Employment Support Scheme Hong Kong

Government Employment Support Scheme and Measures to help the Employers in Hong Kong

The Legislative Council Finance Committee approved the funding of HKD 80 billion for the Employment Support Scheme (ESS) on 8th April 2020. The package includes measures to encourage employers to retain staff through the provision of a wage subsidy (The Employment Support Subsidy) which is expected to benefit 1.5 million employees.

The Government is liaising with Mandatory Provident Fund (MPF) trustees and relevant stakeholders to work out the implementation details which will be announced before application for the first tranche is invited.

The Government will provide wage subsidies to eligible employers who undertake not to make workers redundant during the subsidy period, and to spend 100% of the subsidy on paying wages for their employees.

Who is eligible?

All employers who have been making Mandatory Provident Fund (MPF) contribution or have set up Occupation Retirement Schemes (ORSO) for employees are eligible. It’s not currently clear whether this will be assessed on an individual employee basis or whether it will be sufficient that the employer operates an MPF scheme as a whole.
The subsidy can only be claimed for employees who receive a salary (i.e. for those on unpaid leave are excluded).

How much can the employers claim?

Wage subsidies for each employer are calculated on 50% of the salary on a “specified month”. This is capped at HKD 18,000 per month for a maximum period of six months. Employers may choose any one of the months from January to March 2020 taking into account their own circumstances. If the numbers of employees and payrolls in January are higher than the subsequent months, the wage subsidies to be disbursed by the Government will enable employers to rehire employees to meet their operational needs. Our interpretation is that only one month can be selected for the purpose of the application and not separate months for separate employees.
The Government will grant a one-off lump sum subsidy of 7,500 HKD to about 215,000 self-employee’s persons who have made MPF contributions in the past 15 months.

When will the subsidy be paid?

The subsidy will be disbursed to employers in two tranches, with the first disbursement to occur no later than June 2020. The first disbursement will cover wages for the months of June, July and August 2020, the second will be issued in September to cover wages for September, October and November 2020.

Can the employers still go ahead with planned cost-cutting measures?

The ESS is conditional upon the employer undertaking that they will not implement any redundancy. It is confirmed that this undertaking applies during the subsidy period of 6 months.

Other job creation and measures

The HKSAR Government has announced a series of measures that are expected to create jobs, develop skills, and relieve the financial burden on SMEs and Hong Kong residents.

These includes:

  • Invest HKD 6 billion to create around 300,000 jobs in the public and private sectors for people of different skill sets and academic qualifications, benefitting professionals and technicians, fresh
    graduates, middle level and grassroots workers.
  • The Government will recruit about 10,000 civil servants and create about 5,000 short terms intern positions for young people in the coming year.
  • Increasing rental and fee concessions for government premises;
  • Temporary 20% fare reduction for MTR travel for six months from 1 July 2020 to 1 January 2021;
  • Extending the deadline for payment of tax for the 2018/2019 year of assessment by three months.
    The Employment Support Scheme should be a relief for many employers who have struggled over the past months and for this reason It is now important for employers in Hong Kong to review the terms of the Scheme to determine whether they are eligible to claim relief.

Willing to know more? Contact us today to get meaningful advice

Sara Silenzi
Manager Italian Desk
sara.silenzi@fidinam.com.hk

Notification requirements in accordance to economic substance regulation in U.A.E.

On 30 April 2019 the Economic Substance Regulation (ESR) was introduced in the UAE to align the country with the global standards to prevent Base Erosion and Profit Shifting (BEPS). According to the UAE legislation, the ESR is applicable to 9 business activities called “Relevant Activities” but all businesses licensed in the UAE shall have to submit a notification within 30 June 2020.

The ESR shall apply as of 1 January 2019 consequently the first financial year of assessments is the one starting on or after 1 January 2019.

The purpose of ESR is to assess and ensure that businesses within the UAE conducting Relevant Activities have in the UAE the necessary substance.

Relevant Activities are the followings:

  1. Banking
  2. Insurance
  3. Fund management
  4. Lease-finance
  5. Headquarters
  6. Shipping
  7. Holding company
  8. Intellectual property (IP)
  9. Distribution and service centre

For a more comprehensive background on UAE ESR you can refer to our previous article on this subject published on December 2019: https://fidinamgw.com/2019/12/12/new-economic-substance-regulation-uae/

NOTIFICATION AND REPORTING REQUIREMENTS

Notification vs Reporting

All businesses licensed in the UAE, including branches, partnerships, offshore companies etc. have to notify to competent authorities as provided below within and not later than 30 June 2020 the following:

  1. whether or not they carry out a “Relevant Activity”
  2. whether or not all or any part of gross income in relation of a relevant activity is subject to tax in a jurisdiction outside UAE
  3. The date of the end of its financial year.

