International Regulations Respond to Accelerated Global Trends

International Regulations Respond to Accelerated Global Trends

During the COVID pandemic, the world’s regulatory processes have finally become digitized. Old fashioned paper-based work has been replaced by online processes leading to greater efficiencies. However, digitalization also allows regulators worldwide to process large volumes of data using AI and related technology. As a result, the volume of information required to be reported has also dramatically increased, leading to an additional burden on hard-pressed businesses. In this article we flag the major regulatory changes that are now in effect worldwide, presenting both opportunities and challenges for businesses.

Ultimate Beneficial Owner (UBO) Reporting on the Rise

Maintaining an Ultimate Beneficial Owner (UBO) register and keeping it current has become a requirement in many countries. For example, Netherlands introduced a regulation in September, 2020 requiring all legal entities to report UBO details by March 2022 with newly set up legal entities being required to report UBO details within a week of setup. Singapore law has always required companies to maintain a Register of Registrable Controllers (RORC) but the RORC report now needs to be filed with Singapore Company Registry (ACRA). Similar regulations came into effect in Malaysia on March 1, 2020 with companies now being required to notify the Companies Commission of Malaysia (SSM) of any changes in RORC.   Changes have also been introduced in Canada, Ireland, Italy and India to name a few.

However, to complicate matters, the definition of who exactly is a UBO and the available reporting exemptions vary from country to country.

Stricter Privacy Regulations

With digitalization comes the enhanced risk of data breaches resulting in loss of privacy for individuals. As a result, stricter privacy regulations now apply in Brazil, Canada, China, Germany, India, and Japan to name a few with penalties for non-compliance also rising worldwide.

The EU’s Court of Justice recently invalidated the EU-US Privacy Shield in a landmark case raising the bar on the level of stringency required in data privacy standards that US companies must meet when expanding into the EU and increasing the burden of GDPR compliance on businesses. 

Digitalization of Everything

Countries are increasingly digitizing processes ranging from requiring returns to be filed electronically to complete digitalization of invoicing and payroll.

For example, Australia plans to introduce e-invoicing on July 1, 2022, and Brazil has changed its e-invoicing system to also include the digitalization of delivery notes and transportation invoices for goods shipments. China has introduced a nationwide system of electronic special VAT invoices, Hungary requires reporting of all B2B invoices in its Online Invoice Reporting System, and the UK requires businesses to have digital VAT records and submit VAT returns through compatible software, just to name a few. India has gone even a step further and introduced “faceless assessments” where tax authorities review submissions digitally without any physical contact and carry out investigations this way.

Simpler to Set Up Business in a Country

However, the news is not all negative.

It has become simpler to set up subsidiaries in many countries because applications have gone online, regulations have been simplified and processes streamlined. For example, UAE now allows 100% foreign owned subsidiaries to operate on its soil, no longer requiring local citizen shareholder participation. India has introduced a new SPICe+ web facility for setting up a company.

Work From Home Compensation Changes

We have seen a trend where countries around the world are updating provisions relating to tax treatment of Working From Home (WFH) expenses.

For example, Canada Revenue (CRA) has issued guidance for employees to enable them to claim a deduction on home office expenses in their personal income tax returns. In addition, Mexico has introduced the concept of “teleworking” which has meant employers have had to update their employment agreements.

Clearly employers will also need to realign employee remuneration to reflect WFH allowances instead of paying transport allowances.

Parental & Paternity Leave

There has been a marked increase worldwide in the amount of leave parents can take following the birth of a child or the adoption of a child. For example, in Australia as of November 2020, “flexible unpaid parental leave” of up to six weeks is allowed out of a maximum one year of unpaid parental leave. The leave can be taken in units of one day either together or broken up. Hong Kong has increased the period of statutory maternity leave from 10 weeks to 14 weeks as of July 2020, Ireland has increased the period of unpaid parental leave from 22 weeks to 26 weeks. Italy has increased the period of paid paternity leave from five days to seven days and closer to home, Quebec has increased the time window for taking parental, paternity, and maternity leave.

The current pandemic has dramatically speeded up a digitalization process that was already trending across the world. As a result, there are both positive and negative outcomes for employers and employees. What is clear, however, is that businesses will be able to expand internationally across borders at a much earlier stage in their development and, as a result, the international employment market is going to get much more competitive. There are significant business opportunities and threats arising from this new capability for which expert advice should be sought if pitfalls are to be avoided.

Shan Nair is the president of Nucleus, a one-stop global expansion solution for businesses and a consultant on international expansion.

© 2021 Newsmax Finance. All rights reserved.


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