administrative proceedings of the CFPB are subject to a three-year statute of limitations and the purported misconduct was outside of that window. PHH also cited the broader issue of the structure of an independent agency led by a single director being in violation of the constitution. The Court sided to a large extent with PHH on all points.
The ruling by the Appeals Court is extremely significant on several levels and goes well beyond this particular case as to the authority of the CFPB and its director. The key points of the ruling are as follows:
  1. The Court determined that the single director structure of the CFPB, where the director is removable only for cause, was unconstitutional. Rather than forcing the CFPB to cease operations, the court struck the “for cause” language from Dodd-Frank so the President can remove the director at will. The ruling allows past regulations issued by the CFPB and other enforcement actions to stand;
  2. The Court rejected the argument by the CFPB that the statute of limitations does not apply to its administrative actions and applied the three-year statue of limitations under RESPA;
  3. The Court rejected the interpretation by CFPB of RESPA 8(c), noting that the statutory question “is not a close call.” The plain language of 8(c) permits captive reinsurance arrangements where insurers pay no more than reasonable market value for the reinsurance. In its discussion, the Court broadly speaks of 8(c) as providing an exception/safe harbor (rejected by the CFPB) which permits payments for services rendered if the payments are (a) no more than reasonable market value and (b) the services are actually performed, and;
  4. The Court determined that retroactively applying a new interpretation of RESPA to the prior activities of PHH violated basic principles of due process. The CFPB has forty-five days from October 11 in which to request a rehearing en banc by the DC Circuit Court or ninety days in which to petition the Supreme Court.

Worldwide ERC® Real Estate and Mortgage Forum Chair Eric Arnold contributed to this blog.