Only those businesses that carry out a Relevant Activity shall have to submit a report for each financial year including the following information

  1. the type of Relevant Activity conducted by it.
  2. the amount and type of relevant income in respect of the Relevant Activity.
  3. the amount and type of operating expenses and assets in respect of the Relevant Activity.
  4. the location of the place of business and, if applicable, plant, property or equipment used for the Relevant Activity of the Licensee in the State.
  5. the number of full-time employees with qualifications and the number of personnel who are responsible for carrying on the Licensee’s Relevant Activity.
  6. information showing the State Core Income-Generating Activity in respect of the Relevant Activity that has been conducted.
  7. a declaration as to whether or not the Licensee satisfies the Economic Substance Test.
  8. in the case of a Relevant Activity being an Intellectual Property Business, a declaration as to whether or not it is a high-risk intellectual property business.
To whom notification and reporting have to be submitted:

Notification and Reporting have to be filed with the “Regulatory Authority” as determined by cabinet resolution n. 58 of 2019.

For the companies established in a Free Zone the competent Regulatory Authority is the authority that issued the license. (e.g. for Companies established in DMCC FZ the Regulatory Authority is DMCC).

For the company established in mainland territory the competent “Regulatory Authority” are UAE Central bank, Security and Commodities Authority, Insurance authority or Ministry of Economy depending on the activity carried out.

When notification has to be submitted:

Notifications should be made within the time determined by the competent Regulatory Authority.

According to a recent report published by the Khaleej Times, on 1 April 2020, Younis Haji Al Khouri, undersecretary at the Ministry of Finance, said: “The cut-off date of the notification to the Ministry of Finance is 30 June 2020 and that’s what was communicated to all regulators. To assure the compliance, some regulators decided to cut it short.”

As of today Ministry of Economic, which is the designated regulatory authority for many mainland companies have remained silent on the official notification deadline.

Here below are deadlines circulated by the regulatory authority of some of the Free Zones (the list is not exhaustive, there are about 40 Free Zones and consequently about 40 regulatory authorities in the UAE):

DIFC               30th June 2020

DMCC            30th June 2020

RAK ICC        30th June 2020

RAKEZ          31st May 2020 (extension of deadline should be announced)

All above mentioned it is wise to consider 30 June 2020 as the latest deadline for ESR notification for all business licensed in UAE.

When yearly reporting has to be submitted:

Businesses that according to notification carry out a Relevant Activity shall have to submit a report within twelve months from the end of the relevant financial year.

Since ESR has retroactive effect starting from 1 January 2019 this means that existing businesses with financial year ending 31 December 2019 shall have to submit the first report for the financial year within 31 December 2020

URGENT ACTION REQUIRED – NOTIFICATION

Despite lack of clarity on several aspects regarding the ESR and despite many Regulatory Authorities have yet to communicate procedures and forms to be used for notification purposes, all businesses are urgently required to self-assess whether or not are conducting a Relevant Activity in order to be ready to meet notification deadline.

On 14 April 2020 Ministry of finance published “The UAE Economic Substance Regulations Relevant Activity Guide. Please click here for more information.

This document provides useful guidance for the self -assessment, even though business models are not always easy to be allocated within or outside the relevant activities mentioned by  ESR.

FOCUS ON

Among the nine Relevant Activities targeted by ESR the following are those that may have a significant impact on several businesses:

  • Headquarter business
  • Holding company business
  • Distribution and Service Business Center

Please find below a brief description of these affected Relevant Activities.

Headquarter Business

A company is regarded as carrying on a Headquarters Business if provides services to foreign group companies, and through the provision of such services:

  1. the company takes on the responsibility for the overall success of the group; or
  2. the company is responsible for an important aspect of the overall group’s performance.

In order for a UAE company to be seen as having “taken on the responsibility for the overall or an important aspect of the overall group’s success or performance”, the services provided by the company must involve:

  • the provision of senior management;
  • the assumption or control of material risk for activities carried out by foreign group companies or substantive advice in relation to the assumption or control of such risks.

The company’s position in the group’s corporate structure is not relevant for determining whether it is engaged in a Headquarters Business. This means that the Company does not need to be the direct or ultimate parent of a group company for it to be considered as carrying out Headquarters Business.

Holding company business

A Holding Company Business is defined as a business that:

  1. a Holding Company in accordance with the law applicable to the Licensee carrying out such activity in the State.
  2. has as its primary function the acquisition and holding of shares or equitable interests in other companies; and
  3. does not carry on any other commercial activity.

Equity interests include shares in a company and interests in an incorporated partnership, as well as any other instrument which gives a beneficial ownership interest in a company.

