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The New Transatlantic Agenda: The Journey to a bright US-EU Future

Just as the year before, 2021 is another year with many changes. The European Commission has published new documents on the New Transatlantic Agenda. We are entering a new era with the US re-joining the Paris Agreement and President Joe Biden supporting the World Health Organization (WHO). With the enrollment of European green energy projects and the COVID-19 vaccines, together with global cooperation, the future seems brighter. However, there is still a lot to do before the European Union and the United States can sit back and relax.

Challenge 1: COVID-19 pandemic

Perhaps the biggest challenge for both the US and the Netherlands is the COVID-19 pandemic. Luckily the USA has re-joined the WHO. At the same time, the WHO is making sure vaccines are distributed to the developed world. This distribution is in everyone’s interest because the economy cannot go back to normal until the pandemic is completely vanquished and the world economy is restored.

Challenge 2: Digitalization

Forced by the pandemic, the speed of digitalization has significantly increased. Hopefully, the next time emergencies happen, the world is better prepared and able to act more efficiently with strategic autonomy. Protectionism is not the answer; we need to invest in our strengths and those of other countries. The EU aspires to be the world leader in energy, defense, key technologies and raw materials. The US is an exciting partner for the EU, and vice versa.

Challenge 3: Free Trade Agreements

“America First” became “Build Back Better.” The US economy has to be sufficiently competitive, and there are still actions needed to combat trade issues, but establishing FTAs can support this. Former-president Donald Trump blocked the application for new WHO memberships, which created uncertainty for businesses. If there is one thing businesses do not enjoy, it is uncertainty. President Biden has lifted the application block, which helps rebuild the partnership between the US and the WHO.

Challenge 4: US-China Trade War

China continues to both assist and challenge the world. The US and China have opposite technology and societal systems. In the past years, trade wars occurred between the two nations, affecting the EU. It seems the EU has to choose one of the two eventually, which adds fuel to the fire. The US and the EU have familiar societal systems and dialogue on technology. However, China is the EU’s leading supplier of goods. What will happen in the future is something only time can tell.

Challenge 5: Climate change

Organizations need to align a common strategy to make the best out of online platforms and big tech. With a solid plan, the approach to critical technologist protection, global change program implementation, and continuing the EU-US technology trade council goes sufficiently smoother. A big topic right now is climate change, with the US immediately re-joining the Paris Agreement at the start of President Biden’s inauguration. To reach the 2030 and 2050 climate goals, an ETS system (Emissions Trading System) is necessary. In 2005 the EU established the first large greenhouse to combat climate change by reducing greenhouse gas emissions. The EU ETS is the first global greenhouse gas emission trading-scheme and still the largest. If two immense economic powers (hint: the US and the EU) were to share the same system, we can effectively combat global warming, bringing hope to future generations. Another future investment is hydrogen: the EU is busy setting up hydrogen projects. We have not reached our climate goals. However, with the US back in the Paris Agreement, the future seems promising.

Are you wondering how to establish or expand your business to China or the US? As an experienced global administration office, Global Connect Admin can assist you with all matters of financial management, company administration, accounting and bookkeeping, and much more. Feel free to talk to us.

Related GCA articles

Cross-Border Positions during the pandemic

The 2021 New Year Resolutions of China in Economy and Finance

The investment for the future: Hydrogen

US, China, EU, and the Trade War

The trade war between China and the United States – The consequences for Europe

Sources

AmCham – VNO-NCW

Cross-Border Positions during the pandemic

Image by slon_dot_pics

Cross-Border positions, also referred to as external positions, are most likely for any organization that goes global. Suppose your organization has its main office in, for example, the United States, with branches in Europe and/or Asia. In that case, you will have asset and liability positions of reporting banking offices outside the US. Cross-border financing helps with international trade by providing a source of funding, enabling businesses to compete globally and beyond their domestic borders. This sometimes requires the lender or provider to act as an agent between companies, suppliers, and end-customers. Examples are cross-border loans, letters of credit, repatriable income, or bankers acceptances (BA).

With the global pandemic forcing organizations to change strategies or even their core business, many have expanded globally or relocated to another country. We have taken a closer look at the changes in cross-border positions worldwide by viewing outstanding claims and liabilities of Q3 2020 in trillions of US dollars.

