Credit Restrictions Country

Argentina
FEDERAL TAXES:

Corporate Income Tax :

Corporations: S.A. (Inc.) or S.R.L. (limited liability) are levied with 35% income tax, payable in the AFIP (Public Income’s Federal Administration) in which its head office is located. Dividends paid to shareholders, whether local or foreign, are not taxable. Withholding income tax applicable to royalties is 26.582% (technical services and royalties do not need approval, just registration), withholding on interests paid on loans from abroad (35%).

Value Added Tax. (V.A.T.)

Levied on all sales of goods and services (only books are currently exempted). DS Companies (are registered tax-payers) need to use invoice type “B” in most cases (when direct sellers are non-registered VAT) and invoice type “A” (only when selling to registered tax-.payers direct sellers ) Current VAT general rate is 21% and needs to be disclosed in invoice only if direct sellers are registered tax.-payers in VAT

Effective November 1st 1998, a new law was passed called “Monotributo”, applicable to small business, it is optional and not automatic, but instead requires acceptance and voluntary registration of sales-persons and consolidates income tax, VAT and social security contributions into one tax.

When companies sell to their salespersons: (representatives, agents, distributors, consultants, associates, etc.), there are different possible tax situations: -If sales-persons are registered VAT tax payers or registered in “Monotributo”, then the company should only charge general tax rate of 21%. -If sales-persons do not elect any of these situations, then the company has to charge in addition to 21% general rate, another 12.705% (i.e. made up by applying 10.5% on net to company value, plus 21% VAT).

Individuals (sales persons)

Personal Income Tax
Registration: Individuals need to file a return for personal income tax when taxable net income exceeds personal and family allowance deductions.

V.A.T.
Need to register: For sales-persons: when their annual sales exceeds $200,000 for sales of services or $300.000 for sales of goods. Below that level they are considered non-registered tax-payers. That means that in the price they pay to the companies, 10.5% additional VAT is already factored in for their supposed re-sale to end-consumers.

Payment of commissions to sales persons:
It is mostly advisable to structure them as discounts. When sales-persons do not buy products or services for themselves, commission payments have to be effected by canceling the sales-person’s invoice (who needs to be registered in both personal income tax and social security).

Social Security Taxes:
Sales-persons are not reputed employees and rather considered independent parties. Law regulates compulsory contributions for “Autonomous workers” which as of April 30, 2002 should fall into Category “I” $401.62 per month. D.S. industry interpretation is that they do not apply to their sales-persons.

PROVINCIAL (STATE) TAXES:

Turnover Taxes
Levies net sales (net of discounts, returns, bad debts, V.A.T.) at a rate different for each province, i.e.: approximately an average of approximately 1.85% (sale of own manufactured products) or 4% in average (re-sale of products not-manufactured by tax-payer).

Sales-persons
CAVEDI entered into agreements with Provinces of Jujuy, Tucuman, Entre Rios, La Pampa, Catamarca, Mendoza, San Luis, Neuquen, Ciudad de Buenos Aires by which companies are collecting from their sales-persons turnover taxes ranging from 2% up to 4% of net sales. Most other provinces nominate only larger companies to charge and collect turnover taxes from their sales persons.

MUNICIPAL TAXES:

Companies
Levies on municipalities in which companies have their manufacturing plants, or headquarters. Tax is different among municipalities and based on number of personal employed or sales effected within the municipality.

Australia
The only industry specific tax is in regard to Sales Tax (Wholesale Sales Tax) which is the tax payable on the last wholesale transaction. A special “Deemed Wholesale Value” is in force for direct sellers. This is known as the ‘Sales Tax – Indirect Marketing Arrangements’ and details can be found in Taxation Ruling SST 6 of 5th June 1996.

Austria
Individual: All direct sellers must file an annual tax return. They must also pay social security charges, the rate depending upon income.

Corporate: All direct selling companies must pay Federal Income Tax and other taxes. VAT is rated at 20%. Most corporate taxes are collected by the federal authorities.

Belgium

  1. Employees
    Employees have the social security status of salaried workers. An amount of 13% is retained and paid by the employer for social security on the gross income. Fiscally, the employer must retain from the gross income, a professional deduction between 30-40% according to income.
  2. Independents
    Independent sellers cover all their own charges for social security, being 16% of gross income, payable quarterly. Amounts may be reduced, possibly cancelled, if the activity carried out is complementary. The independent seller is responsible for his own income tax. If his income is considerable, he must pay quarterly.
  3. Companies
    Companies must pay for their employees 35% of complementary charges on gross income. No social security or income tax is retained on behalf of independent sellers. Belgian companies are re-taxed on income as follows:
    > – 28% for the first BEF million
    – 36% for BEF 1,000,000 – 3,600,000
    – 41% for BEF 3,600,001 – 13,000,000
    – 39% for amounts over BEF 13,000,000

VALUE ADDED TAX (VAT):

  1. Companies
    All sales are subject to VAT. Commission paid to intermediaries are also subject to VAT. The normal rate for the majority of products is 19.5%.
  2. Buyer-Resellers
    The buyer-reseller pays VAT on the purchase of products, collects VAT on the sale and pays the difference to the administration. He can also deduct the VAT paid in the course of his professional activities, provided that is subject to VAT which is applied only when turnover exceeds BEF 250,000 per annum. Where VAT is levied, the buyer-reseller must make periodical returns, usually quarterly.
  3. Persons on Commission
    Persons on commission must apply VAT on the amount of commissions and pay it to the administration. The method deduction for VAT payable on pursuit of a professional activity and for franchise systems is identical to the method applied to buyer-resellers.

Brazil
Tributaries and social Welfare Duties
1. The moving merchant, whose obligatory enroll in Social Welfare is made in autonomous category, is observed in the Law number 8.212 of 07/24/91, and Decree Number 2.173 of 03/05/97, that reformulated the Welfare Legislation, is obliged to collect contributions to the National Security Institution calculated with aliquot application of 10% or 20%.

The moving merchant enrolls and the payment of contributions gives him the benefits of Welfare Legislation (retirement, pension to beneficiaries, and others).

Since 2008 Brazil has had special conditions for Individual Microentrepreneuer (MEI – Microempreendedor Individual), who is an autonomous and has an annual income limited to R$ 60.000,00 (sixty thousands reais) per year.
2. The moving merchant, besides welfare contribution, is subject to Federal, State and Municipal Duties, as follows:

Federal Duty – Income tax based on the profits.

State Duty -Turnover Tax on Goods, Services of Transportation between States and Cities, and on communication.

Municipal Duty – Fiscal tax on localization, installation, and functioning.

3. Income tax – It is recommendable that the dealer keeps accounts on the cashbook in order to settle the effective profit (article 48, 1st paragraph, “B”). The income should be declared in the note “H” (article 38, II) or “D” (article 30, III).

4. “ICMS” Turnover Tax on Goods, Services of Transport between States and Cities, and Communications.

As the own denomination points out, this tax is based on operations relating to circulation of goods, and on some sort of services.

In this work we are going to broach only the tributary subjects concerning to the circulation of goods, which is the main object of industrial companies and house dealers.

The generating factor of “ICMS” occurs; basically, on goods departure of sender’s establishment, and the tax is calculated on the value of goods. The aliquots utilizes for this calculation are determined:

1. By the State of Federation, when it is about internal aliquots; nowadays varying from 12 to 25%, according to the essentiality of goods;

2. By the Federal Senate, when it is about aliquots between States, nowadays varying from 7 to 12%, according to the region of country where the goods are destined. In the case of imported goods the ICMS aliquot between states is 4%.