A company which owns other forms of assets (e.g. bonds, government securities, interest in real property) will not be treated as carrying on Holding Company Business.

Holding companies that undertakes also other activity that is not a Relevant Activity are out of the scope of ESR regulation.

Distribution and Service Business Center

A company is considered engaged in a “Distribution Business” if it purchases raw materials or finished products from a foreign group company and distributes those raw materials or finished goods.

A company is considered engaged in a “Service Centre Business” if it provides consulting, administrative or other services to a foreign group company, and those services are in connection with the foreign group company’s business outside the UAE.

PENALTIES FOR FAILURE TO PROVIDE NOTIFICATION

Failure to provide notification required by ESR and/or notification of inaccurate information are sanctioned with an administrative penalty of not less than dirhams ten thousand (AED 10,000) and not exceeding dirhams fifty thousand (AED 50,000).

Penalties are applied in the following situations:

  1. if a company fails to provide information that is required to provide under Article 8 of this Resolution.
  2. if a company provides inaccurate information to the Regulatory Authority and knows of the inaccuracy at the time the information is provided but does not inform the Regulatory Authority at that time of it discovering the inaccuracy after the information is provided to the Regulatory Authority.

PROFESSIONAL ADVICE AND ADMINISTRATIVE SUPPORT

At Fidinam DMCC, our consultants and back office staff are at your disposal to advise on the  Economic Substance Regulation. In particular:

  • Assessing the applicability of the ESR regulation and its extent
  • Assisting with the notification and reporting obligations with the relevant regulatory authority
  • Ensuring maintenance of proper file with minutes of board meetings
  • Restructuring business whenever required.

Stefano Menotti – Managing Director Fidinam DMCC
Matteo Pozzetti – Managing Partner Fidinam DMCC

Singapore budget

Singapore Resilience Budget– COVID-19 Relief Program

Following the release of Budget Statement 2020 last February (the ‘Budget 2020), the global COVID-19 crisis has hugely worsened, rapidly affecting, among others, the economy in Singapore and globally.

Singapore Government has promptly reacted, implementing several measures to support Singapore companies and individuals, to save jobs and to help businesses in preserving their cash flow and operations during this period of uncertainty. Main measures were provided through the Resilience Budget, released on 26 March, the Solidarity Budget, released on 7 April, and through other ad-hoc measures released from time to time.

We highlight here below measures implemented as at the 3rd of May 2020 that may apply to small and medium enterprises and employees in Singapore:

  1. Automatic Deferment of Corporate Income Tax and Good and Service Tax Payment.
  2. Property Tax Rebates for Non-Residential Properties
  3. Duty to Pass to Tenant the Property Tax Rebate on Non-Residential Properties
  4. Rental Waivers for tenants in government-owned / managed non-residential facilities
  5. Individual Income Tax Deferments
  6. Foreign Worker Levy Waiver and Rebate
  7. Enhanced Job Support Scheme
  8. Enhancements to Enterprise Development Grant
  9. Option to accelerate Capital Allowances
  10. Accelerated Deductions of Expenses incurred on Renovation and Refurbishment
  11. Double Tax Deduction for Internationalisation scheme
  12. Carry-back Relief

 

  1. Automatic Deferment of Corporate Income Tax (CIT) Payments and Good and Service Tax Return Submission

All companies with CIT payments due in the months of April, May and June 2020 are granted an automatic three-month deferment of payments. The CIT payments that are deferred from April, May and June 2020 will be collected in July, August and September 2020, respectively.

This relief measure is on top of automatic extension of two months interest-free instalments, and corporate income tax rebate of 25% of tax payable, capped at SGD 15,000 for Year of Assessment 2020, both announced in Budget 2020. No application is required: eligible companies may expect to receive a letter from IRAS by 15 April 2020.

As to GST submission due for the period 1 January – 31 March 2020, the deadline of 30 April has been automatically deferred to 11 May 2020. No application is required, and GST registered entities may immediately take advantage of the postponed deadline.

  1. Property Tax Rebates for Non-Residential Properties

Qualifying non-residential properties will be granted property tax rebate for the period 1 January 2020 to 31 December 2020, ranging from 30% to 100% of property tax payable for the said period. Commercial properties badly affected by COVID-19 like hotels, serviced apartments, tourist attractions, shops and restaurants will receive a 100% tax rebate; other non-residential properties, such as warehouse, will get a 30% tax rebate.

Owners are not required to submit any claims for the rebate: IRAS will inform owners of qualifying properties on their property tax rebates by 31 May 2020, and they can expect to receive their refunds by 30 Jun 2020, or no GIRO deduction for a certain period starting from May 2020.