Developed countries

Between Q3 2019 and Q3 2020, cross-border claims on developed countries increased by 1.75 trillion USD, with the liabilities increasing by 1.46 trillion USD.

Claims in developed countries, otherwise called advanced economies, have declined. Intragroup positions partly drove the movements from one year earlier. The decline is centered on related offices, especially on those in the US, due to the unwinding of central bank dollar swap lines.

Non-bank financial institutions (NBFIs) were involved with the decline; claims on the UK, the Netherlands, Luxembourg, France and Italy declined, with most of them vis-à-vis NBFIs. Another partly offset influence was the increase in Japan and Germany’s claims, notably their NBFIs and resident banks.

During the pandemic, creditor banks in developed countries and offshore centers have reported a large contraction in their cross-border claims on emerging markets and developing economies (EMDE). During Q2 and Q3 of 2020, global cross-border shares on emerging markets and developing economies declined by 95 billion USD. Major developed countries and offshore creditors – such as UK, US, Hong Kong, Singapore and Japan banks – reduced their lending to developing countries by 97 billion USD in these six months.

Offshore centers

The Q3 2020 claims have increased by 0.07 trillion USD in the offshore centers, with the Q2 2020 liabilities increasing by 0.15 trillion USD.

Compared to claims on developed countries, claims on offshore centers expanded by 41 billion USD. Especially Hong Kong SAR and the Cayman Islands have been doing well. More than half of Hong Kong’s increase was intragroup claims, with Singapore and Bermuda having the least growth.

Emerging market and developing economies

The Q3 2020 claims increased 0.03 trillion USD compared to Q3 2019. The Q3 2020 liabilities, compared to Q3 2019, have increased as well, with 0.13 trillion USD.

Cross-border claims on emerging markets and developing economies continued to fall, driven again by claims on Latin America and the Caribbean, with the year-on-year growth remaining negative. Just as one year earlier, these movements were partly driven by intragroup positions. Claims on non-financial corporations in major economic regions of Brazil, Mexico, Chile, Colombia and Argentina declined the most.

As mentioned earlier, creditors reported a large contraction in cross-border claims in developing countries. However, simultaneously, creditor banks within these countries reported a modest expansion. In contrast to the reduced lending of 95 billion USD, banks in EMDE booked a 26 billion USD increase in cross-border claims during Q2 and Q3 2020. The banks that led this expansion in emerging Asia-Pacific were mainly China and Chinese Taipei.

Before you expand or start abroad, it is helpful to know what parts of the world are convenient for your business. Having cross-border positions in countries such as the US, the Netherlands, France, Germany, and Japan can be rewarding; however, even though they work well together, each country and/or state has individual rules. Meanwhile, China and Russia have many business opportunities, but you must have high insider knowledge to use and find all the business possibilities. The UK has always played a big part in the global economy; however, much has changed due to Brexit. In case you want a professional to help you with this, feel free to send us a message. As the saying goes: a good beginning is half the work.

Related GCA articles:

The 2021 New Year Resolutions of China in Economy and Finance

The Brexit impact on Japan

Brexit: Some pointers for you and your company

More Global Transparency on Assets and Less Tax Havens on the List

Cooperation between China and Central-Eastern European Countries (CEEC) is to be deepened

Sources

BIS

“How can I receive financial aid in the Netherlands?”

04 Feb 2021

Belgium, COVID-19, Current news, Europe, Financial aid, France, Germany, Netherlands

Seeing the forest for the trees during the COVID-19 pandemic is a significant challenge. What rights do you have in the Netherlands as a (non-)Dutch business owner? Access to specific support packages depend on your living and working situation. If you live in France, for example, but pay taxes in the Netherlands, you can use schemes of the Dutch Tax Authorities, such as “special deferment of payment” and “reduction of the provisional assessment.” What kind of help is out there for foreign employees in the Netherlands? What can you do if your Dutch company is located in France? Which financial aid packages apply to you? We have listed relevant financial aids for you.