The tax is non-cumulative, i.e., it is discounted on the present operation the tax value paid in the previous operation.

According to the article 155 of the Brazilian Constitution Law, it is entitled to the States and to Federal District to set up the “ICMS” and legislate on the necessary formalities to the control of exaction and administration of this tax.

In order to facilitate this control, the contributors should be enrolled in the Treasury Secretary of his respective State, issue invoices where is stated the “ICMS”, keep accounts, and in the end of each period, usually monthly, collect the selected tax to the State.

For the companies, there is no difficulty to the compliment of these formalities.

For the house dealer, however, there is much difficulty for the compliment of formalities due to their little knowledge of tributary laws and also due to financial costs they would have to support.

Therefore, there is a tributary institution in Brazil called as “Tributary Substitution” through which the industrial and commercial wholesaler is obliged to collect the “ICMS” due in subsequent operations, in relation to determined goods, among them: perfumes and cosmetics, jewels and bijoux, clothes, shoes, food products, electric and electronic house machines, printed matters, etc.

This “tributary substitution” is foreseen at the ICMS Agreement # 45, of July 23rd 1999, assigned by the Federal Finance Secretary together with the Finance State Secretaries and from the Federal District. The ICMS Agreement # 75/94, of Jun, 30th 1994 was revoked since then.
“ICMS” Agreement 45 of July, 23rd, 1999 (Federal Official Gazette of July 29th, 1999)
Under this Agreement, the States and the Federal District are authorized to establish a tax replacement system for the interstate operations involving the shipment of goods to resellers in their territory.

The Ministry of Finance and the Finance, Economy and Tax Secretaries of the States and the Federal District, at the 94th Ordinary Meeting of the National Financial Policy Council held in João Pessoa, PB, on July, 23rd, 1999, considering the provisions in Articles 102 and 199 of the National Tax Code (Law Number 5.172 of October 12, 1966, resolved to enter into the following AGREEMENT:

First Clause – In interstate operations involving the shipment of goods to resellers established in their territories, who make door-to-door sales to end consumers only, which are promoted by companies that use direct marketing system to sell their products, the States and the Federal District are hereby authorized to assign to the shipper the responsibility for withholding and paying the taxes levied on operations related to the circulation of goods, interstate and inter-municipal transportation and communications (“ICMS”) due on the subsequent outputs by the reseller.

§1 – The heading provision applies also to interstate outputs involving the shipment of goods to a regularly registered taxpayer located in their territory that will distribute the products only to resellers for door-to-door sale.

§ 2 – The contents of the heading and the previous paragraph also applies to cases where the reseller instead of making door-to-door sale, makes the sale at a newsstand.

Second Clause – The assignment of responsibility referred to in the first clause shall be formalized through an Agreement signed by and between the State Finance Department of the destination state and the interested company in which the rules related to its operability shall be defined.

Third Clause – The tax calculation base for tax replacement purposes shall correspond to the consumer sales price shown in a table issued by the competent authority or, if such table is not available, in a catalog or price list issued by the shipper plus, in both cases, the freight charges if they are included in the price.

Sole Paragraph – In case of non existence of such amount, the tax calculation basis will be fixed by a Special Agreement before the State Finance Department of the destination State, through a requirement filed by the substitute taxpayer. This requirement must be followed with a statement which declares that the company has no catalog or price list.

Fourth Clause – The invoice issued by the replacement passive subject to document operations involving resellers shall contain, in its body, in addition to the information required by the second clause of SINIEF Adjustment 04/93 of December 9, 1994, the identification and address of the reseller to whom the goods are being shipped.

Fifth Clause – The invoice issued by the replacement passive subject along with a document evidencing their condition shall cover the transit of goods caused by the resellers.

Sixth Clause – The States and the Federal District are hereby authorized to adopt this tax replacement system also for the internal operations performed in the same conditions set forth in this Agreement

Seventh Clause – This Agreement shall become effective on the date of its publication, producing its effects from Oct, 1st 1999 on. The ICMS Agreement # 75/94, of Jun, 30th 1994 is revoked by now.

For this reason, the companies signed with the State’s Treasury Secretaries, a Term of Agreement (a kind of contract), where the establishments of formalities to be accomplished by the parts for the calculation, and collection of “ICMS” due by house dealers.

The companies oblige themselves to keep the fiscal books related to the house dealers” operations, collect the due tax, and to accomplish other formalities in the name of the house dealers.

These last ones receive a collective number of enroll, which comprises all of them, being disobliged, personally, to accomplishment of any formality, including the issuance of invoices.

In that way, the companies assume the total responsibility by the collection of “ICMS”, due by the commercial house dealers’ activities, and they can, including, be prosecuted administratively and judicially in the case of non-accomplishment of assumed obligations.

5. Inspection Tax of localization, Installment and functioning. Tribute under Municipal administration.

In general Brazilian cities collect from the contributors, who hold a commercial activity in its respective territory, a tax by the activity of Municipal Government, inspection of legislation’s accomplishment by the use and occupation of land, sanitation, healthy, safety etc.

The tax is calculated in a monthly, half-yearly basis according to the number of employees, or other factors foreseen in the legislation of each city.

The aliquots are not uniforms, being determined in the law of each Brazilian city.

In São Paulo city, State of São Paulo, for example, the commercial activity is taxed according to the number of employees, according to the list XI stated in the law number 31.417 of 04/08/92.

The house dealers, due to the holding of a commercial activity, are subject to this tax.

In relation to “ICMS”/ Dealer, in case of books and periodical, there is no tax to collect, as the Constitutional appliance interdicts any taxation (Article 150, “d”).

Canada
Federal Income Tax: is levied on taxable corporate income at a net effective rate for 2007 of 22.1% (2008-20.5%; 2009-18.5%).

Provincial Income Tax: All provinces levy tax on income allocated to a permanent establishment in the province. The rates vary from 10 to 17% depending on the status of the corporation and the province in which it is located.

Goods and Services Tax: requires businesses with over $30,000 in annual revenues to register, collect and remit the tax levied at a rate of 6%. The GST is a multi-stage value added tax, applied to each level in the manufacturing and marketing chain and applicable to most goods and services. The tax does not apply to sales of zero-rated goods such as certain exports and supplies such as basic groceries and certain services provided by financial institutions.

Retail Sales Tax: All provinces, except Alberta, Nova Scotia, Newfoundland, New Brunswick and Quebec levy a retail sales tax at rates ranging from 5% to 10% on most purchases of goods for consumption or use in the province and on the purchase of specific ranges of services. British Columbia, Saskatchewan, Manitoba and Ontario levy a retail sales tax on prices that do not include GST. Quebec and PEI levy their provincial sales tax on prices that include the GST. Quebec’s consumption tax base has now been fully harmonised with the GST.

Harmonised Sales Tax: This 14% tax applies in New Brunswick, Nova Scotia and Newfoundland. It combines the GST and provincial retail sales tax in one rate. It operates under the same basic rules as the GST.

GST / HST and the Alternate Collection Method: An alternate collection method, referred to as the Direct Sellers Pre-collection Mechanism (DSM) may be used by qualifying direct seller organisations. Under the DSM, the sale to the independent sales contractor is ignored and the GST / HST and QST is calculated as if the direct seller had sold goods directly to a consumer at the suggested retail price. Performance bonuses, based on volume of purchases or of sales are no longer taxable for GST / HST or QST purposes, and the independent contractor does not pay GST / HST or QST on sales aids (e.g., samples, catalogues and other promotional materials).