SAUDI ARABIA - “Saudization” Brings Major Visa Changes
By: The Knowledge Management team at Pro-Link GLOBAL
The Saudi Arabian Ministry of Labour has announced several immigration changes designed to protect its local labor market and boost government revenues from immigration. The changes include a new requirement of a local labor market test before applying for block visas and major increases in fees for several visa categories.
“Saudization” and the Saudi Labor Market
With over 90 percent of the private sector jobs in Saudi Arabia currently filled by foreign labor, one might assume that the local Saudi labor pool was at full employment, thus the need for all those foreign workers. However, that assumption is not the reality. In recent years the unemployment rate among Saudi nationals has reached as high as 12 percent. Policy makers in Saudi Arabia continue to debate the reasons for this unusual dichotomy – lower prices in the world oil market, demographics, cultural norms, education and job training, the high demand for temporary workers on construction projects, and the lower wages and poor working conditions of many private sector jobs – but the problem persists.
This issue is precisely what has led the Saudi government in recent years to pursue its policy of “Saudization” of its workforce, the goal of which is to increase the percentage of private sector jobs held by Saudi citizens. It then goes without saying that this necessarily involves decreasing the number of foreign nationals working in the Kingdom. However, striking the right balance between the needs of local workers and the demands of Saudi companies for foreign labor has proven an elusive goal, leading to multiple permutations of “Saudization” in their labor and immigration policy. See our Global Brief of April 9, 2016 for more. Several recent immigration changes are part of this continuing effort.
What's Changed?
New, More Extensive Labor Market Testing Requirements
On August 1 the Ministry of Labour (MOL) introduced its new Taqat online national labor portal and database of available jobs. The stated goal of Taqat is to “offer and facilitate employment and training services, efficiently and effectively, to further sustain and develop the labor force.” As of this writing, the Taqat website now lists over 1,500 available employment postings. This is obviously welcomed news to Saudi job-seekers. However, in a major step beyond simple job advertising, the MOL is now requiring Saudi employers to first post all available job positions on Taqat before applying for any new block visas for foreign workers.
The “block visa” scheme is the principle route that Saudi employers take to meet their needs for foreign workers. Under the scheme, employers receive a pre-approval through the MOL for several (a “block” of) positions for which they need foreign labor. After approval of the block visa, applications for work visas are in turn submitted at the Saudi Embassy or Consulate in the job applicant’s country of residence. It now typically takes three to four months from the time that the block visa application is filed until the foreign employee receives his individual work visa and arrives in Saudi Arabia ready for work.
With the addition of employers having to first post the job on Taqat in order to show an effort to recruit a local worker, this process is lengthened. The length of time the position is posted on Taqat and time spent considering the resulting local applicants now increases the overall timeframe before employers can have a foreign national begin work. The MOL has yet to publish guidelines for employers specifying how long a position must be posted on Taqat and what efforts must be made to review local applicants. However, employers at a minimum should be prepared now as part of the block visa process to show documentation of the Taqat position posting, the length of time it was posted, the number and qualifications of any local applicants for the position, and the reasons why the candidates were found unsuitable.
Increased Visa Application Fees
Also announced by the Saudi Cabinet this month were the following new higher visa fees:
  • Single-entry visit visa fee of SAR 2,000;
  • Six-month multiple-entry visit visa fee of SAR 3,000;
  • One-year multiple-entry visit visa fee of SAR 5,000;
  • Two-year multiple-entry visit visa fee of SAR 8,000;
  •  Single two-month exit re-entry visa fee of SAR 200 (+SAR 100 for each additional month);
  • Multiple-entry three-month exit re-entry visa fee of 500 (+SAR 200 for each additional month);
  • Transit visa fee of SAR 300; and
  • Departure visa fee at seaports of SAR 50.
These new fees, which take effect October 2, represent major increases over current fee levels. Currently, all visit visas are SAR 500 regardless of validity period. So in the case of a two-year multiple-entry visit visa, this represents a SAR 7,500 hike in fees, the equivalent of USD 2,000 or EUR 1,775. Further, the transit visa fee and seaport departure fee are new fees that foreign employees and their employers must now take into account. According to the Saudi Press Agency, these increased immigration fees are part of efforts in a number of areas to boost state revenues through higher fees in an era of lower oil prices.
How These Changes Affect You
