LEGAL UPDATES FOR AUGUST, SEPTEMBER, OCTOBER AND NOVEMBER EMPLOYMENT

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1 LEGAL UPDATES FOR AUGUST, SEPTEMBER, OCTOBER AND NOVEMBER EMPLOYMENT Publication of the regulations applicable to mutual insurance companies concerning the coefficients for the management of temporary disability Said regulations are contained in the Resolution of the Directorate General of Social Security Regulation of 15 September 2017 'establishing the terms for the application to mutual insurance companies of the coefficients for the management of temporary disability benefits arising from the common risks of employees of associated entities'. Pursuant to Order ESS/106/2017 of 9 February, the funding of the aforementioned monetary benefit for temporary disability shall comprise the application of a coefficient of of the company and employees' entire contributions for common risks. For employees under the Special System for Agricultural Workers, said coefficient shall be Nevertheless, where situations of financial shortcoming due to structural circumstances exist and may be proven (understood as a situation in which all obligations concerning the management of the temporary disability benefit in favour of the employees cannot be satisfied), the coefficients may rise up to and respectively. The financial shortcoming with regard to the general coefficients shall be calculated by analysing the forecasted income for the 2017 fiscal year relating to the management of the temporary disability benefit for common risks of the referred group of employees, as well as other costs incurred in such management (including those arising from the management of the benefit for independent workers). Thus, said shortcoming shall be deemed to exist when the forecasted financial results are negative and cannot be offset by applying the temporary disability stabilisation reserve for common risks established on 1 January In such case, the mutual insurance companies shall request authorisation to apply the special coefficients of and until the deficit is offset. In essence, the resolution sets forth the instructions on the requirements and conditions for being able to apply the special coefficients of and 0.033, while also establishing the procedural rules to which the requests issued by the mutual insurance companies must abide. The ADP logo and ADP are registered trademarks of ADP,. All other trademarks are registered to their respective owners. Copyright 2017 ADP,

2 New European Professional Card to promote the mobility of employees and professionals Incorporated into the Spanish legal system via the approval of Royal Decree 581/2017 of 9 June 'introducing Directive 2013/55/EU of the European Parliament and of the Council of 20 November 2013 amending Directive 2005/36/EC on the recognition of professional qualifications and Regulation (EU) No 1024/2012 on administrative cooperation through the Internal Market Information System (the IMI Regulation)'. The stand out measure among those introduced via this new regulation - aimed at strengthening the internal market and promoting the free movement of professionals at the same time as guaranteeing a more effective and transparent recognition of professional qualifications -, is the establishment of a «European Professional Card» to facilitate the temporary mobility of professionals and employees in application of the automatic recognition system or simplified procedure under the framework of the general system. In essence, this is a new tool used to remove the barriers between member states and promote the simplification of the recognition mechanisms in order to encourage the mobility of employees and professionals. The professionals themselves must apply for the Card by submitting the necessary documents and after the completion of the corresponding verification procedures by the relevant authorities. The operation of the European Professional Card shall be supported by the Internal Market Information System (IMI) introduced by Regulation (EU) No 1024/2012 of the European Parliament and of the Council. At present, this procedure applies to nurses, pharmacists, physiotherapists, mountain guides and real estate agents. The judgment delivered by the Labour Division of the Supreme Court on 3 May 2017 confirms that life and health insurance, as well as retirement plans, are to be considered as part of an employee's salary for the purposes of calculating compensation for dismissal The Supreme Court has ruled on an appeal for the unification of doctrine filed against a judgment delivered by the High Court of Justice of the Basque Country which included (i) life and health insurance, (ii) a retirement plan, and (iii) the benefits obtained from Restricted Stock Units (RSUs) and Stock Options as part of an employee's regular salary. The aim of the appeal was to ultimately determine whether said concepts should be considered part of the salary and, therefore, if they should be taken into account when calculating compensation for unfair dismissal. The ADP logo and ADP are registered trademarks of ADP,. All other trademarks are registered to their respective owners. Copyright 2017 ADP,