Withholding Taxes: Withholding tax at prescribed rates applies to salaries, bonuses, commissions, etc, as well as to remuneration paid to non-resident employees. Withholding taxes do not apply to payments made to independent contractors. Some direct selling companies, because of an agency relationship with their independent sales contractors, must report payments made to independent sales contractors annually.

Chile

The following is a general overview of the Chilean tax regime:

Companies and individuals resident or domiciled in Chile are subject to income tax on their worldwide income, while non-resident entities and individuals are taxed only on their Chilean source income, i.e. income derived from assets located or activities performed in Chile.

The Chilean income tax system is considered an “imputation” system in which corporate and final income taxes are integrated. As corporate profits flow from the corporate sphere to the shareholder or partner sphere, the Corporate Tax previously paid works as an advanced payment, which is creditable against final income taxes, applicable at the shareholder or partner level. For this reason, Chilean corporate taxpayers are required to record their taxable retained earnings on a special register (“FUT”).

However, this currently existing regime will be substantially modified from January 1, 2017, by virtue of a tax reform enacted on September 29, 2014, (the “Tax Reform”). Among other measures, the Tax Reform sets forth two new tax regimes. On one hand, an “attribution regime” that levies with a 25% corporate tax rate incomes obtained by companies in each tax year, which will be immediately allocated to their shareholders. On the other hand, a “partially-integrated regime” that levies with 25.5% (27% in 2018) corporate tax rate incomes obtained by companies. Under this regime, shareholders will be allowed to defer personal and withholding taxes until such profits are effectively distributed, but it will only allow using a 65% credit of the corporate tax paid by the company, unless the shareholder is resident in a tax-treaty country.

    1. Corporate Income Tax A 22.5% Corporate Tax is imposed annually on the net income, determined under full accounting records on an accrual basis, derived from investments and commercial, industrial, mining and other activities, irrespective of whether the enterprise is organized as a legal entity, branch, or permanent establishment. The Tax Reform progressively increases the Corporate Tax rate to 24% in 2016, 25-25.5% in 2017 and 25- 27% in 2018, these two latter de­pending on the tax regime companies adopted by the second half of 2016.
    2. Personal Income TaxesIncome derived from dependant employment and the total income obtained by resident individuals are levied with Personal Income Taxes at progressive rates ranging from 0% to 40%. The top marginal rate of these taxes will decrease to 35% in 2017 owing to the Tax Reform.
    3. Withholding Tax The Withholding Tax levies Chilean source income and other types of income earned by non-residents when the income is paid or made available to the foreign resident. It is typically collected through withholding by the payer.As a general rule, the Withholding Tax applies at a 35% rate. However, certain items of income may be exempt or subject to lower rates, such as interest payments to foreign banks or financial institutions (4%); engineering or technical works and professional or technical services (15% or 20%); royalties and other payments on patents, models, and designs (15% or 30%); and payments for the use of standard computer programs and commissions to agents, which may be exempt.Double taxation treaties could grant relief or exemptions of the Withholding Tax. Chile has entered into tax treaties, following the OECD Model, with Australia, Belgium, Brazil, Canada, Colombia, Croatia, Denmark, Ecuador, France, Ireland, Malaysia, Mexico, Norway, New Zealand, Paraguay, Peru, Poland, Portugal, Russia, United Kingdom, South Korea, Spain, Sweden, Switzerland and Thailand. Conventions have also been subscribed with South Africa, USA and Austria, but they are not in force yet.In the case of profit distributions or dividends paid by a Chilean entity, the Withholding Tax rate is 35%. However, the Corporate Tax paid on the same profits is creditable against the Withholding Tax. Tax treaties subscribed by Chile do not limit or reduce the Withholding Tax applicable to profits or dividends.
    4. Taxation of Capital Gains

Capital gains arising from the sale of shares or an interest in a Chilean corporation are subject to a special tax regime of the 22.5% Corporate Tax rate as a sole tax, unless: (i) the sale is made between related parties, (ii) the seller is recurrent in the sale of shares or interests in corporations, or (iii) less than one year has elapsed between the acquisition and the sale of the shares or interest. If any of these circumstances occur, the gain is subject to the ordinary tax regime (i.e. Corporate Tax plus Personal Income Tax or Withholding Tax, as applicable). This regime is available until December 31, 2016.

  1. Value Added Tax (“VAT”):VAT levies at a 19% rate the habitual sale of tangible goods, the sale of real estate totally or partially built by the seller, imports and certain types of services. Exports are VAT exempt (zero-rated). A special refund mechanism is available regarding the acquisition of fixed assets.From January 1, 2016, due to the Tax Reform, the scope of the VAT will be broadened to the habitual selling of real estate, regardless whether the property was built by the seller.VAT is declared and paid on a monthly basis and assessed under a credit-debit mechanism.
  2. Municipal License: An annual duty is payable to the Municipality in which professional, commercial, industrial activities are carried out. The tax is calculated over the tax-adjusted equity and the rate ranges from 0.25% to 0.5%, depending on the Municipality, capped at 8,000 UTM or Monthly Tax Units (approx. USD 675,000). In the case of professional activities, a fixed amount is levied.
  3. Stamp Tax Stamp Tax mainly levies documents evidencing loans and other specific documents such as notes and bond issuances. The discount (factoring) of the same documents may also be subject to Stamp Tax. Foreign loans made to a Chilean debtor are subject to Stamp Tax, even if no documents are issued. Stamp Tax basis is the principal amount of the loan, and its rate is 0.033% multiplied by the number of months to maturity of the loan, capped at 0.4%. In case of loans payable on demand, the current rate is 0.166%. The Tax Reform doubles these rates as of January 1, 2016.
  4. General Anti-Avoidance Rules (GAAR) Until the enactment of the Tax Reform, Chile didn’t have a GAAR or substance-over-form rule (limited rule on derivatives). Under new GAAR, taxes are determined based on the legal character of the transaction or series of transactions, disregarding its form or label.The Tax Reform recognizes the principle of the good faith of the taxpayers, by which the IRS must undertake the effects arising from the business or acts carried out by them. However, if a taxable event set forth by the law is “eluded” by means of the business or acts executed by taxpayers, there will be no good faith. “Elusion” takes place if there is abuse or simulation. In the case of abuse, taxpayers shall fulfill the tax obligations arising from the taxable events set forth in the law. In the case of simulation, taxpayers shall pay the taxes corresponding to business or acts effectively executed by the parties, regardless of the simulated business or acts.The Tax Reform admits taxpayers’ right to choose between the different conducts and alternatives set forth by the tax legislation. The sole exercise of such option will not be considered as abuse.The existence of abuse or simulation should be declared by a Tax Court, upon requirement of the IRS, which will have the burden to prove that elusion was the sole purpose of a given structure. Individuals and companies involved with the design or execution of elusive tax planning will be subject to penalties of up to 100% of the taxes eluded. If the infraction were committed by a legal entity, the penalty will be applied to its directors or legal representatives, to the extent that there is a breach of their managerial and supervision duties.These rules will enter into force on September 29, 2015.

Columbia
Every person, individual or corporation, is classified under one of the two specific fiscal regimes. Considering the person classification, they must comply with certain fiscal duties:

Simplified Regime: (Law 863 Of 2004) To this regime belong those who fulfill certain conditions previously established by the government considering their activity, patrimony and total income, among other aspects. They will have to follow certain duties which are not as complex as those for the other regime.