For employers of foreign nationals in Saudi Arabia, both the time and the cost of doing business have now increased. Employers will certainly need to consider the new, longer process for obtaining block visas when planning for their work force needs. While we await more specific guidance from the Ministry of Labour regarding the new labor market testing requirement, employers should be immediately examining - and revising, if need be - their recruitment practices to include posting open positions on the new Taqat employment portal. Human resources managers should keep thorough documentation at each step of the process, as proof that the new requirements have been met will likely be required when applying for any future block grants.
Further, with the new higher re-entry fees, employers may want to plan business travel more strategically to minimize their foreign national employees’ needs to frequently exit and re-enter the country. Also, these higher visit visa fees should be taken into account when budgeting travel for employee assignments, client visits, and business meetings and considered in negotiating future contract terms as an additional cost of doing business in Saudi Arabia.
Caveat Lector - Warning to Reader
This is provided as informational only and does not substitute for actual legal advice based on the specific circumstances of a matter. We would like to remind you that Immigration laws are fluid and can change at a moment's notice without any warning.
IRELAND - Improvements to Employment Permits Process Benefit Employers of Foreign Nationals
By: The Knowledge Management team at Pro-Link GLOBAL
There have been several positive new changes to the Employment Permits scheme in Ireland. A new online application system will debut in September, making the application process for work permits easier for employers and foreign nationals in The Emerald Isle. Also announced last week, immediate changes were made to the Highly Skilled Eligible Occupations List (HSEOL) and the Ineligible Categories of Employment List (ICEL) allowing Irish sponsoring companies to employ more foreign nationals. Further, the requirements for Trainees under Intra-Company Transfers have also been relaxed.
The Steady Rise of Ireland’s Labor Markets
According to the Expert Group on Future Skills Needs (EGFSN), which advises the Irish government on current and future labor needs, the Irish labor market has seen steady improvement in the last three years, and that improvement is beginning to be felt by employers in worker shortages in certain high-demand skills. A recent study by the specialist recruitment firm Hays Ireland stated that Ireland is now beginning to experience a “talent mismatch.” In other words, while there is a measurable but declining unemployment rate (projected to be 7.5 percent by September), Irish employers are finding themselves unable to fill certain skilled positions with local labor. This problem is exacerbated by the large emigration out of Ireland which occurred during the last recession. As a result, employers are looking to foreign workers to fill the gaps in numerous sectors, including IT, engineering, and skilled construction.
What's Changed?
Employment Permits Online System (EPOS) Moves Forward
The Department of Jobs, Enterprise and Innovation (DJEI) announced last week that it will be assisting employers by making the Employment Permits process easier and faster for their foreign workers. In September, the DJEI will roll out its new Employment Permits Online System (EPOS), which will provide intuitive online application completion and filing, document submission, and fee payment for Employment Permits in Ireland. This much-anticipated improvement should result in a more convenient process with a faster turn-around time for applicants.
Pro-Link GLOBAL’s KGNM office in Ireland reports that the currently-used employment permit application forms have already been withdrawn from use and are being replaced by the electronic procedure and a new suite of revised paper forms. The Employment Permit Section is asking applicants to delay filing new applications in August, if possible, in order to ease the transition to the new online process in early September. For immediate submission needs, the Section is entertaining urgent requests on a case-by-case basis and will provide paper copies of the new amended forms if necessary.
Additions to Occupation Lists
Also to support employers experiencing labor shortages, the DJEI has made immediate additions to the HSEOL list which determines whether an applicant holds an occupation eligible for a Critical Skills Employment Permit. The DJEI also made adjustments to the ICEL list of occupations ineligible for employment permits.
The following occupations have been added to the HSEOL:
  • Paramedics;
  • Respiratory physiologists;
  • Tax consultants specializing in non-EEA taxes; and
  • Accountants working in multinational corporation (MNC) global audit services.
Of particular welcome is the addition of qualifying accountants to the HSEOL. This will allow multi-national corporations operating in Ireland to more easily employ accounting professionals to assist in international tax filings and work in key senior finance roles. Officials are hopeful that this new measure will make Irish offices a more attractive option for multi-national business. Previously, such companies were limited to recruiting foreign national accountants credentialed by the relevant accountancy bodies in the British Isles. Now accountants registered or qualified by the American Institute of Certified Public Accountants, the Philippine Institute of Certified Public Accountants, or the Institute of Chartered Accountants of Pakistan also qualify for Employment Permits.