  1. Duty to Pass to Tenant the Property Tax Rebate on Non-Residential Properties

Provided the Property Tax rebate granted to non-residential properties as mentioned in the paragraph (2) above, the Singapore Government has enacted the Covid-19 (Temporary Measures) Act, according to which owners granted property tax rebate on non-residential property have a duty to transfer the tax benefit on relevant tenants of such non-residential properties.

The manner in which the benefit may be passed may be:

  1. A payment of money, whether as a lump sum or by way of instalments; and/or
  2. An offset against or a reduction of the whole or any part of any rent fee payable by the tenant to the owner.

 

  1. Rental Waivers for tenants in government-owned / managed non-residential facilities

To help alleviate costs for businesses located in Government-owned / managed non-residential facilities, the following tenants will qualify for rental waivers:

  1. Commercial Tenants: commercial tenants who qualified for the half-month rental waiver announced in Budget 2020 will not get three months’ worth of rental waiver in total (i.e., two months more), with a minimum waiver of SGD 200 per month. Eligible tenants may include those providing commercial accommodation, retail, F&B, recreation, entertainment, healthcare, and other services.
  2. Other Non-Residential Tenants. Government agencies such as Jurong Town Corporation (JTC), Singapore Land Authority (SLA), Housing and Developing Board (HDB), Urban Redevelopment Authority (URA), Building Control Authority (BCA), National Parks Board (NParks), and People’s Association (PA) will provide half a month’s worth of rental waiver to eligible tenants/lessees of other non-residential premises who do not pay Property Tax. Eligible tenants/lessees may include those in premises used for industrial or agricultural purpose, or as an office, a business or science park, or a petrol station.

In addition, all government fees and charges will be frozen for one year, from 1 April 2020 to 31 March 2021.

  1. Employee Income Tax Deferments

Employees may defer their income tax payments due in May, June and July 2020. For Giro payments, income tax deduction will resume in August, September or October 2020 and the end-date of the instalment plan will be extended by 3 months. For lump sum payment, payment may be deferred by three months.

This deferment option is not automatic, but a request must be submitted – and approved – by IRAS. Taxpayers must sign up for the deferment option by 31 July 2020. The amount of income tax payable remains the same.

  1. Foreign Worker Levy Waiver and Rebate

A waiver for payment of Foreign Worker Levy (FWL) for March and April 2020, which is due in April and May 2020, respectively, has been granted to employers, to ease labour costs of those entities employing foreign workers.

Employers will also receive a one-off FWL rebate of SGD 750.00 for each work permit or S Pass holder employee, for levies paid in 2020.

  1. Enhanced Job Support Scheme

The Jobs Support Scheme (JSS) was released to help businesses to retain local employees (Singapore Citizens and Permanent Residents) during this period of uncertainty. Eligible employers will receive as follows:

  • 75% cash grant on the gross monthly wages of each local employee for the months of April and May 2020, subject to a monthly wage cap of SGD 4,600 per employee.
  • 25% cash grant on the gross monthly wages of each local employee for 7 months (i.e., October to December 2019, and February, March, June and July 2020), subject to a monthly wage cap of SGD 4,600 per employee.

Employers do not need to apply for the JSS. The grant will be automatically computed pursuant to CPF contribution data. Employers can expect to receive the first JSS payment from IRAS by 30 April 2020, and subsequent payments in May, July and October 2020.

  1. Enhancements to Enterprise Development Grant (EDG)

The EGD provides customised support to local enterprises which undertake projects in the following three areas: (i) Core Capabilities; (ii) Innovation and Productivity; and (iii) Market Access.

The current maximum support level was up to 70%; Resilience Budget has raised such a level up to 80%, from 1 April 2020 to 31 December 2020, with a further raise up to 90% for enterprises that are most severely impacted by COVID19, on a case-by-case basis. Enhanced support will be granted to eligible enterprises that plan to refresh their business models and find new opportunities.

To qualify for the EDG, enterprises will need to fulfil the following criteria:

  1. be registered and operating in Singapore;
  2. have a minimum of 30% local shareholding; and
  • be in a financially viable position to start and complete the project.

In addition, in order to qualify for the enhanced EDG effecting from 1 April 2020, companies must commit that the benefits of enterprise transformation are passed on to the employees by  improving staff outcomes, such as wage increment, job creation, job re-design, or training for existing staff.

  1. Option to accelerate Capital Allowances

Companies that incur capital expenditure for purchase of plant and machinery (not for resale) in the basis period for YA 2021 (i.e., financial year 2020) shall have the option to accelerate the write-off of such an expenditure over two years, namely 75% write-off of the cost incurred in YA2021 and 25% of the cost incurred in YA2022.

  1. Accelerated Deductions of Expenses incurred on Renovation and Refurbishment

Certain qualifying capital expenses incurred for the renovation or refurbishment works done in the business premises can be claimed as a tax deduction against the income derived from that business.

