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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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Solar Panels: It’s Not Easy Being Green...
By Bet Mansfield, Vice President, Legal Services, Altair Global
 
Relocation Renewable energy gains in popularity; managing homes with solar panels.
 
In an increasingly “green” world, renewable resources are an important aspect of sustainability. According to the U.S. Energy Information Administration, the most frequently used renewable resources are biomass, geothermal, solar, water and wind. Unlike fossil fuels, we can regenerate or replenish these resources. Although biomass in the form of wood once supplied 90 percent of U.S. energy needs, all renewable energy sources combined supplied only about 8 percent of energy resources in 2009. With the rising cost and decreasing availability of nonrenewable fossil fuels, renewable resources are receiving increasing attention. Indeed, the International Energy Outlook 2016 projects renewables as the fastest-growing energy source – increasing 2.5% annually through 2040. While Europe has been at the forefront of renewable energy development and utilization, the United States and other developed nations are closing the gap.
 
Solar is the most abundant energy on the planet. The sun has produced energy in the form of heat and light since the Earth formed. The use of Photovoltaic (”PV”) panels that harness solar energy greatly reduces the cost of electricity, improves the electrical supply in various locations globally, and helps to improve the environment by drastically cutting carbon emissions. PV devices, or solar cells, directly convert solar energy into electricity, do not produce emissions and are often not harmful to the environment. Individual solar cells grouped into panels range from small applications that charge calculator and watch batteries, to large systems that power residential dwellings. Installing solar panels enable the homeowner to produce energy for personal use with excess energy added to the local grid through the sale of Solar Renewable Energy Certificates (“SRECs”). The homeowner pays less for the energy he/she consumes but also reaps the benefit of selling the excess, thereby creating a win/win situation.
 
Solar panels are typically installed on the roof of a residence. Panels may be purchased (ranging from $10,000 to upwards of $50,000 although federal tax credits reduce the cost) or leased (typically, $50-75 monthly) with terms of approximately 20 years. Purchased systems, with a life expectancy of approximately 25 years, will typically pay for themselves through sales of SRECs within about 10 years, leaving up to 15 years of free energy. Leases, while simpler, don’t carry the same financial benefits although, for those supporting “green” initiatives, the intangible benefits may outweigh the negative. However, Nevada recently signaled its intent to phase out solar subsidies, a move that will be closely watched by other states.
 
If it comes to light (via the property condition disclosure, BMA or appraisals) that a home authorized for homesale benefits is fitted with solar panels, below are suggested steps a relocation management company can take to address the situation.
  • Direct Reimbursement: The preferred method of handling homes outfitted with solar panels is to have the employee go through the direct reimbursement or an Assigned Sale program (i.e., the employee sells the home to a buyer willing to accept and assume the terms of the lease or contract; relocation management companies (RMCs) can often assist with closing via a power of attorney however, the employee remains liable if the sale fails to close).
  • Panels Owned, Client Directs RMC to Acquire:
    • Confirm the panels are, in fact, owned via a “paid in full” receipt;
    • Obtain unequivocal written confirmation from the client to proceed notwithstanding the presence of solar panels may limit the property’s marketability;
    • Verify the panels are covered by the employee’s homeowner’s insurance;
    • Contact the Solar Panel Company (as early as possible in the process) to explain
      • The 2-step process (RMC will not formally assume the contract but will honor terms as to credits; buyer will be required to assume all the other terms of the contract);
      • Obtain copies of all relevant documents including the assumption and assignment, warranties and any other documentation, all of which will be provided to the broker to be executed by the buyer.
    • Ensure that the panels have been inspected for functionality (age, etc.); and,
    • Include in the purchase agreement that Buyer acknowledges he/she/they are purchasing the solar panels, in “as is” condition, and request a “Release and Waiver” to be signed as part of the contract and again at closing.
  • Panels Leased, Client Directs RMC to Acquire:
    • Obtain copies of all documentation listed above along with a copy of the lease.
    • Notify the client, obtain unequivocal written direction to proceed notwithstanding the presence of solar panels may limit the property’s marketability;
      • Determine whether the client wants the lease paid in full (from the employee’s equity) or RMC to take subject to the lease.
    • Contact the Solar Panel Company (as early as possible in the process) to explain
      • The 2-step process (RMC will not formally assume the contract but will honor terms as to credits; buyer will be required to assume);
      • Obtain copies of all relevant documents including the assumption and assignment, warranties and any other documentation, all of which will be provided to the broker to be executed by the buyer;
      • Obtain information on termination – under what circumstances may the lease be terminated, when, how much, etc.
    • Verify the panels are insured by the lessor and obtain copies of the current Certificate of Insurance;
    • Ensure that the panels have been inspected for functionality (age, etc.); and,
    • Include in the purchase agreement that Buyer acknowledges he/she/they are purchasing the solar panels, in “as is” condition, and request a “Release and Waiver” to be signed as part of the contract and again at closing.
  • Valuation: If the property is authorized for the appraised value/Guaranteed Purchase Option, instruct the appraisers and broker to give values both with and without the solar panels. If/when a Guaranteed Purchase Option offer is extended, ensure the proper value (with/without) is utilized based on client direction.
Each RMC may also need to modify its process for addressing solar panels to fit its respective homesale programs.
Social Security Administration and IRS Provide 2017 Inflation Changes
The Internal Revenue Service and the Social Security Administration have released adjustments to benefits, deductions, and other items due to inflation for 2017.
 