In addition, the following occupations are now considered general skills in short supply and have been removed from the ICEL ineligible list and are thus now open to Employment Permit applicants:
  • Legal associate professionals fluent in an official language (other than English) of a non-European Economic Area (EEA) state; and
  • Executive chefs, head chefs, sous chefs and specialist chefs specializing in a non-EEA cuisine are removed from the ICEL. Previously, these individuals fell under the ineligible Chef category of the Food Preparation and Hospitality trades section of the list.
Relaxed Requirement for ICT Trainees
In the final noteworthy part of last week’s announcement, the DJEI reduced the minimum employment period for Trainees under the Intra-Company Transfer (ICT) Permit scheme from six (6) months to one (1) month. Now foreign national trainees only employed with their foreign employer for one month are eligible for assignments at the company’s branch or affiliate in Ireland.
These changes to the HSEOL and ICEL lists and to the ICT trainee regulations are effective immediately, and the details will be incorporated into the new EPOS online application process and the accompanying amended forms due out in early September.
How These Changes Affect You
Irish employers and foreign nationals desiring to work in Ireland received some welcomed improvements to the Employment Permits scheme. The new EPOS electronic application system due to come online in early September should make it faster and more convenient to process Employment Permit applications. Further, employment opportunities for foreign nationals are growing in Ireland due to the steadily improving labor market. Labor shortages in certain key skills categories have led the DJEI to expand the opportunities for employers and foreign nationals in Ireland. Liberalization of the HSEOL and ICEL lists and the ICT scheme are the most recent positive changes.
As with any improvement in the process, there may be temporary inconveniences during the transition. While use of the current application forms has been suspended, the DJEI is optimistic that the new EPOS and accompanying amended forms will be available early in September. In the meantime, applicants may want to consider delaying submission of new Employment Permit applications until the new EPOS comes online. However, if there is a need that cannot wait, the DJEI is making accommodations for submitting applications over the next few weeks.
Employers and foreign national employees anticipating moves in Ireland over the next few weeks should be in close contact with their immigration advisors to anticipate and respond to these changes effectively.
Caveat Lector - Warning to Reader
This is provided as informational only and does not substitute for actual legal advice based on the specific circumstances of a matter. We would like to remind you that Immigration laws are fluid and can change at a moment's notice without any warning. Please reach out to your immigration specialist or your client relations.
New W-2, 1099 Deadlines Require Implementation Planning Now
Last year’s tax extenders legislation included provisions accelerating the required filing dates for information returns, including the Form W-2 and the various Forms 1099. Those accelerated filing dates will be in effect for 2016 returns due in 2017. However, there has been relatively little publicity or guidance concerning this important change, and Worldwide ERC® members should make sure they are aware of it, and prepared.
Prior to the new law, the employee copies of Forms W-2 were due to employees at the end of January, but the copies for the IRS and Social Security were not due until the end of February (paper) and the end of March (electronic). The same deadlines applied to Forms 1099.
In order to better combat refund tax fraud, the deadlines for filing with the IRS and Social Security have been moved to mirror the January 31 due date for the employee copies of all of these forms. In addition, the old automatic one-month extension for these filings has been eliminated, and an extension is now only available on a case-by-case basis for “good cause shown.”
As a result, processes must be changed, and information must be assembled and assessed earlier than in the past. This may cause significant problems that relate to wage information received from third parties, such as providers of taxable relocation services. The time to perform necessary adjustments, such as reconciling gross-ups, will be shortened.
The American Payroll Association has warned that this, in turn, will significantly increase the need for subsequent adjustments, including Forms W-2c. It will also likely lead to more amended tax returns. Moreover, companies may well find it necessary to demand information from third party providers on an accelerated schedule, which undoubtedly will result in an increase in errors in that information that must subsequently be corrected. And of course, payroll processing software will require modification.
Although payroll professionals believe that most large companies are aware of and preparing for these changes, may smaller and mid-size companies likely are not. Worldwide ERC® members should make sure that their systems for processing relocation-related items have been updated.
Posted by Peter K. Scott
Minnesota and Maryland:  Changes Made to Worldwide ERC® Two-Deed Chart