Common Regime: To this regime belong those who fulfill certain conditions previously established by the government. They will have to follow stricter obligations such as: invoice issuance, accounting, VAT responsible and declarant, among others.

1. National Taxes:

There are two main taxes nation wide: Income (35% Of total income) and Value Added Tax –VAT (16%).

2. Territorial taxes.

Complementary taxes have been imposed regionally: Industry and Commerce Tax for those commercial places and merchandisers. Its percentage varies from one to another territory.

Czech Republic
No specific taxes are applicable for direct sellers. There are VAT laws and Income Tax laws beside other tax laws and regulations.

Income Tax

An entrepreneur must pay the income tax as the physical person. The income tax rate is 15% plus 7% from income up to 1,2 mil CZK

There are no tax exemptions. Fee for obtaining a trading license is 1000 CZK. There is no separate statute for Direct Sellers.

VAT Tresholds

326000 CZK (€11 872): threshold for application of the special scheme for acquisitions by taxable persons not entitled to deduct input tax and by non-taxable legal persons.

1140000 CZK (€41 510): threshold for application of the special scheme for distance selling.

1 000 000 CZK (€36 413): exemption for small enterprises.

Denmark
All salespeople have to make their yearly declaration whether they are employed or independent.
If employed, the employer must withhold tax and pay social security and supply the tax authorities with information on the salesperson’s income, fringe benefits, etc. The salesperson’s business expenses not being reimbursed by the company can be deducted by the salesperson provided the expenses exceed an amount of 4,000 DKK, and then only deductible at a decreased percentage rate.

Independents must file their own tax forms based on a profit and loss statement, meaning that all expenses are deductible at full value (only 25% of actual entertainment expenses are tax deductible).

Unemployed benefit – unemployed people can take up direct selling activities against reduction of their unemployment benefit. When the working hours exceed a certain limit, the benefit will cease. Direct salespeople themselves can be members of an unemployment benefit body of their own choice and have the same rights as any other in that respect.

Health benefits – direct salespeople have the same rights to health benefits as employees.

European Union
Consult national laws. Direct taxation falls within the competence of Member States.

Finland
There is no difference between the rules governing direct sellers and other forms of trading.

France
Employees and independent salespeople pay their own income tax.

Germany

Non Employees Employees
Definition Income from self employment Income from dependent employment
Consequences Non-employees are subject to the:
– Income Tax
– Value Added Tax (VAT) (from 1.1.93 – 15%)The results are:
– Possibility of prior tax deduction
– More fiscal deduction possibilities (operating expenses)The tax assessment is done by the non-employee himselfValid for both parts (Annual wage / income tax re-computation to make up differences of taxes paid too much or too little)		 Employees are subject to the Wage and / or Income Tax

The taxes are paid monthly by the employer

Guatemala

  • Income tax (different economic regimes)
  • VAT 12%

Social security (4 %) this percentage is paid by the employee (8.67 this percentage is absorbed by the company.

Hong Kong
No legislation.

Hungary
Hungary’s taxation of an individual’s income is flat.
In 2011 the tax rate in Hungary for an individual is 16%. The 16% rate is imposed on a wider tax basis of 1.27, bringing the effective tax rate to 20.3%.
There are reduced rates of tax for certain income earners.
Corporate tax in Hungary in 2011 is fixed at 19%.
Corporate tax for income up to HUF 500 million is 10%. (HUF 250 million in 2010).

Relevant acts:

  • Act XCII of 2003 on taxation
  • Act CXVII of 1995 on personal income tax
  • Act CXXVII of 2007 on VAT

India
The relevant legislators existing in India on the point is Central Sales Tax Act and State Sales Tax Act which provides for the sales tax to be paid by the parties.

Indonesia
No legislation.

Ireland
Corporation Tax is payable on company profits after allowing deduction for certain allowances, e.g. a
Capital Taxes. The following taxes are imposed on certain capital property:

  • Capital Gains Tax – a tax payable on the profits on the disposal of certain assets
  • Rates – a tax imposed by local authorities on a notional value of commercial and industrial property

Value Added Tax. A tax added on the value at each stage of the production and distribution cycle. It is chargeable on the supply of certain goods and services in Ireland and on some services supplied from outside Ireland.

Customs and Excise Duties on imported and exported goods.
No information available.

Income Tax (Pay As You Earn tax). Tax deductible from employees’ earnings collected through payroll. In the case of Independent Contractors companies paying commissions (or any other payments not taxed at source through payroll) are liable to declare any such payment annually to the Inland Revenue. The Collector of Taxes will levy the tax payable by such individuals after making allowance for business expenses as defined in tax regulations.

Pay Related Social Insurance. Payable by employers, employees and Independent Contractors (self employed).

Italy
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INDIVIDUAL

Income Tax – The solicitor of business is subject to a 23% withholding tax on the 78% of all commission received. The tax is withheld by the direct selling company in lieu of all income taxes.

The solicitor of business need not to file any tax return since this withholding tax fulfils any income tax obligation.

The professional agent is subject to a 11.50% withholding tax which is withheld by the direct selling company against income taxes. A tax return must be filed by the agent and more may be owed.

Regional Tax on Business Activity (IRAP) – The solicitors of business, no matter whether they are liable to VAT or not, are exempted from this tax.

The professional agent instead is subject to a 4.25% regional tax on net commission.Value Added Tax (VAT) – It is applicable on commissions of those independent salespeople who are liable to this tax. The VAT is collected and paid over to VAT Tax Office, so it implies the compilation of, at least, two (2) VAT registers.

CORPORATE

Direct selling companies are bound to pay a corporate tax and the regional tax on business activities. They are also bound to file an information return on all commissions disbursed and taxes withheld (Form 770). Failure to withhold tax on commissions and to file such an information return can result in criminal offence and substantial penalties.

Japan
For salespeople who have contracts of employment, companies participate in the unemployment and social security programs established by the government. Each salesperson’s costs for these programs are split between the salesperson and the company.

However, as stated in Section VIII, the great majority of salespeople are independent, having a consignment contract with a company. Many of these participate independently in the social security programs at their own cost.

Regardless of which type they belong to, salespeople must have taxes withheld from the income they earn.

Lithuania
The following taxes are payable by direct sellers: income tax, health insurance tax, social security tax.

In case of business licenses income tax amount per month and year is defined in advance and vary from county to county.

In case of individual activity registration direct sellers are obliged to pay income tax in rate of 15% (if they will not deduct allowed deductions) or 27% (if they will deduct allowed deductions), health insurance tax which consist 30% of income tax. Health insurance tax amount cannot be smaller that certain amount prescribed by law (currently it is about 10 euros per month). The tax rate is applied on the total income received less allowed deductible expenses.

Income tax and health insurance tax should be paid in advance (if the activities are executed by obtaining business license) or till 1 May of each year after the end of taxable year by submitting Personal income declaration (if the activity is executed by registering individual activity within local tax board).

Governing Lithuanian law

  • Law on personal income tax
  • Law on State Social Insurance

Malaysia
Distributors are responsible for their own submission of earnings for taxation purposes to the relevant authority.

Mexico
In general terms, pursuant to the new Income Tax Law in force as of January of 2014, direct sellers whose income is determined through commissions may decide to pay their tax subject either to: (i) the Salaries and Subordinate Services Income Tax Regime, or (ii) the Independent Personal Services Income Tax Regime.