Such expenditure, which was deductible over three consecutive years subject to a cap of SGD 300,000.00, may now be deducted in a single year. Once made, the election is irrevocable.

The acceleration of deductions can provide immediate cash tax savings to profitable businesses; nevertheless, non-profitable businesses will not benefit from this option because no deferment of claims is allowed under this scheme. 

  1. Double Tax Deduction for Internationalisation scheme

Under the current Double Tax Deduction for Internationalization Scheme (“DTDI”), businesses are allowed a deduction up to 200% of qualifying expenses incurred for certain market expansion and investment development activities. The DTDI scheme, which was to expire on 31 March 2020, has been extended to 31 December 2025 and enhanced to include a wider list of eligible costs.

Companies that incur capital expenditure for purchase of plant and machinery (not for resale) in the basis period for YA 2021 (i.e., financial year 2020) shall have the option to accelerate the write-off of the expenditure over two years, i.e. 75% write-off in YA2021 and 25% in YA2022.

Automatic double tax deduction can be claimed up to SGD 150,000; for qualifying expenditure exceeding the mentioned threshold, approval must be sought with the Singapore Tourism Board.

  1. Carry-back Relief

The carry-back relief scheme has been enhanced to allow qualifying deductions for YA 2020, to be carried back for up to three immediately preceding years of assessment, capped at SGD 100,000 of qualifying deductions and subject to certain conditions (e.i., shareholders continuity test for loss utilization).

The changes to the carry-back relief scheme would allow a Singapore company that has qualifying deductions in YA 2020 to obtain a cash refund utilizing these deductions against the prior three years of assessment assessable income.

Should you have any queries as to how your business may benefit from the above measures, please do not hesitate to contact Fidinam Singapore.

To read more about Relief Programs Worldwide, click here

Hong Kong COVID-19 financial relief package

To face the challenges brought by Covid-19, the Hong Kong Government has issued a financial relief package. On Wed 8th April 2020, Carrie Lam has announced a financial relief package in order to help individuals and business highly affected by the Covid-19 outbreak, including the introduction of HKD 80 Billion Employment Support Scheme (ESS).

  • The relief package, worth around HKD 137.5 Billion (USD 18 Billion), represents 4.8% of HK’s GDP.
  • The Government would pay 50% of salaries for half of a year. However, each worker’s monthly subsidy is capped at HKD 9,000. The plan is to spend HKD 80 Billion on a six-month wage scheme for entire private sector, as long as employers make contributions to Mandatory Provident Fund schemes for workers.
  • Subsidies will be distributed directly to employers in two tranches, with the first payout no later than June. It is estimated to cover 1.5 Million employees.
  • All the employers who have applied and are approved to enjoy the ESS will be made known, especially to the employees in order to operate in a very transparent way.
  • The amount of HKD 21 Billion has been allocated to sectors and businesses hard hit. Notably, aviation sector, smaller ventures, educational centers, school bus operators as well as gyms. Businesses forced to close because of social-distancing measures are also set to benefit.
  • For the general public, the government would also create 30,000 new jobs and there will be a reduction of 20% on train fares starting from July for the incoming two years.

Get to know more no how Fidinam (Hong Kong) Limited professionals can help you in this delicate phase. Contact us for free advise.

Thailand Retirement Visa

Discover today all the benefits of obtaining a Thai Retirement Visa.

  • No Thai source income taxable only if remitted to Thailand
  • No wealth tax
  • No tax filing obligations for foreign investments and assets
  • Mitigated inheritance and gift tax
  • Retirement VISA eligible to applicants of age 50+

Find here the full program and all the advantages. Interested in know more about how to apply and what does it take to obtain Thai retirement Visa? Contact us today to get free advice!

Download the full document here

coronavirus ecommerce in china

China: Acceleration of e-commerce and new online purchasing patterns

The Coronavirus outbreak that first developed in Wuhan and quickly spread to the entire country has triggered a range of disruptive consequences for the supply chain of a multitude of domestic and foreign companies in China, also generating significant change in terms of consumers’ behavior and preferences.

An army of delivery men, riding their scooter through the empty avenues of China’s megacities to deliver warm meals, hand sanitizers and masks have become the iconic image of an entire nation during Coronavirus outbreak.

Given the unfortunate circumstances, delivery men have been the only link with the outside world for many Chinese who have been forced to residential lockdown in their apartments for weeks.

While China is already an established leader within the field of digital economy, the outbreak has represented a fertile ground to even further accelerate the transition from traditional retail to e-commerce platforms, whereas the push has been supported by automated delivery, use of artificial intelligence and robotics.