Recent events and practices in the states of Minnesota and Maryland prompted a re-examination by Worldwide ERC®’s Real Estate and Mortgage Forum of the status of the blank deed in those states. 

In 2014, Worldwide ERC® published, and continues to maintain, an information chart outlining the various known issues and risks relating to the use of a single deed (a “blank deed”) versus a two-deed process in completing relocation home sales in each state.  That chart is currently available on the Worldwide ERC® website at

An issue arose in Minnesota concerning the ability of notaries to add anything to a deed that has been signed and that the notary has certified. 

In 2014, a notary was asked to check a box on a deed that had inadvertently been left blank by the seller when the deed was executed.  The box simply attested to whether the home was on well water, and the notary was specifically authorized to make the alteration.  However, the Minnesota Department of Commerce, which administers the statutes governing notaries, determined that a notary who alters a document after the document had been signed and notarized is guilty of fraud.  The notary settled the matter by paying a fine of some $3,500 personally; the Department’s position is that the fine must be paid individually by the notary rather than by an employer or customer. 

Minnesota has generally been a state in which the use of a single deed for relocation two-sale transactions is common practice.  However, if notaries are involved in the transaction, it appears that they will no longer be allowed to add the buyer’s name to the deed after having notarized the seller’s signature. 

Worldwide ERC® has discussed the issue with Minnesota companies engaged in relocation transactions, and with the National Notary Association.  Although the issue may prevent notaries from adding buyer names to blank deeds, it does not appear that the participation of a notary is necessary for that step in the process.  Further, addition of the name is typically authorized by a Power of Attorney from the seller(s).  Consequently, while Worldwide ERC® will continue to monitor the issue, currently it does not appear to present any problems other than possibly necessitating modification of the process by which blank deeds are completed, and eliminating the participation of licensed notaries in that step. 

The single deed/two-deed chart has been modified to include a note concerning this issue.

For many years, the largest counties in Maryland had been thought to collect two transfer taxes even if only one deed was used.  Because Maryland’s recording of deeds and administration of transfer taxes is the responsibility of the 23 county clerks, not all of whom historically followed the same rules, it has been difficult to identify a common treatment of blank deed transactions. 

Until recently, common wisdom was that certain county clerks, particularly in the larger counties, would sometimes seek to impose two transfer taxes.  However, this was an isolated occurrence, and only in high-value transactions ($1 million or more).  Consequently, Worldwide ERC®’s analysis, reflected in the single deed/two deed chart, was that in most cases companies could safely utilize the one-deed process in Maryland, but that county clerks sometimes asked for a copy of the HUD-1 and might seek to impose two taxes.

Recently, a new analysis of the statutory provisions and known practices in Maryland was done.  It confirmed that there is little if any statutory basis to impose two taxes on blank deed transactions.  Moreover, recent experience is that none of the county clerks seem to be seeking to impose the second tax. 

Consequently, Worldwide ERC® has amended the one deed/two deed chart to remove the language suggesting a risk of two taxes in the state.

Worldwide ERC® is grateful to John Brennan of Brennan Title Company, who is Vice-Chair of the Tax Forum, for the work of his staff and attorneys on this issue.  