The Social Security Administration addressed 2017 inflation adjustments in an October 18 News Release, and a Fact Sheet on 2017 changes. Unlike last year, there will be a slight benefit increase for 2017, and a corresponding increase to the maximum amount subject to the Social Security tax (usually referred to as the wage base). Benefits will increase by 0.3%, and the wage base will increase from $118,500 to $127,200 (note, however, that there is no wage limit for the Medicare portion of the tax). The rise in the wage base appears very large, and SSA offered no explanation for the size of the increase other than that it is the result of calculations under the prescribed formula. The effect, however, will be to substantially increase Social Security taxes for many employees and their employers.
 
In IR-2016-139, and Rev. Proc. 2016-55, the Internal Revenue Service provided its annual changes to tax items subject to inflation adjustments. There are 55 such provisions.
 
Some items increased slightly, while others are unchanged. For example, the standard deduction amounts for singles and married couples increases from $12,600 to $12,700 (couples) and from $6,300 to $6,350 for singles, but the personal exemptions remain the same.
 
The foreign earned income exclusion rises from $101,300 to $102,100. And the Alternative Minimum tax exemption amount goes from $53,900 to $54,300 for singles, and from $83,800 to $84,500 for married couples filing jointly. For high-income taxpayers subject to the 39.6% rate, the income at which that rate kicks in goes up from $415,050 to $418,400 for singles, and from $466,950 to $470,700 for married couples.
 
The penalties for failing to file, or filing incorrect, information returns such as Forms W-2, which were indexed for inflation after 2015, go up to $260 per return, with a maximum penalty of $3,218,500.
 
Unfortunately, for the first time in several years the excise tax on arrow shafts has increased, from 49 cents to 50 cents per shaft.
 
Posted by Peter K. Scott
CHINA - Major Overhaul of Work Permit System Started November 1
By: The Knowledge Management team at Pro-Link GLOBAL
 
China announced implementation of a new single-permit work authorization system for foreign nationals starting November 1. The new integrated system is a major overhaul of the Chinese employment immigration scheme and includes new electronic application submission and processing. The system also combines the current two permit categories – the foreign work permit and the foreign expert certificate – into a single permit with three occupation groups evaluated on a points-based system. The goal is to increase the population of highly-skilled foreign talent working in China.
 
China’s Labor Market and Rising Immigration
Since 1978, China has been steadily transforming itself from a centrally-planned economy into a market-driven economy. The economic reforms of the past forty years have resulted in the fastest sustained expansion by any major economy in the modern world, with average annual GDP growth of over 10 percent. Currently the world’s second largest economy, China is expected to surpass the United States to claim the top spot by 2020. While still a developing nation in some respects, and with significant regional disparities in personal income and standard of living, the rapid economic growth has lifted more than 800 million Chinese out of poverty, according to World Bank statistics.
 
Although China has historically been a country of significant emigration to the western world, the country has experienced a 35-fold increase in inbound immigration during that period. A 2015 report of the Center for China and Globalization revealed that almost 850,000 foreign nationals were residing in China – with the top five countries of origin for expatriate employees being the Republic of Korea, the United States, Japan, Burma, and Vietnam. A similar study by the HSBC Group ranked China the third most attractive country for foreign nationals working abroad, and unofficial estimates suggest that their number in China is now rapidly approaching one million individuals.
 
As the Chinese market economy matured and growth slowed somewhat in the last several years, the slower growth in heavy industry and manufacturing brought a relatively new phenomenon to China – corporate “lay-offs” and a low but measurable unemployment rate. However, that unemployment is primarily confined to the lower-skilled labor pool. In contrast, the Chinese high technology industry continues to expand and companies in that industry continue to experience an acute shortage of highly-skilled labor. It is precisely this shortage and China’s desire to continue the rapid expansion of its high-tech sector which has driven recent immigration reforms. Recent years have seen a loosening of immigration laws and procedures in an attempt to attract the needed highly-skilled foreign talent and encourage the return of highly-skilled Chinese nationals from overseas.
 