The WW (Unemployment Insurance Act)

In case you have employees whom you have employed for an indefinite period, you must record their employment contracts in writing to apply for the low unemployment insurance premium. You must indicate that you have done this in the tax return, even if it is still incomplete. For employees who started working before 31 December 2019, you had the option to arrange this until 1 July 2020. Many companies and institutions, such as hospitals, are now dealing with the WW’s premium differentiation. The Dutch cabinet had therefore decided to give employers more time, mainly due to the coronavirus impact.

An immediate record of the employment contract in writing is necessary for employees who entered your company after 31 December 2019. This contract does not necessarily have to be on paper; you can save the employment contract digitally if you have signed and scanned the written agreement or if you set up a digital contract with a qualified electronic signature from you and your employee. Further options are to send the employment contract by e-mail, to which the employee replies that they agree. Another option is to save the employment contract in your HR-system.

Due to the coronavirus, many sectors, such as healthcare, have to deal with much extra overtime. As a temporary scheme, no employer, regardless of the industry, has to pay the high unemployment insurance premium retroactively in 2021. Usually, this was required if employees with a permanent employment contract of <35 hours worked overtime for 30%.

Widening of the free space

Under the work-related expenses scheme, you have the option of spending part of your taxable wages on untaxed allowances, benefits in kind, and provisions for your employees. The free space on your taxable salary, up to and including 400,000 euros, is 3% in 2021. The year before, this was only 1.3%. For amounts of the wage bill above 400,000 euros, the free space remains 1.18% in 2021.

This space offers you an opportunity extension to provide extra support for your employees during the pandemic with the financial scope. You can kill two birds with one stone by purchasing a gift voucher or gift package for your employees. By doing that, you help both your employees and the sectors affected by the crisis.

Reduction of the average wage

If you are dealing with a decrease in turnover due to the corona crisis, you may set the customary wage lower for your payroll tax returns for 2021 and 2020. To do this, you do not need permission from the Dutch tax authorities. However, it would be best if you meet the following conditions: pay attention to the current account debt or dividend, the wages of the holder of substantial interest, and turnover influencing due to special matters (e.g., a strike, merger, or division). You determine the customary wage of 2021 by dividing the “2021 turnover excluding VAT” by the “2019 turnover excluding VAT.” Multiply this amount by the customary of 2019. You can read the 2020 and 2021 calculation overview on the Dutch tax authority website.

Frontier work

Each country has its corona measures, which affect employees who live or work across the border. There are various options for frontier workers; the Netherlands works efficiently with Belgium and Germany. The following applies to the withholding and remittance of payroll tax:

No changes take place for the home frontier worker
You can continue to deduct Dutch payroll taxes from your salary

However, what does this situation look like if you are an employer who employed French workers? What if they are forced to stay at home while retaining their salary? To ensure that entrepreneurs who live or work across the border are not left out, the Dutch government has used the Tozo loans. Entrepreneurs can apply for this benefit, for example, from 1 March 2021, with retroactive effect from the previous month (1 February 2021). From 1 October 2020 to 1 April 2021, the third Tozo support package, Tozo 3, is active. Tozo 4 is operational from 1 April 2021 to 1 July 2021. Examples of the Tozo scheme are:

Do you live in France, but do you have your company in the Netherlands? You can receive a Tozo loan for your working capital of up to 10,157 euros. You can submit your Tozo loan application to the municipality of Maastricht. However, for your livelihood, you have to rely on social assistance in France.
Do you live in the Netherlands, but do you have a company in France? If you meet the conditions, you can receive a Tozo benefit for your living expenses. However, this cannot be done in your working capital; you must arrange this in France.

If, as a Dutch company, you employ a French employee during the pandemic, you can make use of the relaxation of administrative obligations for payroll taxes. You may not determine the French employee’s identity at this time through a physical ID. Usually, the employee falls under the anonymous rate of 52%. However, you do not have to do this until the 30^th or June 2021. You must still apply the employee’s identity correctly as soon as possible. Due to the prescribed working from home and maintaining a distance of 1.5 meters, it can be challenging to comply with all administrative obligations for payroll taxes. In this case, the tax authorities will not impose any consequences.