UK to Vote on Whether to Stay in EU
By Gordon Kerr
On June 23, the United Kingdom (UK) will hold a referendum and voters will head to the polls to cast ballots on whether the UK will leave or remain in the European Union (EU). Initial polls showed a small majority of voters in favor of the UK remaining in the EU but more recent polls have tilted the balance slightly in favor of the UK leaving. So the outcome on what’s being called “Brexit” is no means certain.
If the UK does vote in favor of leaving the EU, the biggest impact is likely to be the end of free movement of labor between the UK and the EU. This would clearly have a significant impact on mobility management in the region.
While there is no clear blueprint for what would follow the exit of the UK from the EU, the next steps in the process are known and are as follows:
  • The UK Government will request the EU to start the "Article 50 process" - the process which exists for the exit of a member state, but never previously used. The UK would enter detailed negotiations about both past and future arrangements. Agreement would need to be concluded on how to "unwind" previous rights and obligations, with decisions taken on how the UK and the EU would interact in the future. These negotiations would need to fit within a 2 year time period, unless the remaining 27 EU states agreed to give the UK an extension.
  • Following conclusion of exit negotiations, including future UK/EU trade arrangements, the next step will be for the UK to enter into separate trade negotiations with non-EU countries.
The legal consequences of Brexit would be considerable. Subject to the terms of the new trading agreements, all EU treaties, regulations and decisions of the European Court of Justice would cease to apply to the UK unless specifically preserved by UK law.
Agreeing to a new relationship with the EU could be problematic. The UK would wish to avoid the imposition of "free movement of labor" obligations which the EU has in place in their trade agreements with countries such as Norway and Switzerland. "Leave" campaigners believe that the UK will be able to negotiate an EU trade deal which will allow the UK to limit immigration from the EU to skilled immigrants only, in line with UK immigration rules for non-EU citizens.
Brexit could also mean wider political uncertainty for the UK, with a "leave" vote widely expected to trigger the resignation of UK Prime Minister David Cameron. It could possibly also lead to a further independence referendum by the Scottish who generally are more favorable to maintain their ties to the EU.
For more background information on Brexit, the BBC has developed a very good guide which can be accessed at:
Immediately following the results of the UK vote on June 23, Worldwide ERC® will issue a Member Advisory with the outcome and any additional information known at the time.
Gordon Kerr is Vice Chair of the Worldwide ERC® Government Affairs Global Forum and Director of the Employee Mobility Unit at Morton Fraser. Gordon is based in Edinburgh, Scotland.
Get-acquainted Tours-Are They Taxable to Employees?
One of the most frequently asked questions surrounding the hiring or transfer of personnel is whether expenses incurred by the employee (including family) to visit a location before deciding whether to go there (sometimes referred to as “get-acquainted tours”) are taxable to the individual if paid or reimbursed by the company.
Employers often pay or reimburse the expenses of prospective employees, newly hired employees, or current employees traveling to the employer’s place of business, including the costs of transportation, meals, and lodging. The activities in which such individuals participate while visiting the employer often include a get-acquainted tour of homes and the area in general (for example, schools). Depending on the circumstances, the costs of these trips may be taxable to the employee, and subject to withholding, payroll taxes, and inclusion on the W-2.
Generally, since 1993 the costs of a “househunting” trip have not been deductible as moving expenses, and therefore employer payments or reimbursements of the costs are taxable. Get-acquainted tours would fall into this category. However, there are exceptions to this rule in limited circumstances, discussed below.
One exception is for payments for prospective employees, that is, individuals who have not yet decided to accept employment with the employer.
The payment or reimbursement generally should not constitute taxable income to a prospective employee or wages subject to withholding by the prospective employer, as long as the employer agrees to bear the costs of the trip before the individual accepts employment with the employer. See Rev. Rul. 63-77, 1963-1 C.B. 177, in which the IRS reached this conclusion in the case of prospective employees’ travel expenses incurred in interviewing at the prospective employer’s home office. Therefore, neither a Form W-2 nor a Form 1099 is necessary.
According to the IRS, "the payments in question are not remuneration for services rendered or to be rendered in an employment relationship." The same conclusion should apply where the primary purpose of the trip is the prospective employee’s attending the get-acquainted tour, since Code §82 only requires inclusion in gross income of moving expense payments or reimbursements "in connection with the performance of services." Reg. §1.82-1(a)(5). Under this rule, payments for both prospective employee and family would not be taxable.
If, however, the employer’s agreement to pay or reimburse the expenses is contingent upon the prospective employee’s ultimately being employed by the employer, the payment or reimbursement would constitute consideration for services to be rendered, even though the individual is not an employee at the time the expenses are incurred. Rev. Rul. 66-41, 1966-1 C.B. 233. For this reason, the payment or reimbursement under such an agreement should be treated in the same manner as in the case where the expenses are incurred after the individual becomes an employee, discussed below.