Critical to contain virus contagion is the ability to limit movement and contact between people. In response, we have seen companies implementing new delivery models and contactless services to reach out their customers.

JD, China’s leading e-commerce company, has implemented delivery solutions that involves drones. Where a physical delivery is not possible, being remote countryside or cities particularly exposed to coronavirus contagion risk, consumers have indeed been reached through drone delivery.

Drones have been used also for other reasons. Xinhua News Agency, the biggest and most influential media organization in China, has shown videos of drones that thanks to thermal imaging technology equipment, were able to detect people with fever from the air.

In order to enhance contactless services, a hospital in Wuhan has built a “unmanned self-service grocery store” that allows the medical staff to purchase their daily necessities at any time while processing their payment through a mobile payment app at the full self-service cashier, hence reducing to zero any human intervention. The self-cashier system in the store is provided by China’s tech-giant Alibaba.

Delivery robots have been used to carry food from door-to-door to hotel residents in Hangzhou, China to people being quarantined after traveling on a flight with patients thought to be infected by coronavirus, Reuters reported.

Also Baidu, China’s leader in driverless technology, has deployed a range of unstaffed vehicles for various uses in the epidemic area.

Chinese tech, retail, food and delivery companies have shown a strong ability to rely on technology to quickly adapt to new consumers’ behavior to overcome this period of economic and social distress. Not only Millennials and urban consumers are engaged in e-commerce shopping. The health crisis could indeed lead to new patterns of online consumption based on changes in users’ age, locations and other demographics. 

The epidemic is indeed much likely to represent a substantial push for an even faster growth in China’s digital economy, reaching out new market segments such as elder people and rural residents.

Online trade in China is the most mature in the world. Successful brands in China have been able to create an ecosystem that mixes web related sales with physical stores. All of this has been made possible thanks to a successful integration of (i) artificial intelligence, (ii) consumer data collection and (iii) increased mobile payment adoption rate.

Big players like Alipay and WeChat Pay have now been adopted widely by shopkeepers, restaurateurs and consumers. In a country where credit cards have never been widely adopted, businesses are moving directly from cash to payment apps.

According to Statista Digital Market Outlook, in 2019, user penetration in the mobile point-of-sale segment in China was equal to 35%, far above if compared to advanced economies from the West (9% for the US and 6.5% for the UK).

Yet, the overall annual transactions value per user is still higher in the US (equal to USD 2,994) and in the UK (equal to USD 2,465), whereas Chinese users spend online an average of USD 1,163 a year. If we combine this information together, this means that the average Chinese online platforms’ user spends less than the half of the yearly amount of Americans and Brits, but the mobile payment adoption rate in China is up to 5 times the one of UK and US.

Data confirm that mobile payment platforms remain the most favorable purchasing channel for Chinese consumers, hence delivering a great opportunity for western brands aiming at exploiting the vast Chinese market.

How to take advantage of the Chinese online ecosystem

The current health crisis could represent a push for western brands, that should now more than ever consider to further enhance their online presence in China in order to achieve equity brand growth and increased exposure to the final consumers.

However, the Chinese big consumer base can result being a double-edged sword: brands risk to  get “diluted” by the vast purchasing options that Chinese consumers now have. Target specific consumer groups, increasing precision and lowering acquisition costs are key goals for brands willing to overcome the challenges of a crowded digital market and survive long-term.

The Chinese market is complex and multi-faceted. It is key for foreign investors to develop a clear digital strategy on how to best position brands and use digital channels efficiently to reach and sell to the target audience.

Foreign investors should approach the digital world by carefully considering the following three major digital communication channels:

(i)    sale through e-commerce platforms (i.e Tmall / Taobao);

(ii)   sale through social media platforms (i.e Wechat / Xiaohongshu);

(iii)  sale through a proprietary website with Chinese domain.

Every communication channel entails different opportunities, risks and costs.

Comparison factors such as accessibility; existing frictions and integration with other platforms, data ownership, management and exposure of viewers traffic, digital marketing tools availability, etc. should be included in the equation when drafting the most suitable marketing strategy to put in place.

The right business model may be achieved by actually combining more online and offline market platforms, resulting into an efficient implementation of a “omnichannel model”, the integration of online and in-person purchasing that ensures a unified experience at every touch point with the brand.

Within a competitive e-commerce market, standing out from the crowd is the key to success. Relevant for western brands is to create a dynamic online ecosystem able to keep followers entertained through creative and engaging content. This is made possible by integrating marketing campaigns, livestreaming activities, media placement and engagement of influencers.

WeChat for example, has become a high versatile platform where western brands can develop their own personalized WeChat shop and operate with cross-border payments. Hence, even if the foreign brand does not yet have a registered company in China, you can start selling within a few weeks.