As a general rule, direct sellers must pay taxes subject to the Independent Personal Services Income Tax Regime, in which, the agent is obliged to perform advanced payments through the filing of provisional tax returns, which must include the withholdings done during each period in accordance with procedures laid down in the Income Tax Law and its Regulations. Furthermore, agents must file their annual tax return during April of the following year.

Additionally, direct sellers have the option to tax under the Salaries and Subordinate Services Income Tax Regime. In this case the direct seller must communicate in writing to the company his decision to tax under said regime.

Should the aforementioned option be taken, the company would acquire the following obligations: (i) perform the corresponding withholdings (ii) perform advanced payments through provisional tax returns (iii) calculate and pay the annual tax through a tax return filed on February of the following year, except if the agent communicates them otherwise, in which case they would have to perform said obligations themselves (iv) grant to the direct seller certificates evidencing the payments, withholdings and amount of taxes paid during the fiscal year. Withholdings are considered as advanced payments on account of yearly taxes and must be asserted in accordance with procedures laid down in the Law and its Regulations.

The annual tax must be calculated and tax returns filed for each person, taking into account the minimum creditable salary percentage and the amount of advanced payments made.

Income Tax Law (“Ley del Impuesto sobre la Renta”): http://www.ordenjuridico.gob.mx/

Regarding VAT, in general terms, commission agents trigger VAT over their commission, which should be charged to the recipient of the services (i.e. the direct selling company), who usually should perform a 10% withholding of such tax.

However, those agents that request that their income is treated like a salary (exclusively for tax purposes), should not trigger VAT over their commissions.

Regarding nutritional supplements, the tax authorities have confirmed in repeated occasions their position in the sense that the sale and/or import of nutritional supplements should trigger VAT at the general rate of 16% regardless that the corresponding law has not been amended.

Although their no defined position from the courts, in some isolated cases the Supreme Court has favored the authorities in this controversy.

Furthermore, in March of 2015 a Presidential Decree was issued under which the VAT over the sale of nutritional supplements is condoned for fiscal years prior to 2014, under certain conditions, one of which is that the tax is charged as of the fiscal year of 2015.

Value Added Tax Law (“Ley del Impuesto al Valor Agregado”) http://www.ordenjuridico.gob.mx/

Taxpayers are bound to issue government approved electronic invoices to record all transactions. Obtaining such invoices is necessary in order for taxpayers to be allowed to take deductions and/or VAT credits, for their expenses. Transactions with the general public can be documented in sales receipts and global invoices, in which several transactions are recorded in a single transaction (for reporting purposes). Federal Tax Code (“Código Fiscal de la Federación”) http://www.ordenjuridico.gob.mx/

Netherlands
For self-employed salespeople:

Value Added Tax (VAT)

Registration for VAT is required. For ‘Small Entrepreneurs’ there are some special regulations on simplifying bookkeeping, payment of VAT, etc. VAT rate is 17.5%.

Income Tax

Salespeople have to inform the tax authorities on their income and pay income tax according to the general legislation. There is no withholding for self-employed salespeople. Spouses are treated separately for income tax purposes. No taxation when net earnings do not exceed certain amounts.

New Zealand
The DSA provides a Taxation Guide IR261 written in conjunction with the Inland Revenue Department setting out tax obligations for distributors and provides a full outline of individual taxes on its web site. This section does not deal with product associated costs or charges.

Taxes and earnings related fees in New Zealand are broken down into the following categories:

  • Income Tax
  • Withholding Tax
  • Indirect Taxes
  • Employment Charges
  • Local Government Taxes

Income Tax – Income tax in New Zealand falls into two types:

  • Personal Income Tax (Individual)
  • Company (Corporate) Tax

Personal income tax has a maximum rate of 33 cents in the dollar and has a graduated scale starting at 15 cents for income below the $12,000 level. The top tax rate threshold commences at $60,000 per annum. All personal income is deducted at source to some extent with the exception of self-employed persons such as independent contractors.

Company or Corporate Tax also includes those that have a formal partnership arrangement registered with the Inland Revenue. Company tax is currently at 28 cents in the dollar and is applied at a flat rate on net profit. Income from dividends may be inputted and likewise dividends paid to overseas shareholders may receive an input credit by the shareholders own country tax administration where a double taxation agreement is in place and recognition has been granted.

All business costs are deductible however those that apply to employees where no tax is gathered from the source deduction will be offset by Fringe Benefit Tax at the maximum rate of 33 cents in the dollar.

Withholding Tax – Withholding tax is deducted for dependent contractors and on payments made to overseas owners including those for dividends paid. This is deducted at 20 cents in the dollar and may be claimed back by the contractor or shareholder against their tax liability. Note that for international investors a double taxation agreement must be in place for the claim (imputation) to be achieved. Direct Sellers independent contractors should not have withholding tax deducted and they should be treated as self-employed unless they are a full commission agent and acting as an employee.

Withholding tax deducted by network marketing and party plan companies in particular exposes the company to potential liability under Fringe Benefit Tax when such benefits as cars, trips or prizes are given as rewards for performance. The reason for receiving these benefits needs to be expressly laid out in agreements to prevent this liability and to prevent the need to deduct withholding tax.

Indirect Taxes
These taxes are:

  • Goods and Services Tax
  • Excise Taxes
  • Duty or Tariff on Goods

Goods and Services Tax (GST) is voluntary for filing up to $60,000 sales but mandatory once that level is reached or if it is believed that this level will be reached in the next twelve months. Independent contractors may choose to register while below this threshold to gain the deductibility against capital goods purchased for their business. The DSA guide on this should be consulted to ensure that they are entitled to claim such deductions. The rate of GST for New Zealand is 15% and is charged on all goods sold regardless of type or use with the exception of financial transactions such as banking and life insurance.

GST must be returned the registered business monthly, bi-monthly or 6 monthly based on turnover level. 6 Monthly is frequently picked and suited to Direct Seller Distributors/independent contractors/salespeople.

All goods imported to New Zealand will incur GST at the border which is charged by Customs except where the import is deemed personal and the goods valued below $400 New Zealand. The GST charged at the border may be claimed back against sales made by the importing company as an “input” to ensure that the overall end consumer only pays 15% on the total added value of the product they purchase.

Excise Taxes are charged on Alcohol, Tobacco products and fuel products such as petrol and diesel oil. The rates vary but range up to 100% depending on the product. These are deemed to be social taxes where either the health or welfare is adversely affected or usage taxes where with fuel taxes, the funds are normally deployed back into the areas that use them such as new roading etc. These taxes very rarely affect Direct Sellers.

Duties or tariffs on goods are charged for a range of imported products not covered by a free trade agreement such as CER (Australia), P4 – Singapore/Brunei/Chile Closer Economic Partnership, China FTA, Hong Kong FTA, Thailand FTA, ASEAN FTA, AANZFTA. There is also provision for imports from the poorest countries to exempt there products from any tariffs or duties although this list fluctuates and is based on the UN bottom 48 countries.

There are only a few categories of products that still have duties or tariffs applicable which are mostly under the following headings:

  • Textile and Clothing products
  • Footwear
  • Cosmetics

The tariff rates range from 5% to 15% and are being reviewed downward over a period of time although it may be 2020 before the last are removed.