It is common for a newly-hired employee to visit the new city after he or she has already agreed to become an employee. Or a current employee may visit a new city for a get-acquainted tour or househunting before he or she agrees to accept the transfer.
If the individual is an employee (i.e., has agreed to work for the employer, regardless of whether the individual actually has begun performing services for the employer, or is already working for the employer at another job location) at the time the expenses are incurred, the proper tax treatment of the payment or reimbursement depends upon the characterization of the expenses. If the expenses are characterized as moving expenses, the payment or reimbursement will constitute gross income to the employee under Code §82 and the employer will be obligated to withhold income and employment taxes thereon. As noted earlier, househunting in a new location is a common nondeductible moving expense.
If, on the other hand, the expenses are characterized as expenses incurred by the employee in carrying on the employer’s business (and assuming the employee’s "tax home" has not yet changed to the new place of employment), the payment or reimbursement will not be includable in the employee's income or subject to withholding by the employer provided that the accountable plan rules of Section 62 are met. But the key here is that the employee must primarily be doing business in the new city, not just visiting to look it over or check out the housing market.
Where the purpose of the trip includes both providing the employee with a get-acquainted tour (generally a moving expense) and the employee conducting the employer’s business, "fixed" expenses should be characterized according to the predominant purpose of the trip and "incremental" expenses should be characterized according to their specific purpose. For example, if the primary purpose of the trip is the employee’s participation in a bona fide business meeting of the employer, the transportation expenses and the meals and lodging expenses necessary for the employee’s attendance at the meeting should be characterized as expenses in carrying on the employer’s business. If the employee remains an additional day in order to take part in the get-acquainted tour, any additional meals and lodging expenses should be characterized as moving expenses.
Travel, meals and lodging expenses for a spouse or family to accompany a current employee or a new employee who has already agreed to accept employment clearly are taxable, even if the primary purpose of the trip for the employee is business. Moreover, the presence of the spouse/family may make it more difficult to characterize the primary purpose of the employee’s trip as business.
The primary purpose of the trip must be determined based on all facts and circumstances, and the relative time spent on the two activities is an important factor in making this determination. Reg. §1.162-2(b)(2).
Consequently, company payments for most get-acquainted visits to a new city for either new-hires or current employees will be taxable. Companies have sometimes argued that a get-acquainted trip for such workers is not taxable because it is akin to a recruiting expense. Unfortunately, the tax law does not support such an argument.
EU and US Release Details of Data Privacy Shield
In Short:
The European Union (EU) and US recently made the details of the “Privacy Shield” available to the public. A month earlier, EU and US negotiators had reached an agreement on the “Privacy Shield”. It would replace the “Safe Harbor” and allow US companies to be in compliance with EU data security and privacy regulation when transferring EU personal data to the US. Last fall, the European Court of Justice invalidated the EU-US “Safe Harbor”.
The Full Story:
On February 29, the European Union (EU) and US made the details of the “Privacy Shield” available to the public. On February 2, negotiators for the EU and US reached an agreement aimed on allowing US companies to continue to more easily transfer personal data from the EU to the US. The agreement, which is being called the EU-US Data “Privacy Shield”, would replace the EU-US Safe Harbor. The agreement is not final, as EU data privacy regulators need to review the proposal and provide their recommendation to the EU Commission as to whether the deal should be adopted by the EU. This is expected to occur in the next few months.
If implemented, the Privacy Shield would provide US companies with certain regulatory protection from enforcement action if they follow the guidelines of the agreement. To comply with the Privacy Shield Framework, US companies would have to self-certify with the US Department of Commerce and publish their commitments on how personal data would be processed and how individual rights would be guaranteed. These commitments would then be subject to US law and enforceable by the US Federal Trade Commission (FTC).
The Privacy Shield Framework is divided into four specific areas. Those are 1) EU Individuals’ rights and legal remedies, 2) Program oversight and cooperation with EU data protection authorities, 3) Key new requirements for participating companies, and 4) Demonstration of limitations and safeguards on national security and law enforcement access to data. A copy of the Framework can be accessed at:
The first section of the Framework provides EU citizens with recourse should they believe the privacy or security of their personal data has been compromised. US Companies participating in the Framework must put into place a system to address and investigate complaints. Companies have 45 days in which to respond to the individual acknowledging receipt of the complaint. The individual can also pursue private causes of action through U.S. state courts and participating companies must agree to binding arbitration if the matter has not be resolved through other means.
