RECENT LEGISLATION CHANGES
It is important that employers note the following:
Government Budget of 2022
The 2022 state budget – the first since 2020 and long overdue – came into effect on 15 November 2022. The budget includes certain tax amendments.
In addition, circular number 686-1, dated 23 November 2022, was issued from the Ministry of Finance referring to the Budget 2022 that clarifies salaries and tax calculation rates.
Changes related to employment, summarised:
Effective 1 January 2022, the annual taxable brackets for salaries and wages are set as follows:
Personal deductions and allowances (family abatement):
Resident individuals are entitled to the following family exemptions, which are deducted from taxable income, effective 1 January 2022.
• For a single person: 37,500,000 LBP
• For a wife (non-working spouse): 12,500,000 LBP
• For a husband (non-working): 12,500,000 LBP
• For a child: 2,500,000 LBP (up to five children) with conditions
Exemption for daily/hourly workers:
An exemption out of the basic pay for daily workers is determined at LBP 125,000 per day, irrespective of their family status.
Exempt termination benefits upon dismissal or resignation:
Termination compensation paid to employees during the period extended from 1 July 2019 until 30 September 2022, upon their dismissal or resignation, is exempt from employees’ income tax and is considered as tax deductible expenses for employers’ subject to income tax on real profit basis, even if this termination compensation exceeds the ceiling prescribed in the Lebanese applicable laws.
Cash and in-kind assistance paid or granted to employees during the year 2022:
Cash and in-kind assistance paid or granted to employees during the year 2022 is considered to be a deductible expense for taxpayers subject to tax on real profits, and is considered exempt from social security contributions.
Employees who became permanently disabled as a result of the Beirut port blast:
Salaries of employees who have been permanently disabled as a result of the Beirut Port blast are exempt from employees’ income tax.
New increase on basic salary:
• Based on Decision number 10598 dated 19 October 2022, a new increase on basic salary was decided, in addition to the previous increase amount 1,325,000 stated on Decision number 9129 dated 12 May 2022, by the amount of 600,000 that will be applied starting 20/10/2022.
• Daily workers will also benefit from an increase of 28,000 LBP per day.
• Minimum basic salary for a new joiner will be 2,600,000 LBP.
Clarification for budget 2022 related to salaries and tax calculation rate:
• Starting 15 November 2022, employers who paid salaries in USD must calculate salaries and related tax on the new rate that will be mentioned in another decision (Decision number 687 1).
• If employers paid salaries for the previous three quarters in USD they must re-calculate the salaries on the new rate that will be mentioned in another decision (Decision number 687 1) and add the difference in quarter four 2022.
• For tax calculation, employers must add the difference mentioned in the second bullet point to salaries related to quarter four in the new rate and recalculate the full salaries after using the new family exemption and new tax brackets, as mentioned in the budget 2022.
• If the tax result was negative, the employer can request a tax refund from the Ministry of Finance, along with representing the supported documents needed.
New Social Insurance Law
The Director of Customer Management at the General Retirement and Social Insurance Authority (GRSIA) has issued Law No 1 of 2022 on the Social Insurance Law. The law is effective from 3 January 2023.
The new Social Insurance Law is applicable to all Qatari nationals, whether working in the public or private sector, with a minimum age of 18 years and a permanent job of duration not less than one year.
The law applies voluntarily to self-employed Qataris subject to the income bracket system. The exception to the applicability is military personnel subject to the law relating to military retirement, or employees/workers subject to retirement or private insurance scheme.
Where the insured’s subscription salary was in excess of QAR 100,000 before the effective date of this law, the insured is exempt from this maximum value and will continue to contribute based on the subscription salary that was applicable before 3 January 2023.
The introduction of a housing allowance is a new entitlement under the Social Security Law. Where an insured receives a housing allowance or housing benefit from their employer, the value of such allowance or benefit must be included in the subscription salary of the insured, up to a maximum of QAR 6,000. This limit is applicable even if the insured’s subscription salary was in excess of QAR 100,000 prior to the effective date of this law.