Products imported under Free Trade agreements or exemptions must qualify with rules of origin content requirements. These are:

  • Australia 50% or Change of Tariff Heading with 50% regional content FOB
  • Singapore 40% FOB (P4 Agreement)
  • Poorest countries 40% Collectively or individually
  • Thailand – Change of tariff heading with 40% regional content FOB
  • Chile – 40% FOB (P4 Agreement)
  • Brunei – 40% FOB (P4 Agreement)
  • China – 40% Regional Content FOB and Change of Tariff heading
  • Hong Kong – 40 Regional content FOB and Change of Tariff heading
  • Malaysia – 40% Regional content FOB and Change of Tariff heading
  • ASEAN Countries – 40% Regional content FOB and Change of Tariff heading
  • AANZFTA – (Australia/ASEAN/New Zealand FTA) 40% Regional content FOB and Change of Tariff heading and with differing reduction timelines for some countries like Indonesia where their entry into the agreement has been delayed.

Pending FTA agreements include:

  • Russia/Belarus customs union – likely late 2012 or early 2013
  • Korea – possible around 2013
  • India – possible around 2014
  • United Arab Emirates – awaiting approval by UAE Parliament – no date known
  • Trans-Pacific Partnership (expansion of P4 agreement to include US, Australia, Uruguay, Japan, Canada and Mexico) – Target for first in is 2012 for signing at APEC and last three countries after the agreement is complete.
  • Taiwan – first round negotiations and possible around 2013

Those importing products that are not manufactured by local manufacturers and therefore will have no impact of local employment can apply for a tariff exemption through the Ministry for Economic Development when their product is covered by a tariff heading duty.

Employment Taxes and Fees
This area or tax generally acts as a deduction from employees or dependant contractors and so has little impact on Direct Selling companies. Liability is passed to independent contractors for their own tax provision and in relation to Accident Compensation.The main taxes or fees involved in employment are:

  • PAYEE Tax
  • Fringe Benefit Tax
  • Accident Compensation Tax

Payee tax is employee tax deducted at source by the employer. “Pay as you earn employee” It is a legal obligation to deduct for all employees and pay monthly to the Inland Revenue Department.

Fringe benefit Tax is charged for benefits received in relation to employees. This includes employee company cars, employee insurances, employer paid – non work related trips or prizes given to employees and the rate is presently 33 cents in dollar but may change based on the top income tax rate. This is assessed quarterly and paid to the Inland Revenue Department although a special arrangement is available for an annual assessment and payment on application to the department.

The Accident Compensation levy is due to be paid by all employers, self-employed (independent contractors) and by employees. Employers are obliged to pay this levy based on wages or salary on a prescribed ratio calculated on the industry or occupation. This same levy is applicable to self-employed people and thus Direct Selling independent contractors are also liable to pay when this is their prime or sole source of income. The levy in based on gross income that the contractor draws from their business which is treated as a wage/salary equivalent.

Employees are also levied a smaller percentage which employers are obliged to deduct in conjunction with the PAYEE tax and pay through the Inland Revenue to the Accident Compensation Commission.

Accident compensation is a no fault, no blame system and negates employers from being sued for damaged when a worker/contractor is injured at a place of work. However employers who have injury claims will pay more in their levy than those that do not with serious levels of claim meaning up to 100% more liability. Conversely those with no claims or proven safety management systems in place can receive a discount of up to 20% on their levy.

Injury accidents employers can still be prosecuted by the Occupational Safety and Health Service of the Labour Department and fined where negligence can be proven. This can include fines and imprisonment in significant negligence cases of responsible persons such as managers. In medical or business negligence cases individuals may sue the medical specialist or business for non-injury harm however such cases are rare and normally have limited success.

Local government taxes
These are essentially a property tax and called “rates”. These are based on the rateable value of the property and payable directly to the local government or council for maintenance of services such as rubbish collection, sewage, storm water and roading. There is often a differential rate applied between business and domestic property with business picking up a larger level of rating. Some local government also separate out charges for water supply and wastewater services for both business and domestic properties.

Norway
Direct sellers are responsible for their own taxes, social charges and VAT.

Peru

V.A.T.
Need to register in RUS, ( Unic Simplified Regimen) in SUNAT. That means that in the price they pay to the companies, 2% additional VAT ( pereception) is already factored in for their supposed re–sale to end–consumers.

Social Security Taxes:
Sales–persons are not reputed employees and rather considered independent parties.

Philippines
Income Tax – Individual and corporate direct sellers are generally required to pay taxes on their income. Corporations must file their income tax return quarterly, individuals annually.

Value Added Tax – Generally, persons (whether individual or corporate) who, in the course of trade or business, sell, barter or exchange goods, render services or engage in similar transactions and persons who import goods are subject to Value Added Tax (VAT). VAT registration is required of all persons with gross receipts of 200,000 pesos or over.

The tax is equivalent to 10% of the gross selling price or gross value in money of the goods sold, bartered or exchanged and such tax is to be paid by the seller or transferor. The taxpayer is required to file a return and pay the tax quarterly.

Peddler’s Tax – Cities and municipalities throughout the country have ordinances which impose a Peddler’s Tax. The tax is payable annually at a rate not exceeding fifty pesos. (A peddler is defined under the law as any person who, either for himself or on commission, travels from place to place selling his goods or offering to sell and deliver the same.)Poland
The Income Tax system does not contain any special regulations for direct sellers. There is no withholding of taxes for independent Direct Sellers.

The Value Added Tax (VAT) is 22%.

Above a threshold of PLN 20.000 annual sales turnover every company or person, who sells directly to final consumers is obliged to use cash register machines for every single sale. The cash register machine produces a receipt (pragon) which has to be given to the customer with or without a regular invoice. The machine contains a sealed “black box”, which has to be kept until the next tax audit.

Portugal
The sales force pays IRS according to their status and earnings, global level of income and family composition. With a Monthly income of 585 Euros no IRS is paid.

Than the IRS taxes are the following, that area subjected to and additional 3,5% extraordinary tax:

  • Until, 7.000 euros: 14,5%
  • 7.000€ – 20.000€: 28.5%
  • 20.000€ – 40.000€: 37%
  • 40.000€ – 80.000€: 45%
  • Over 80.000€: 48%

Russia

GENERAL TAXATION SYSTEM

  • PROFIT TAX rate (max) is 20% (for legal entities).
  • PERSONAL INCOME TAX rate is 13%.
  • VAT rate is 18% (recoverable).
  • CONTRIBUTION TO THE PENSION FUND AND MEDICAL INSURANCE FUND in 2013 is 35 664.66 RUB (more than 1130 USD) a year.
  • PROPERTY TAX rate (max) is 2.2% (regional authorities may introduce lower tax rates as well as grant tax exemptions).
  • LAND TAX rates vary from 0.3% to 1.5%.

SIMPLIFIED TAXATION SYSTEM
(Chapter 26.2 of the RF Tax Code)

    • This system is voluntary
    • Applicable for individual entrepreneurs and legal entities with turnover up to 60 million Rubles (approx. 2 million USD)
    • Replaces 3 taxes (including VAT, personal income tax or profit tax, property tax)
    • Two options for a taxpayer:

1st option – Unified Tax is 6% from revenues

2nd option – Unified Tax is 15%* from revenues minus expenses

  • Unified Tax should be paid on quarter basis
  • Taxpayer should file once a year
  • Annual contributions to Pension Fund and to Medical Insurance Fund equal to
    35 664.66 RUB (more than 1130 USD) and is recoverable from the Tax for 1st option and can be deducted from revenues for 2nd option.