The Current System – What’s Changing?
Because significant immigration into China has been a relatively recent trend, the roots of its current national immigration scheme go back only to its first federal immigration law in 1986 and later refinements in 2012. Much of the current law and practice remains largely local - governed by provincial, regional, and municipal agencies. Therefore, immigration processes in China also vary greatly by region. Because those procedures and requirements differ depending on the location of the foreign national’s work assignment, the appearance to many is that applications are considered almost on a case-by-case basis. This has resulted in a notoriously difficult application process for employees and very little predictability of result for employers. However, a new system to be administered by the State Administration of Foreign Experts Affairs (SAFEA) is attempting to streamline and standardize China’s immigration practice into a unified national system.
 
A new integrated system will formally replace the current system nationwide April 1, 2017, but it will be launched on a trial basis on November 1 of this year in Beijing, Hebei, Tianjin, Anhui, Shandong, Guangdong, Sichuan, and the Ningxia Hui Autonomous Region. Those eight regions are home to the large majority of the companies employing foreign nationals in China.
 
Under the new system, a single permit will replace the current two employment permits – the Ministry of Human Resources and Social Security’s (MHRSS’s) foreign work permit and SAFEA’s foreign expert permit. “The integration of the two different work permits is designed to remove impediments, such as inconsistent administration, policies and inefficient communication related to different and often complicated issues related to the jobs, identities and social status of foreigners,” according to the head of SAFEA. “It will help reduce repetitious checks and approvals, avoid administrative loopholes and improve efficiency by building a more active, open and efficient personnel introduction system...”
 
A new electronic application procedure will reportedly allow applicants to complete and submit applications for the new single permit online. A permanent national code number will then be assigned to the applicant to link the applicant’s personal information and application through the system. The expectation is that this will reduce document submission requirements and significantly decrease the time for approval. Once approved through the new process, SAFEA will issue a “work permit card” equipped with a contactless RFID chip to link the foreign national to their immigration record. The new single work permit will be categorized into three groups - group A for “high-end personnel,” group B for “professional personnel,” and group C for “temporary and seasonal personnel in service and non-technical sectors.” Applicants in each group will then be evaluated on a points-based system, with points awarded based on salary, education, length of service, working hours in China, Chinese language proficiency, region of their workplace, age, and work experience. In evaluating work experience, SAFEA will reportedly also positively consider such criteria as the influence and reputation of the company sponsoring the applicant.
 
The specifics of how points will be awarded in each category have yet to be announced. However, the stated purpose of this new three-category, points-based approach is to greatly reduce the number of permits for lower skilled workers and to significantly increase the number of high-end talent workers receiving permits. The hope of both Chinese employers and foreign nationals in the highly-skilled occupations is that the net result will be greater availability of work permits for highly-skilled employees and a more transparent and efficient process for application.
 
How These Changes Affect You
The changes to China’s employment immigration scheme represent a major overhaul of the work permits process. This is a fundamental shift away from the current regionalized system to a more national standardized system. The new system should make the process for bringing highly-skilled foreign labor to China more convenient and predictable for employers and allow for more strategic workforce planning. For highly-skilled foreign nationals, especially those in the high technology sector, it should present more opportunities for employment in China, and the new electronic applications process should ease and speed the issuance of new work permits. However, for foreign nationals in what are considered “lesser skilled” positions, the new points-based system may lead to reduced employment opportunities in China.
 
With the November 1 starting date in the initial eight provinces fast approaching, there is a concern that SAFEA has yet to issue specific guidelines and procedures for work permit applicants to follow. While this is not necessarily unusual in the governmental process in China, it does present obvious uncertainty for employers anticipating employee assignments in the coming months. We believe the changes as currently announced by SAFEA are a major positive step for immigration in China. That being said, employers and employees will need to be prepared for some “growing pains” as the new system is implemented.
 
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.
ISO Issues Global Standard for Anti-Bribery Systems
By Bill Tehan, Ruder Ware and General Counsel of Graebel Relocation Services Worldwide, Inc.
 
The World Bank has estimated that over $1 Trillion Dollars (U.S.) is paid in bribes each year, with a resulting erosion in political stability, increase in the global cost of doing business, and creation of significant barriers to international trade.
 
To address these matters on a global scale, on October 14, 2016, the International Standards Organization (“ISO”) issued ISO 37001 which is a global standard for anti-bribery management systems. The ISO 37001 standard was established at the initiative of the British Standard Institution with the participation of twenty (20) national delegations from the OECD zone, major emerging economies, and developing countries spanning five continents.
 