The next component of the Framework falls on the US Department of Commerce and the FTC. The Department of Commerce has agreed to help ensure compliance with the program by verifying that participating companies submit all the necessary information, identifying and addressing false claims of participation, conducting periodic analyses of the program as well as other safeguarding activities. Both entities would also establish channels of communication with EU data privacy authorities to exchange information regarding complaints and program material and to provide enforcement assistance.
The third area addresses the requirements for participating companies. Companies must inform individuals about their rights to access their data, provide information on the obligations of the company to supply individual data to law enforcement and other authorities and the liability of the company in cases of the transfer of personal data to third parties. Companies must limit the transfer of personal information to the data that is needed for that purpose of processing and enter into agreements with third parties on the limitations and requirements that come with the transfer of the data. The Framework also outlines those instances when companies need interact with the Department of Commerce and FTC.
Finally, under the Framework, the U.S. Department of Justice and U.S. intelligence agencies have provided the European Commission with information about the limitations of US government agencies to access data held by U.S. companies and the policies in place to ensure the data is being accessed in adherence to US laws. If the agreement is adopted, EU citizens who have questions about communications being monitored by US intelligence officials could submit their inquiries to an Ombudsman. The U.S. Department of State would establish the Ombudsman to respond to the inquiries about U.S. intelligence policies regarding communications or signals intelligence.
EU data privacy regulators, known as the Article 29 Working Party, along with a committee comprised of EU member representatives are reviewing the agreement to provide their advice to the EU College of Commissioners. It is not certain that the Working Party will recommend supporting the agreement and if the EU Commissioners will approve it. However, it is likely that some sort of agreement will be reached between the EU and US. In the meantime, the recommendation of Worldwide ERC® is that members continue on the course of implementing and adhering to Model Contract Clauses or Binding Corporate Rules.
Posted by Tristan North
Worldwide ERC® Submits Comments on Proposed United Kingdom Stamp Duty Land Tax Increase
The government of the United Kingdom has been engaged in a series of actions designed to make sure that there is an adequate supply of residential housing. As a part of this program, on December 28, 2015, the government sought comment on a proposal that would increase by 3% the Stamp Duty Land Tax (SDLT) on purchases of “additional residential properties”, to be effective April 1, 2016.
The SDLT is a transfer tax on real estate, payable by the buyer, that applies to purchases in England, Wales, and Northern Ireland. Currently, the tax does not apply to purchases under 125,000 Pounds. It is 2% of the purchase price for transactions between 125,000 and 250,000 Pounds; 5% between 250,000 and 925,000 Pounds; 10% between 925,00 and 1.5 million Pounds; and 12% over than price. The proposal would add an extra 3% to all such transactions (including those below 125,000) if the purchaser already owns another residential property. It is intended to enhance the number of homes available in the market by discouraging purchase of homes as rental properties or as second homes.
In a typical UK relocation home sale transaction, as in the United States, the relocation management company (RMC) or employer will not take title to the old home it purchases from the transferring employee. It will pay the full purchase price, and take over all the ownership costs, risks, and benefits, but will leave the employee in title until the home is sold. Unfortunately, the employee will usually purchase a new home during this period, and will appear to own two residences rather than one. In such circumstances, it may appear that the extra 3% tax should apply to the purchase of the new home.
Although the proposed rules include a provision for a refund of the extra tax if the old home is disposed of within 18 months, the tax will still have to be paid initially, and then procedures will have to be developed to obtain a refund. The tax will be paid by the employer, and it or the RMC will have to waste time and money recovering it. Moreover, this procedure will also burden the government, which will have to process the receipt of payments, and arrange for the refund, in 100% of the relocation cases.
On February 18, 2016, Worldwide ERC® submitted a comment letter suggesting that rather than a refund mechanism there should simply be an exemption for relocation transactions. The letter can be found here. Such an exemption already exists to excuse collection of SDLT on the RMC’s initial purchase of the home. Worldwide ERC® suggested that the exemption be extended to encompass the additional SDLT in the proposal. It is hoped that the UK Treasury will recognize that the collection and refund of the additional tax would not be useful or productive, and that it will further burden the residential housing market rather than enhancing it.
Coincidentally, Worldwide ERC®’s letter was submitted on the same day as the announcement of the opening of Worldwide ERC®’s new office in London. Both the letter, and the announcement, evidence Worldwide ERC®’s strong commitment to an active presence in EMEA.
Posted by Peter K. Scott
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