*The RF regions have the right to decrease this rate to 5%
(50 of 83 RF regions use this right)

UNIFIED TAX ON IMPUTED INCOME
(Chapter 26.3 of the RF Tax Code)

  • This system is voluntary
  • Replaces 3 taxes (including VAT, property tax and personal income tax)
  • Rate is 15% from the tax base
  • Applicable only to the listed types of activities (including different forms of retail trade)
  • Levels of the tax base are limited by those ones that are stipulated in the Tax Code
  • Annual contributions to Pension Fund and to Medical Insurance Fund in 2013 equal 35 664.66 RUB (more than 1130 USD) and is recoverable from the Tax
  • Tax for direct selling is not paid in 2013 because unified tax on imputed income less than contributions to Pension Fund and to Medical Insurance Fund.

It is possible to combine Simplified Taxation System and Unified Tax on Imputed Income for different types of activities.

Singapore
Sales people pay their own Income Tax, through the basis of disclosure. Tax on income is based on residence. As far as companies, including those involved in direct selling, are concerned, the present corporate tax rate of 24.50% applies.

Slovak Republic
In Slovakia, equal tax is applied in the percentage of 20 %.

No tax exemptions.

Registration fee is EUR 5.00 per each free trade activity.

VAT Thresholds
€13 941: threshold for application of the special scheme for acquisitions by taxable persons not entitled to deduct input tax and by non-taxable legal persons.
€35 000: threshold for application of the special scheme for distance selling.
€49 790: exemption for small enterprises.

Slovenia
Taxes and Fees
Fiscal and Tax Legislation (Corporate Profit Tax Act)

Tax administration published detailed explanation of income taxation of direct sellers which is even more bureaucratic for them than before.

Income taxation of direct sellers

The Value Added Tax (VAT) is 22%.

Act amending the Labour market regulation act
In III. chapter of 27 Article adds a new section to read as follows:

1.3 Temporary or casual work

Article 27.c
(Limitation of temporary or casual work)
(1) A temporary or part-time work can be performed by beneficiary to the extent of 60 hours per calendar month. Unused hours cannot be transferred into the next calendar month.
(2) The hourly rate for beneficiary who performed temporary or part-time work may not be less than 4.20 euros. The income for temporary or occasional work may not exceed 6,300 euros in the aggregate in any calendar year. The hourly rate and the amount of income for temporary or occasional work is coordinated with the growth of the minimum wage in the Republic of Slovenia, as defined by the law that governs minimum wage.

Article 27.e
(Duties)
(1) The remuneration paid for reason of the temporary or casual work, employers are levied a duty of 25%. (2) The person liable to pay the levy referred to in the preceding paragraph is the employer.

Article 27.f
(Collecting and draining of funds from the levy in the budget fund)
(1) Employers transfer the funds from the duties set out in the previous article to the budget of the Republic of Slovenia.

The provisions of the Law apply from 1 July 2013.

South Africa
Taxes and Fees

Income Tax – South Africa operates a residence based income tax system which means that South African residents must account for their worldwide income regardless of the source. In direct selling organisations the onus is on the independent contractor to register with SARS and pay the relevant income tax.

Dividends Tax – Dividends paid by a company is subject to dividends tax in the hands of the recipient of the dividend.

Capital Gains tax – applies to a resident’s worldwide assets or assets situated in South Africa owned by a non-resident. Capital Gain Tax is triggered upon disposal of an asset.

Excise duties – are imposed on the local production of a number of commodities. Excise duties and levies are imposed mostly on high-volume daily consumable products (e.g. petroleum and alcohol and tobacco products) as well as certain non-essential or luxury items (e.g. electronic equipment and cosmetics).

Customs Duties – are payable in respect of imported commodities or finished goods at varying rates. Surcharges are also payable at varying rates in certain instances.

Value Added Tax (VAT) – is currently levied at 14% on the supply of standard non-exempt goods and services by vendors at each stage of the distribution chain. VAT is an invoice-based added tax. In general terms, vendors collect output tax from their customers and are able to reclaim refunds of VAT paid on inputs. VAT is also levied on the value of imports. Certain exemptions and zero ratings apply.

In direct selling companies, VAT is either included in the prices shown on the order form or added to the sub-total of the products purchased or service rendered. The total VAT included in an invoice needs to be reflected clearly on an invoice. The company then collects this amount from the consumer when payment is made and paid monthly or bi-monthly to the SA Revenue Services (SARS). Additionally, independent contractors whose turnovers are in excess of 1 million rand per annum must register for VAT and charge their direct selling company VAT on commissions being received by the independent contractor. For this purpose, turnover represents sales plus commissions received.

Skills Development Levy – this is a levy which has to be made on a monthly basis to SARS, based on the monthly salaries and wages bill of each enterprise at a rate of 1% of payroll. The organisation has to join a Sector Education and Training Authority (SETA). For direct selling companies this is usually the Wholesale and Retail SETA, but it may also be one of the other SETA’s depending on the product or service being offered. Companies are required to train their staff through accredited training programmes and may claim back annually up to 50% of their Skills Development levies paid from their relevant SETA through the annual submission of an Annual Training Report and a Workplace Skills Plan.

Employee’s Tax – All remuneration from employment is subject to a monthly employee’s tax known as “pay as you earn” or PAYE. The employer must deduct PAYE monthly from salaries and wages and pay the amount deducted to SARS monthly. Spouses are taxed separately on their taxable income.

South Korea
The taxation on distributors occurs differently depending on their income and they pay the integrated income tax in May next year.

Spain
See information in Section IX – Status of Direct Sellers.

Sweden
For employed salespeople, income tax must be withheld and social security contributions paid on their actual income.

The position of independent contractors is ambiguous, having regard to the above case. Any person having been granted an F-tax status is regarded as independent from the fiscal point of view. The independent contractor is in such case responsible for his own income tax, VAT and social security contributions. If he abuses this position, the authorities may withdraw his F-tax status.

Turkey
All direct selling companies must pay cooperate tax VAT and other applicable taxes. Independent Direct Sellers pay with holding tax.

Taiwan
If Multi-level sales enterprise had filed for individual participants’ yearly purchases amount equal to the total amount of the products’ retail prices and the retail prices shown on the products, the multi-level sales enterprise is not required to calculate individual participant’s income from profit seeking and report individual participant’s summary of purchase details to Tax Authority. No matter the individual participant’s bonuses resulting from the down-line distributors’ accumulated purchase amount or points achieved certain requirements or the individual participant’s accumulated purchase amount or points achieved certain requirements, the individual participant’s individual income tax should be levied by the Ministry of Finance Letter Tai-Tsai-Sui-831587237.

The above mentioned purchase amount does not include in individual participant’s yearly accumulated purchase amount calculated based on the Ministry of Finance Letter Tai-Tsai-Sui-871957401 dated on August 6, 1998.

If the yearly accumulated purchases amount is under $50,000 ($70,000 starting from Jan. 1 2006), individual participant in multi-level sales is not required to calculate sales amounts based on the retailed prices to determine his or her individual income from profit-seeking. If the yearly accumulated purchases amount is over $50,000, individual participant should be responsible for the submission of evidence of his or her earned retail profit. According to the Ministry of Finance Letter Tai-Tsai-Sui-831587237 dated on March 30, 1994, the Tax Authority calculates the sales amount based on 6% of the surplus profit from incidental trading activities to determine individual participant’s income from profit-seeking to levy his/her individual income tax, except that the sales amounts are recognized if the submitted evidence is verified and found true by the Tax Authority.