The contribution for the insured will be calculated on the basis of the subscription calculation salary, not exceeding QAR 100,000 and the contribution must be paid at the rate of 21% in the following manner:
For more information and to register on the GRSIA website, follow the link.
UNITED ARAB EMIRATES
New unemployment insurance scheme
The United Arab Emirates government has introduced the new Unemployment Insurance Law under the Federal Decree-Law No. 13 of 2022 regarding the Unemployment Insurance Scheme for Unemployed People. It is effective from 1 January 2023.
The UAE Ministry of Human Resources is expected to establish and administer the Unemployment Insurance Scheme based on further directions from the UAE Cabinet.
The scheme is mandatory and applies to all employees, Emiratis and expatriates in the private and public sector, with the exception of the following categories:
• Investors (business owners who own the entire business and manage it themselves);
• Domestic workers;
• Contractual workers/employees on a temporary basis;
• Juveniles under the age of 18;
• Pension-receiving retirees who have joined a new employer.
The premium payable by employees depends on their current basic salary.
• An employee with a basic salary of AED 16,000 or less will need to pay a monthly insurance premium of AED 5, i.e., AED 60 annually.
• Eligible employees in this category will be compensated with a monthly cash benefit of up to 60% of their average basic salaries, which shall not exceed three monthly payments of up to AED 10,000 per month following the involuntary termination of their employment.
• Those with a basic salary exceeding AED 16,000 will need to pay AED 10 per month, i.e., AED 120 annually.
• Eligible employees in this category will be compensated with a monthly benefit of up to 60% of their average basic salaries, which shall not exceed three monthly payments of up to AED 20,000 per month, following the involuntary termination of their employment.
|A worker or employee who fails to subscribe to the unemployment insurance scheme for a period of three (3) months from the date the premium is due, or fails to pay the prescribed insurance premiums, may be disqualified from receiving unemployment insurance. The employee will be required to subscribe/resubscribe by purchasing a new insurance policy, effective on the date of purchase.
An employee may choose to pay the premium on a monthly, quarterly, half-yearly or annual basis.
Deadline for subscription: Six months, until 30 June 2023. Workers who change their visa or begin work in the UAE after 1 January 2023 will have a grace period of four months.
To learn more about the unemployment insurance scheme and to subscribe, follow the link.
The resolution introduced a set of rules for determining whether a person may be considered a tax resident of the UAE. The rules cover both natural and legal persons.
The UAE has had no domestic legal definition of tax residency for legal or natural persons to date. In the absence of legislative domestic tax residency rules, tax residency certificates (TRCs) were issued based on the specific tax residency criteria as provided in the relevant tax treaties, alongside other eligibility criteria as established by the Federal Tax Authority (FTA).
Tax residence of individuals (natural persons)
· The individual’s usual or principal place of residence is in the UAE, and the centre of their financial and personal interests is in the UAE or other conditions and criteria provided in a specific decision (to be) issued by the UAE MoF.
· The individual has been physically present in the UAE for a period of 183 days or more in a consecutive 12-month period.
· The individual has been physically present in the UAE for a period of 90 days or more over a consecutive 12-month period and is a UAE citizen, UAE resident or GCC national who either (i) has a permanent place of residence in the UAE or (ii) carries out a job or business in the UAE.
Where a person is considered a tax resident under either of the definitions outlined above, they may apply to the FTA to obtain a TRC, which is often a formal requirement for UAE residents wishing to claim benefits under the relevant tax treaty or other forms of tax relief (outside the UAE).
UAE to increase Emiratisation rate in private sector
Companies registered with the Ministry employing more than 50 workers must increase their current Emiratisation rate from high-skilled jobs by 2% annually, gradually raising the said rate to 10% by 2026.
The calculation of UAE nationals as compared to skilled workers is as follows:
Contact our legislation team on firstname.lastname@example.org if you require any additional information.
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