Foreign brands can also leverage on dedicated import e-comm platforms such as kaola.com and VIP.com. Goods cam be shipped to their fulfilment warehouses in Fujian FTZ or Hong Kong and they will take care of the distribution.

What Fidinam is able to offer to clients

Fidinam, in cooperation with trusted partners specialized in the provision of digital solutions for foreign brands, is able to prepare feasibility study comprising of (1) Competitors Analysis, (2) E-Commerce platforms benchmark comparison and (3) Tailor-made Business Plan.

Based on client’s specific investment criteria such as (i) investment period and budget; (ii) sales and growth expectations, (iii) customer coverage expectation, (iv) product’s characteristics, we provide our clients with a tailor-made business plan providing advice on how to integrate e-commerce platforms with other e-commerce platforms or offline retail solutions efficiently. We will deliver revenue tables modelled after the investment criteria yielding an approximation of cost and performance according to different digital marketing models. The cost analysis will be comprising of an overview of (i) platform set-up costs; (ii) platform management costs; (iii) marketing activities costs; (iv) creative/social engagement campaigns cost; (v) livestreaming activities and (vi) ads placement costs.

Fidinam is able to provide 360 degrees operational support to clients thanks to expertise developed in the field of corporate structuring, logistic coordination, Accounting best practice, traditional- and/or virtual bank account opening, tax planning and trademark registration.

For more information, place take contact with patrick.heimann@fidinam.com.hk.

未雨绸缪

近年来,中国的综合国力不断提升,日趋频繁的贸易活动也加强了国际人才流动的必要性。不论是为了下一代的教育或是营商,申请一个海外的身份或居留权的优势变得越来越明显。富德林综合了部分主流国家的居留项目,从法规、税务、申请手续等不同方面提供了分析。

欢迎细阅附件的信息,并随时与我们联系info@fidinamgw.com

Dubai_Residency_by_Incorporation

Singapore budget 2020: key takeaways and changes

On 18 February 2020, the Singapore Ministry of Finance has delivered the Budget Statement for the Financial Year (“FY”) 2020. We are pleased to highlight here below the main tax and employment changes that may impact businesses in Singapore.

As preliminary remark, it must be noted that Budget 2020 has been presented against the backdrop of the COVID-19 outbreak, as well as broader uncertainties in the economy landscape. It therefore provides a comprehensive suite of measures to care for and support all business entities and Singapore individuals, to enhance economy-wide support and stabilization.

A. Corporate Income Tax (“CIT”)

Corporate Income Tax rebate

A CIT rebate of 25%, capped at S$ 15,000, is granted to all Singapore companies for tax payable in Year of Assessment (“YA”) 2020.

Provided the tax rebate is capped at S$ 15,000, it will benefit especially small and medium enterprises with immediate cash flow concerns.

Automatic Extension of two interest-free instalments for payment of CIT

Companies will be automatic granted a two-months extension of interest-free instalments for payment of CIT on Estimated Chargeable Income (“ECI”) filed within three months from the companies’ financial year end. The automatic extension will apply to (i) all companies that file their ECI from 19 February to 31 December 2020; and (ii) companies that file their ECI before 19 February 2020 and have ongoing instalments to be made in March 2020.

This measure aims to help and ease companies’ cash flow.

Option to accelerate Capital Allowances

Companies that incur capital expenditure on the acquisition of plant and machinery in the basis period for YA 2021 (i.e., financial year 2020) shall have the option to accelerate the write-off of the expenditure over two years, which will be 75% write-off of the cost incurred in YA2021 and 25% of the cost incurred in YA2022. This option, once made, is irrevocable.

Option to accelerate deductions of expenses incurred on Renovation and Refurbishment

Such expenditure is currently deductible over three consecutive years subject to a cap of S$ 300,000.

Now, companies that incur qualifying expenditure for renovation and refurbishment in the basis period for YA 2021 (i.e., financial year 2020) may opt to claim such an expenditure in a single year, subject to the same cap of S$ 300,000 for an aggregate period of three consecutive years. Once made, the election is irrevocable.

The acceleration of deductions can provide immediate cash tax savings to profitable businesses; nevertheless, non-profitable businesses will not benefit from this option because no deferment of claims is allowed under this scheme.

More years to carry-back unabsorbed capital allowances and tax losses

Under the current carry-back relief scheme, qualifying deductions for a certain year of assessment may be carried back to offset the assessable income of a taxpayer for the immediately preceding YA. The amount of qualifying deduction available for carry-back is capped at S$100,000.

From YA 2020, the carry-back relief scheme is enhanced to allow qualifying deductions for YA 2020 to be carried back for up to three immediately preceding years of assessment, capped at S$ 100,000 of qualifying deductions.

