Ecovis in South Africa

Vietnam Labour Law: Prior Notice Period on Unilateral Termination of Employment Contracts

Companies doing Business in Vietnam need to be aware of the country’s labour regulations on the prior notice period for the unilateral termination of labour contracts. This is relevant for international companies appointing managing officers in subsidiaries, branches or representative offices in Vietnam.

For some special works and lines of business there are extended deadlines. These include:

• Aviation: aircrew members, aircraft maintenance technicians, aviation repairmen, flight coordinators
• Marine: crewmembers working on Vietnamese vessels operating overseas, crewmembers dispatched to foreign vessels by Vietnamese agencies
• Business: the owner, chairperson or member of the board of members, president or member of the board of directors, director, general director or deputy director, chief accountant

Under Vietnamese labour law, certain deadlines must be observed when a contract is unilaterally terminated. We know the pitfalls. Contact us.

Vu Manh Quynh, Managing Partner, ECOVIS Orient Counsel/ECOVIS Vietnam Law, Ho Chi Minh City, Vietnam

What Must Companies Know?

• The notice period before unilaterally terminating a labour contract for special works and lines of business is substantially longer than in other areas.
• If an employee or employer unilaterally terminates an employment contract, a specific period of notice must be observed before the termination date (see table).

For further information please contact:

Vu Manh Quynh, Managing Partner, ECOVIS Orient Counsel/ECOVIS Vietnam Law, Ho Chi Minh City, Vietnam
Email: quynh.vu@ecovislaw.vn

Corporate Income Tax in Croatia: Permanent Establishment of a Non-Resident in Croatia

A foreign company operating in the Republic of Croatia may, under certain conditions, be subject to corporate income tax. Those wishing to start a business activity in Croatia should therefore have experts check whether this activity leads to a permanent establishment of the company and what tax obligations result from this.

In Croatia, corporate taxation is based on the principle of residence, as well as the principle of origin, which have been implemented into national regulations and international agreements of the Republic of Croatia.

Double Taxation is Avoided

Croatian corporate income tax law provides that a permanent establishment of a non-resident in Croatia shall be subject to corporate income tax. The definition of a permanent establishment (PE) of a non-resident in Croatia is provided in the Croatian general tax law and international agreements for the avoidance of double taxation concluded between the Republic of Croatia and other countries.

We check for you whether your business activity in Croatia leads to a permanent establishment and what tax obligations may arise.

Daria Mijić, Tax Leading Specialist, ECOVIS FINUM, Zagreb, Croatia

It should be noted that the Croatian Constitution sets out that the provisions of an international agreement for the avoidance of double taxation, if such an agreement has been concluded, have primacy over the provisions of the general tax law in determining a PE.

In examining the existence of a PE, judgments of the European Court of Justice are also considered, as they are part of the EU acquis and therefore mandatory for EU Member States, i.e., for Croatia. It should be kept in mind that judgments relate to specific cases and circumstances. Therefore, the judgment shall apply only if there is a judgment of the European Court of Justice. in the same or a similar case.

How Corporate Income Tax is Determined

The tax base of business units of non-residents is the corporate income attributable to the business unit in the Republic of Croatia in accordance with Croatian corporate income tax law. It should be noted that regulations relating to a controlled foreign company apply when determining the corporate income of a PE. In addition, the business unit of a non-resident, if participating in taxable deliveries, must also register for VAT purposes in Croatia. The Ecovis experts therefore recommend that before starting business activity in Croatia, it is necessary to check very carefully whether a permanent establishment is being created and what consequences this means for corporate income tax.

For further information please contact:

Daria Mijić, Tax Leading Specialist, ECOVIS FINUM, Zagreb, Croatia
Email: d.mijic@finum.hr

Money Laundering in Germany: Stringent New Rules for Companies

Germany is seen as a money laundering paradise. As a result, on 18 March 2021, the German government introduced the new section 261 of the Criminal Code (StGB) – the offence of money laundering. At the same time, it has implemented an EU directive into national law – more stringently than required by the EU.

With the new law, the German government wants to prevent criminals from smuggling their money, for example from tax evasion, into legal businesses. Also, even reckless subsidy fraud is a predicate offence to money laundering. The aim is to make it easier for authorities and prosecutors to track down assets of criminal origin.

Until now, they have only prosecuted money laundering if the assets in question originated from very specific criminal offences. For this there was a catalogue of predicate offences in which certain crimes and offences were listed. In terms of tax evasion, for example, these were only intentional offences committed on a professional basis or by members of a gang. This is now to be abolished.

Do you want to know when transactions are reportable? Contact us and we will support you.

Alexander Littich, lawyer, specialist lawyer for tax law and criminal law, Ecovis in Landshut, Germany

How the New German Law Affects Foreign Companies

In principle, German criminal law only applies to offences committed in Germany. However, foreign companies can also be liable to prosecution if:
they are active in Germany themselves or, for example, through a subsidiary, and must therefore be aware of and comply with German law, or
they commit criminal acts abroad which count as predicate offences for money laundering in Germany and lead to their own criminal liability here.

When Offences Abroad are Punishable in Germany

The legislator has included some regulations in the law in terms of when foreign offences related to the EU are in any case also punishable in Germany. The foreign offence must be punishable either in the country where it was committed or in Germany. The transfer, procurement or use of objects resulting from such acts is then also punishable for money laundering. Or the offence is not necessarily punishable abroad but is punishable in Germany and is one of the priority offences defined by the EU. These include organised crime, corruption, financing terrorism, human trafficking/smuggling, drug trafficking and the sexual abuse and exploitation of children. The transfer, procurement or use of objects resulting from such offences is thus punishable.

With the new regulation, it is no longer important that the perpetrator evades taxes abroad on a professional or gang basis. A single, simple act of tax evasion is sufficient. For example: An entrepreneur in England evades taxes and wants to buy a property in Berlin in Germany with the wrongly received tax refund. This act is punishable in Germany, say the lawyers at Ecovis.

The Consequences for Entrepreneurs

The obligations to report possible violations of money laundering laws are much more comprehensive. In addition to the typically known cash transactions, less commonplace business transactions now also come under scrutiny. If proceedings are initiated, entrepreneurs must justify their business procedures.

Businesses subject to reporting requirements should in future check even more intensively which transactions they have to report. Companies subject to reporting requirements include, for example, banks, real estate agents, insurance companies, tax advisors, lawyers, auditors, or trustees. If an investigation is initiated, entrepreneurs must justify their business practices.

If there is a suspicious activity report for a business transaction, the company is not allowed to continue with that business. This is only possible if the Financial Intelligence Unit (FIU) or the public prosecutor’s office agrees or has prohibited the transaction three days after the suspicious activity report. For companies, the new money laundering act means more bureaucratic effort and even more precise documentation, explain the Ecovis experts.

For further information please contact:

Alexander Littich, lawyer, specialist lawyer for tax law and criminal law, Ecovis in Landshut, Germany
Email: alexander.littich@ecovis.com