Thailand

Taxes

Individual: They are liable to pay tax on income varied by range of generated income , so called progressive tax rate that government announced rate is 10% – 37% while 2015 earning is subjected to the reduced individual tax rate 5% – 35% which is applicable until December 31, 2015. Individual with income less than 150,000 Thai Baht per year are refrained from paying tax.

Company: Company has general range to pay tax. It is the progressive tax rate start from 15%-20%, Recently, the revenue department had adjusting the fixed tax rate to be 20% collecting from the Company that had registered to the ministry of commerce with amount of the capital over than 5 Million Thai Baht and sales and services are over than 30 Million Thai Baht.

Fees

Thai Direct Sales and Direct Marketing Act has stated that :-

Section 22 The direct sales operator shall not demand from the independent distributor or the self-employed direct sales representative for membership fee, training fee, promotional material costs or any other fees related to the participation of the direct sales network at a higher rate than imposed by the Commission.

Turkey
All direct selling companies must pay cooperate tax VAT and other applicable taxes. Independent Direct Sellers pay with holding tax.

Ukraine
Direct sellers as individual entrepreneurs are personally responsible for all the tax payments (these are personal income tax, VAT, social tax and Pension Fund contributions). In some regions for particular types of activities the unified tax on imputed income (so called fixed tax) is implemented. This tax includes all the above mentioned types of taxes. An individual entrepreneur can choose between two other tax regimes (on voluntary basis): ordinary and simplified taxation system. Again, the list of activities subject to simplified taxation system and the corresponding rates depend on local authorities and are different in various regions. General Taxation System:

  • Personal Income tax – 15-17%.
  • VAT – 20% (recoverable). VAT exemption is available for those whose revenue for three months does not exceed 300 000 UAH (apr. $ 37 000);

Simplified Taxation System
For those who receive commission from companies they shall be registered as tax payers of III group and pay 5% tax or 3% but being VAT payers (exceeding a limit of 300 000 UAH). Tax shall be paid after quarter reporting period.

Total revenue limit is 3 000 000 UAH (apr. $ 373 000) a year.

United Kingdom
Taxes and VAT
Provided that the direct seller is not an employee, there is no requirement for the direct selling company to withhold any remuneration for tax or social security.
A direct seller who is not an employee is responsible for tax and social security (National Insurance) matters, including:

  • Keeping accounts and records,
  • Informing Her Majesty’s Revenue and Customs (HMRC) of his/her income,
  • Making payments to HMRC.

A direct seller is not required to register for VAT unless his/her turnover exceeds a threshold (in 2011 £73,000).
A direct selling company will normally be able to negotiate with the relevant VAT office to pay VAT on the assumption that a negotiated percentage of sales are sales to end consumers at the full retail price and the remainder of the sales are at a lower price sold to direct sellers for self-consumption.

Available in the public area of the DSA website:

  • Tax & Accounting advice for direct sellers.

United States
Individual

Generally, two kinds of business taxes apply to individual direct sellers – income taxes and Social Security taxes. Since both the federal income and Social Security tax are pay-as-you-go taxes, quarterly estimated payments must be made.

Income Tax. Each direct seller must file an annual income tax return as a sole proprietor, partner or corporation, depending on the nature of the business.

Self-employment Tax. This tax is the Social Security tax for those individuals who work for themselves (whether as sole proprietor or as a partner in a partnership). As with income taxes, direst sellers must make quarterly estimated payments.

IRS 1099 Misc. Information Returns. For a direct seller who has individuals in their downline to whom they pay more than $600 in prizes or awards or to whom the direct seller sells more than $5,000 worth of goods during the year, an information return is required.

Corporate

Income Tax. Generally, a direct selling corporation is obligated to pay a corporate tax in states where its headquarters are located or in which it has distribution or manufacturing facilities (otherwise generically referred to as ‘bricks and mortar’ presence). Public Law 86-272, 15 U.S.C. Section 381 protects the ‘mere solicitation’ of orders for tangible property by direct sellers if those orders are sent out of state for approval or rejection and the orders are shipped or delivered by a direct selling company from outside the state.

Information Returns. As individual direct sellers described above, direct selling companies who pay more than $600 in non-employee compensation or who sell more than $5,000 in goods to one or more direct sellers during a calendar year must file an information return. Failure to file such a return can result in substantial penalties. Submission of an incorrect return can result in back-up withholding.

Tax Collection Responsibilities. Approximately 7,000 state and local jurisdictions across the country impose a sales / use tax on the sale of goods or services. Direct sellers usually collect and remit these sales taxes in two ways. The first approach is for the company to collect and remit these taxes on behalf of its direct sellers directly to the state or locality. Alternatively, the individual direct seller may be required as an independent business person to obtain the necessary sale-for-resale certificates to collect these taxes. About twenty (20) states have vendors collection allowances which partially compensate the company or individual direct sellers for their costs of collection.

Uruguay
Individual Merchant Direct Sellers, as defined in Section IX on Status of Direct Sellers, are liable to two types of taxes:

  1. Income Tax (IRAE) which taxes net income from Uruguayan sources earned by persons from capital and work at the rate of 25%. They can choose if paid the tax on a “real method” (Real Income – Real expenses) and a tax rate of 25% or 12% of all the Income.
  2. Value Added Tax (VAT) which is levied on (among other items) the sales of goods within the country, at the rate of 22%.

There are exemptions from both taxes if the gross income is below a certain amount (in 2007 – approximately US$ 20,000). Nearly all direct sellers come within this exemption. Direct sellers exempt from the two taxes are subject to a single small companies tax (amounting to approximately US$ 40 per month in 2007).

Individual Commission Merchant Direct Sellers are liable to:

  1. Income Tax, they can choose a tax rate of 12% for all the income or at the 70% of the income a plicate a progressive rate (0% – 25%), and
  2. VAT at the rate of 22%, which is the same rate as sales services taxes.

Corporate Income Tax

Corporations: all kind of society (SA (Inc) or SRL (Limited Responsibility)) are levied with 25% Income Tax payable to the DGI (Internal Revenue Service). Dividends paid to shareholders are levied with 7% income tax.

Value Added Tax (VAT)

Applies on the internal circulation of goods, on the supply of services inside Uruguayan territory and the importation of goods to the country (there are few exceptions). The tax is applied at two different rates: a general rate of 22% and a minimum rate of 10% on specific goods and services which include primary food and medical products. The bigger part of products sold by direct selling companies is levied with 22% VAT.

Decree 186 / 94 of 3 May 1994 – Direct Selling companies must act as VAT and INT (Income Net Tax) collect agents of the sales reps.

Resolution 174 / 94 of the Internal Revenue Service (DGI) dated 27 May 1994 – The INT deduction was cancelled out and it was established that a coefficient 0.65 had to be applied to the VAT (22%) in such a way that the VAT paid by the sales reps is 22% x 0.65 = 14.30%.

Individuals (Sales Persons)

All individual sales persons must register in the DGI except direct selling representatives:

  • Companies with sales over US$ 20,000 apply the same levies applied to SA (Inc) and SRL (limited responsibility)
  • Companies selling under US$ 20,000 have to pay a monthly amount of US$ 40

Payment of Commission to Salespersons

This case applies to persons who do not buy products or services for themselves. They have to register in DGI and must invoice their services with 22% VAT and they can choose for different situation for Income Tax a tax rate of 12% for all the income or at the 70% of the income a plicate a progressive rate (0% – 25%).

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