The changes to the carry-back relief scheme would allow a Singapore company that has qualifying deductions in YA 2020 to obtain a cash refund by utilising these deductions against the prior three YAs’ assessable income. The Inland Revenue Authority of Singapore (“IRAS”) will provide further details about this scheme in the following weeks.

B. Good and Service Tax (“GST”) rate stays 7%

The GST Tax Rate was planned to increase from 7% to 9% sometime between 2021 and 2025. Given the current economic headwinds, the Minister of Finance decided that the prospected GST rate hike will not take effect in 2021 and will remain at 7%.

In addition, to cushion the impact of the future GST rate increase, the following measures have been announced:

  • Implementation of a S$ 6 billion Assurance Package when the GST rate will be raised;
  • Continue to absorb GST on publicly subsidised healthcare and education activities;
  • Enhance the permanent GST Voucher Scheme.

C. Tax Incentives

Double Tax Deduction for Internationalisation scheme

Under the current Double Tax Deduction for Internationalisation Scheme (“DTDI”), businesses are allowed a deduction up to 200% of qualifying expenses incurred for certain market expansion and investment development activities. The DTDI scheme, which was to expire on 31 March 2020, has been extended to 31 December 2025.

In addition, the scope of the DTDI has been enhanced to include the following market expansion and investment development costs:

  1. Third-party consultancy costs relating to new overseas business development to identify suitable talent and build up business network; and
  2. New categories of expenses incurred for overseas business missions (i.e. fees incurred on speaking spots to pitch products/services at overseas business and trade conferences, transporting materials/samples used during business missions, and third-party consultancy costs to arrange business networking events to promote products/ services).

The increased scope will take effect for expenses incurred on or after 1 April 2020. The measure is a major trust of for local enterprises to expand internationally.

Non-taxation of gains on disposal of shares

Currently, section 13Z of the Income Tax Act exempts companies from tax on gains from disposal of ordinary shares by qualifying companies, if:

  1. The divesting company holds a minimum shareholding of 20% in the company whose shares are being disposed; and
  2. The divesting company has maintained the minimum 20% shareholding for at least 24 months prior to the disposal.

The scheme is due to lapse after 31 May 2022. It has been proposed to extend it to disposals made on or before 31 December 2027. Further details should be provided by IRAS by end of June 2020.

D. Stabilisation and Support Packages

Jobs Support Scheme

The Jobs Support Scheme (“JSS”) will help enterprises to retain their local employees during this period of uncertainty.

Employers will receive an 8% cash grant on the gross monthly wages of each local employee (applicable to Singapore Citizens and Permanent Residents only) for the months of October 2019 to December 2019, subject to a monthly wage cap of S$ 3,600 per employee. Employers do not need to apply for the JSS. The grant will be computed based on CPF contribution data.

Employers can expect to receive the JSS payment from IRAS by 31 July 2020.

Enhancement to Wage Credit Scheme

The Wage Credit Scheme (“WCS”) currently in place will be enhanced in Budget 2020. A summary of the changes to WCS is summarized in the table below:

 

Scheme Existing WCS Enhanced WCS
as announced in Budget 2020
Qualifying years ·     2018, 2019, 2020 ·    2019, 2020
Level of co-funding ·     20% of qualifying wage increases in 2018

·     15% of qualifying wage increases in 2019

·     10% of qualifying wage increases in 2020

·    20% of qualifying wage increases in 2019

·    15% of qualifying wage increases in 2020

Gross monthly wage ceiling ·     S$ 4,000 ·    S$ 5,000
Qualifying wage increases ·     Increases in gross monthly wage of at least S$ 50.00 given to Singapore Citizen employees in the qualifying year, up to a gross monthly wage level of S$ 4,000.00, will be co-funded.

·     In addition, increases in gross monthly wage of at least S$ 50.00 given in 2017, 2018 and 2019 up to a gross monthly wage level of S$ 4,000.00, and sustained in subsequent years of the scheme, will be co-funded.

·    Increases in gross monthly wage of at least S$ 50.00 given to Singapore Citizen employees in the qualifying year, up to a gross monthly wage level of S$ 5,000.00, will be co-funded.

·    In addition, increases in gross monthly wage of at least S$ 50.00 given in 2017, 2018 and 2019 up to a gross monthly wage level of S$ 5,000.00, and sustained in subsequent years of the scheme, will be co-funded.

 

Employers do not need to apply for the WCS; the entities who benefit from additional wage credit arising from the Budget 2020 enhancements, will receive a separate supplementary pay-out in the second half of 2020.

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Should you have any queries as to how Budget 2020 may impact your business, please do not hesitate to contact Fidinam Singapore.

 

Daniela Radrizzani, Head of Finance

EMAIL: daniela.radrizzani@fidinam.com.sg

 

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