ISO 37001 for the first time sets out an agreed-upon international set of standards and procedures for anti-bribery management systems. Specifically, ISO 37001 specifies requirements and provides guidance for establishing, implementing, maintaining, reviewing, and improving an anti-bribery management system. Certification as an ISO 37001 compliant organization likely will be a differentiating factor for those businesses which so certify.
 
Regardless of the size or type of the certifying business entity, the ISO 37001 standard will help businesses identify any weaknesses, and implement improvements, in anti-bribery management systems in order to meet international best practices standards. The ISO 37001 standard system can be stand-alone or can be integrated into an overall management system to address the following activities:
  • bribery in the public, private, and not-for-profit sectors;
  • bribery by the organization;
  • bribery by the organization's personnel acting on the organization's behalf or for its benefit;
  • bribery by the organization's business associates acting on the organization's behalf or for its benefit;
  • bribery of the organization;
  • bribery of the organization's personnel in relation to the organization's activities;
  • bribery of the organization's business associates in relation to the organization's activities;
  • direct and indirect bribery (e.g. a bribe offered or accepted through or by a third party).
Significantly, ISO 37001 standard is auditable which allows for an independent third party to certify that an entity’s procedures meet the internationally agreed upon standard.
 
It is important to note that ISO 37001 is only applicable to bribery, it does not specifically address fraud, cartels, and other anti-trust/competition offenses, money-laundering or other activities related to corrupt practices, although an organization can choose to extend the scope of the management system to include such activities.
 
Worldwide ERC® members of all types and sizes should investigate ISO 37001 and consider certification under this standard.
Recent Challenges to EU-US Privacy Shield and Model Contract Clauses
By Bill Tehan, Ruder Ware and General Counsel of Graebel Relocation Services Worldwide, Inc.
 
On September 16, 2016, the Irish privacy advocacy group Digital Rights Ireland filed a widely expected legal challenge to the EU-US Privacy Shield with the General Court of the Court of Justice of the European Union. The title of the case is Digital Rights Ireland v. Commission and the case number is T-670/16. This challenge is described in court records as an “action for annulment”. Court records do not indicate that there has been any action taken in this case since its filing. It is likely that any ruling in this case may not be rendered for a year or more. If this challenge to the EU-US Privacy Shield is successful, then self-certification under the EU-US Privacy Shield will not be a basis for the transfer of personal data from the EU to the US in compliance with EU data privacy laws.
 
In a related development, on May 31, 2016, the Irish Data Protection Commission commenced a legal proceeding in the Irish High Court seeking a reference to the Court of Justice of the European Union in relation to the use of model contractual clauses pursuant to which personal data may be transferred from the EU to the US. The Irish High Court currently is receiving information from the parties in this case and has scheduled a hearing on the issue of whether a referral to the Court of Justice of the European Union is appropriate on February 7, 2017. If this challenge to the model contract clauses is ultimately successful, then the use of these clauses will not be a basis for the transfer of personal data from the EU to the US in compliance with EU data privacy laws.
 
Due to the uncertainty regarding the validity of both the EU-US Privacy Shield and the model contract clauses, Worldwide ERC® members should evaluate the use of both (a) model contract clauses and (b) agreements regarding compliance with the provisions of the EU-US Privacy Shield in their relationships with downstream suppliers. Worldwide ERC® will continue to monitor both of these cases and will keep members informed of their status.
Crumbling Home Foundations in Northern Connecticut
By Jay Hershman, Senior Partner, Baillie and Hershman
 
Relocation professionals operating in Connecticut should be aware of the recent discovery that hundreds and perhaps thousands of home foundations, primarily in Northern Connecticut, are crumbling. The counties most affected are Hartford, Tolland and Windham. These circumstances are creating unsafe and in some cases uninhabitable dwellings.
 
The homes all have concrete provided by one concrete vendor and material obtained from a Willington, CT quarry. The time period of the affected homes is hard to definitively identify, but appears to run from the very early 1980s to well into the 2000s. Of course, relocation professionals should also keep in mind that additions, garages or other repairs may have been made to homes outside of this time period with the concrete in question. This specific concrete mixture has high levels of pyrrhotite, an iron sulfide mineral that can react with oxygen and water to cause swelling and cracking. The concrete vendor denies responsibility, asserting that the problems arise from improper installation. To further complicate matters, records where the concrete mixture was used were destroyed in a fire a number of years ago.
 
