Countries around the world are making changes to their social security systems, and global payroll professionals are struggling to keep up. To ease their burden, two Bloomberg Tax research analysts explained the ABCs of social security changes in six nations in the GPMI webinar, “Complying With Social Security Taxes on Wages Around the World.”
Research Analyst Anna Massoglia and Senior Research Analyst Howard Perlman, CPP, walked their audience through reforms in Argentina, Brazil, Canada, China, France, and India in the fast-paced, hour-long webinar that is available on demand.
Perlman explained that Argentina recently engaged in major social tax reform.
“While Argentina isn’t necessarily one of the most prominent countries for payroll, it’s still important as a case study of the major changes a country might undertake,” he said.
The five components of Argentina’s tax system are:
- Argentine Integrated Pension System
- National Institute of Social Services for Retirees and Pensioners
- National Employment Fund
- Family Allowances Regime
- National Social Work Regime
“The huge change that Argentina decided to undertake, which took effect January 1, 2018, was the consolidation of rate assessment for four of its major types of social taxes assessed on employers into one singular rate, with the goal of enabling two different classes of employers each assigned two different types of rates to eventually have a unified rate,” he said.
All but the National Social Work Regime will consolidate their rates.
“Brazil is another country with a lot of big changes, not the least is eSocial, which is completely revolutionizing payroll and impacting employers across the world,” Massoglia said.
She described eSocial as a digital bookkeeping system through which data about payroll and taxes are submitted.
As of January 2018:
- Employers are required to submit social tax and other data through the eSocial electronic filing portal
- Fifteen separate filing streams are consolidated into one
- eSocial may be a harbinger of further global payroll developments
- Reports and payments of social tax data are generally due by seventh day of the month following the month for which tax is due and must be reported
Employees in Canada are primarily liable for two types of social insurance taxation:
- Pension plan contributions
- Employment insurance premiums
Massoglia explained that employers in Canada are required to withhold Canada Pension Plan (CPP) contributions and Employment Insurance (EI) premiums, while employers in Quebec contribute to the Quebec Pension Plan (QPP).
The People’s Republic of China has 33 jurisdictions that must be recognized, Perlman said—22 provinces, five autonomous regions, four first-order municipalities, and the special administrative regions of Hong Kong and Macau.
“Hong Kong and Macau overall are going to have different payroll provisions in effect from the vast majority of mainland China because the status they have as special administrative regions enables them to have certain degrees of autonomy with regard to the way they implement payroll provisions in the country,” he said.
Taiwan also operates separately from mainland China, he said.
“For those operating payroll in China or with expats working in China, it is very important to assess exactly where employees are based to determine applicable rates and applicable amounts of taxable wages,” Perlman said.
China’s six types of social insurance:
- Pension insurance
- Unemployment insurance
- Occupational injury/worker’s compensation insurance
- Housing fund contributions
- Maternity insurance
- Health insurance
“Not only is France one of the most complex systems for social taxes in the world, but it also has a lot of big changes happening this year,” Massoglia said.
Social tax contributions are now based on the period worked for wages. Before January 1, 2018,mthey were based on the period when wages were paid.
Taxable amounts for social security contributions are based on:
- Gross wages and earnings
- Holiday pay
- Benefits in kind
- Cash or amounts received through a third party
Employer contributions into the social security system are not counted toward employees’ taxable incomes, she said.
“India is a very complicated country with regard to payroll,” Perlman said.
Generally speaking, the Employees’ Provident Fund Organization (EPFO) is somewhat akin to a retirement and pension program, while the Employees’ State Insurance Corporation (ESIC) is a health insurance agency, he said.
Assessments are levied for the EPFO and the ESIC.
The Employees’ Provident Fund, Employees’ Pension Scheme, and Employees’ Deposit Linked Insurance Scheme fall under EPFO, while Employees’ State Insurance falls under ESIC.
The Bloomberg Tax-sponsored webinar contains detail about tax rates and a question-and-answer session.
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Kerry Cole is Senior Editor of Membership Publications for the American Payroll Association and the Global Payroll Management Institute.