NOW (Temporary Emergency Bridging Measure to maintain Employment)

The NOW organization scheme replaces the WTV (Shortening of Working Time). The NOW is a substantial contribution towards wage costs, for which you receive an advance from the UWV (Institute for Employee Insurance). This allowance goes from 80% to 85% of the wage bill. The wage bill exemption remains 10%. If your company has a Dutch business address, you can use NOW. If your company has a French business address, but you and your employees are covered by the Dutch social insurance, you can apply for NOW as well. The application period for NOW 3.2, under modified conditions, is from 15 February 2021 to 14 March 2021. NOW 3.3. will most likely take place from 17 May 2021 to 13 June 2021.

TVL (Allowance Fixed Expenses)

SMEs and self-employers have the option of obtaining a partial allowance for fixed expenses. If you have a structural turnover loss of >30% and meet the conditions, you can request an allowance of up to 90,000 euros from the TVL through the RVO (Netherlands Enterprise Agency). This TVL scheme applies from 1 October 2020 to 30 June 2021.

Fixed travel allowance

If your employees receive a fixed travel allowance, you do not need to adjust this allowance, even if they work entirely or mainly at home due to the pandemic. Until 1 April 2021, the existing fixed travel allowances can still be reimbursed tax-free by the employer, even if these are no longer (fully) implemented. You must meet this condition as an employer: the fixed travel allowances were granted by you before 13 March 2020. If you want to read more information, the Dutch tax authorities have made an FAQ overview about payroll taxes and travel expenses during the corona crisis.

From 1 June 2020, the Dutch government implemented the rule that everyone on public transport must wear a mask. Until 1 April 2021, you may reimburse or provide masks’ costs tax-free to your employees as a targeted exemption.

WHOA (Homologation Private Agreement in Bankruptcy Act)

If you are at risk of bankruptcy due to high debts while still running a viable business, you can agree on a debt settlement with the WHOA without all creditors’ consent. Companies without good survival chances also benefit from this agreement because they can quit without bankruptcy. Besides, you keep control of your company during the WHOA-process. With the WHOA-Roadmap, you can follow the step-by-step path from preparation to an agreement:

You consult with creditors.
You make agreements.
These agreements are recorded in a draft agreement.
You submit the draft agreement to your creditors and shareholders.
You organize a vote for creditors and shareholders.
One week after the vote, you draw up a report on the outcome.
You submit the composition to the court.
The court 9homologation) confirms the compulsory) agreement on the proposed debt settlement.

The content and structure of the agreement must, however, comply with the regulations. For example, you must divide your creditors into classes or a hierarchy. The WHOA gives you the freedom to set this up yourself. If you fail to approach one or more creditors, these creditors retain their right to full payment of your outstanding debts. A majority within a class must agree to the proposal. The aim of the agreement must be that your company will be financially healthy again after restructuring. If your company has no survival chances, a better result should be achieved through this agreement compared to bankruptcy. Besides, the agreement must be feasible and well-thought-out, under the legal regulations on the agreement’s decision-making and content. Finally, the agreement must be reasonable; the plan is not intended to put creditors and shareholders in a disadvantageous position and suddenly change your staff’s terms of employment.

Do you have offices, units, or shares in France or the EU? Then you can benefit from a general agreement procedure, thanks to the recognition of the EU member states. The registration and publication of these approval procedures are in the public Insolvency Register. From 1 April 2021, these will most likely be entered in the Trade Register as well.

Whether or not corona still exists, the Dutch government and tax authorities request you to prepare everything in a timely matter. If you request a deferment of payment, you do not have to pay immediately. Send your declaration in good time, even during the crisis, because the UWV needs data to use specific support schemes as useful as possible. If you are entitled to emergency funds, you can rely on these by having your papers in order. As you can see in this article, if you meet the conditions, you have many options for obtaining Dutch government support. The Netherlands mainly cooperates effectively with Germany and Belgium, but there is support available for French workers and companies as well. We especially recommend keeping an eye out on the current information, data, programs, forms, and disruptions via the Dutch government websites. In addition, we are always ready to talk to you and support you.

Related GCA articles:

Corona Countermeasures on Tax Matters Recommended by OECD

Press Conferences in Japan and the Netherlands: Different news, different actions

Sources:

Government of the Netherlands – Belastingdienst – the Municipality of Maastricht– RVO – UWV – KvK