The chemical reaction that causes crumbling home foundations can lead to catastrophic home collapses. The only remedy once cracks start to appear is a total foundation replacement, which presents daunting financial and logistical challenges for homeowners. Insurance companies have, thus far, denied coverage for repairs; although, the Governor’s office is working on structuring an agreement with insurers that would provide a fund for repairs.
 
While not a guaranteed indicator of a future problem, prior to accepting a home into a relocation program, a thorough inspection of the foundation should be completed. There may also be a laboratory test that can be conducted at a substantial cost (in many cases upwards of $5,000); however, based on current research, the existence of pyrrhotite does not necessarily mean that cracking/crumbling will occur in the future thus requiring a disclosure that would significantly impact the property’s value. Additionally, in-bound transferees should be made aware of this issue and encouraged to have a thorough foundation inspection to reduce the risk of purchasing an impacted property.
 
Per Connecticut’s Department of Insurance, insurance companies cannot cancel or non-renew a homeowner's policy due to a crumbling foundation. A class action lawsuit against insurers was filed in February asserting insurers are involved in a concerted scheme to deny coverage.
 
The Legislature has also passed Public Act 16-45, which enables homeowners to request a home reassessment for tax relief purposes and also requires further study of the issue. This legislation went into effect October 1, 2016. The Connecticut Department of Consumer Protection has established a web page devoted to this is where additional resources can be found. Additionally, the Connecticut Association of REALTORS® has created a disclosure form that should be signed by all home purchasers in the impacted area providing notice of the potential issue.
 
On October 19, 2016, Connecticut Governor Dan Malloy wrote to the Federal Emergency Management Agency (FEMA) citing that the crumbling foundation issue is now a natural disaster which requires the assistance of FEMA. In April, the state had contacted FEMA and the agency stated it did not meet the criteria as an emergency or major disaster. A state report issued in June identified that the high-levels of pyrrhotite, which is naturally occurring, causes the deterioration and thus the problem should qualify as a natural disaster.
 
This blog was revised on December 9, 2016 to reflect a change in the time frame of when the concrete was poured for the foundation of affected homes.
Canada Restricts Personal Residence Capital Gain Provision
On October 3, 2016, the Canada Department of Finance put in place new restrictions that narrow the availability of the capital gain exemption for sales of personal residences. The stated purpose of the changes was to “close loopholes.”
 
The exemption is contained in paragraph 40(2)(b) of the Income Tax Act, and is a longstanding feature of Canadian tax law. Under that provision, if a taxpayer designates a residence as his or her “principal residence,” all capital gain on its sale, regardless of amount, is excluded from income. The designation must be made each year the property is owned.
 
If a residence is the principal residence for some years of ownership, but not others, the law requires that capital gain be allocated ratably based on the number of years the property was the principal residence compared to the total number of years the taxpayer owned the property. However, in the not-infrequent situation in which the taxpayer sells one property and buys another within the same year, the statutory formula recognizes that each should qualify during that year and adds “1” to the principal residence years. This is commonly referred to as the “special one-plus rule.’ Non Canadian properties can qualify for the exemption, and the law also allows certain personal trusts to claim the exemption.
 
When the property is sold, the claim of exemption is made on the taxpayer’s income tax return for that year. However, not unlike the law in the United States, the Canada Revenue Agency (CRA) does not require the sale to be reported at all if all gain is eliminated by the exemption.
 
The first change imposed by the new law is that the “one-plus rule” will not apply unless the taxpayer was a resident of Canada in the year the property was acquired. This will affect, for example, some expats who purchase a Canadian residence during the year they began working in Canada. Upon sale of the residence, they will not be allowed to exclude gain allocable to the year of acquisition. Fortunately, the new rule will not affect Canadians who emigrate and purchase a new home in the U.S., for example, since such taxpayers were residents of Canada during the year the property was purchased.
 
Second, the availability of the exemption for trusts has been significantly curtailed.
 
And finally, for 2016 and subsequent years, if a sale of a principal residence is not reported on the tax return for the year of sale, the normal 3-year statute of limitations for assessment is extended indefinitely. However, the extended ability to make an assessment would apply only to gain from the property sale. This rule effectively overrides the administrative reporting exception currently permitted by the CRA. The 3-year assessment period would only begin only if the taxpayer files an amended return reporting the sale and claiming the personal residence exemption. As a result, the CRA has changed its administrative position to require reporting of all sales starting with the 2016 tax year even if the taxpayer claims that all gain is exempt.
 
Worldwide ERC® members with home-owning employees in Canada should be aware of these new rules, which may affect such employees being relocated or temporarily assigned into or out of Canada.
 
Posted by Peter K. Scott
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.
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