3 With regard to the status of the benefits derived from Restricted Stock Units and Stock Options, a procedural defect meant that the Supreme Court was unable to carry out such assessment. Concerning life and health insurance and retirement plans, the Supreme Court refers to previous proceedings heard before the Labour Division regarding whether they should be considered part of an employee's salary (judgments delivered on 27 June 2007 and 2 October 2013), affirming the following: 1. That the payment of insurance premiums stems from an employment relationship and represents compensation for the employee's obligations. 2. That said payment cannot be considered within the concepts excluded from salaries under article 26.2 of the Spanish Workers' Statute. In contrast, obtaining subsequent benefits arising from the existence of an insured risk may not be deemed as part of the salary pursuant to the aforementioned article, although the payment by the company of insurance premiums would be considered a part thereof. 3. That the classification of insurance as part of an employee's salary is reinforced under tax legislation (article 42 of the Personal Income Tax Act). Thus, the life and health insurance premiums paid by the company, as well as any retirement plan, is included as part of the salary in kind when calculating compensation for dismissal. eference= &links=&optimize= &publicinterface=true RED SYSTEM Creation of a new service: "Request for a summary of bank details for authorisation purposes" An announcement has been made regarding the forthcoming launch of a new service aimed at broadening and improving the current functionality of the Direct Payment System enabling online requests to extract a summary outlining the bank details provided for direct debits or credit balances linked to contribution account codes used for authorisation purposes (Direct Payment System and RED Directo). Said summary, available to both primary and secondary users, will include the following details: Authorised party Date and time of generation Scheme The ADP logo and ADP are registered trademarks of ADP,. All other trademarks are registered to their respective owners. Copyright 2017 ADP,

4 Contribution Account Code Corporate name Type of data (credit balance, direct debit or unspecified). Bank details Lastly, for users of the Direct Payment System, a deferred summary will be generated and issued to the user via the Siltra system. Please find below a direct link to the manual relating to the Request for a summary of bank details for authorisation purposes: Launch of a new online service for the provision of contact details for RED authorisations A new service was launched in September located in the "Management of Authorisations" menu of the RED System's virtual office enabling primary users to consult and modify their contact details for RED authorisations online, as well as to provide their consent to allow the General Social Security Treasury to send notices and information. In this regard, a new version of the Management of Authorisation Manual shall be made available in which the guidelines on using the new function are provided. Update of Winsuite and Siltra Users have been informed of updates to the two software items. At the time of writing, the latest versions are Winsuite and Siltra Please find below a table providing a summary of the new functionalities and issues fixed by the updates: Contributions - New "Request for a payment status report" service - Modification of the Employees' File and Tranches to request data on one or several employees Affiliation - New "Report on compliance with the percentage reserve for the disabled" functionality - New "IDC/PL-CCC Request for a primary contribution account code and for authorisation purposes" functionality National Social Security Institute (INSS) - New National Social Security Institute mass communication topics The ADP logo and ADP are registered trademarks of ADP,. All other trademarks are registered to their respective owners. Copyright 2017 ADP,

5 - New "Request for a summary of bank details for authorisation purposes" service - Removal of the Temporary Disability Report for common risks - New General Social Security Treasury mass communication topics - New values in the "Benefits" camp - Update of the T-38 table: Special Employment Relationship - Update of the T-50 table: Division-share - Update of the T-68 table: Loss of benefits (employee) Introduction of a new functionality relating to the communication of remunerative concepts paid Said update enables users of the RED Directo system to notify their "Remunerative Concepts Paid" and obtain a receipt per contribution account code of the remunerative concepts subject to such notification. In this regard, a new option has been created so that users can now either choose to submit (option 1) or obtain the corresponding receipt (option 2). TAX Multilateral Competent Authority Agreement for the automatic exchange of Country-by- Country reports signed in Paris on 27 January 2016 The Multilateral Competent Authority Agreement for the automatic exchange of Country-by- Country reports signed in Paris on 27 January 2016 was published in the Official State Gazette on 29 September The ADP logo and ADP are registered trademarks of ADP,. All other trademarks are registered to their respective owners. Copyright 2017 ADP,

6 The Agreement has been adopted for the purpose of increasing international tax transparency and improving the tax authorities' access to information relating to the worldwide distribution of income, taxes paid and specific indicators regarding the location of economic activities between tax jurisdictions in which multinational groups operate via the automatic exchange of annual country-by-country reports. Each competent authority (aside from those of jurisdictions which have declared their inclusion in the list of jurisdictions without reciprocity) shall exchange the country-by-country report on an annual and automatic basis with the rest of the competent authorities in the jurisdictions tied to the Agreement and where one or more entities comprising a multinational group of companies are tax residents or subject to taxation due to activities performed through a permanent establishment. Council Directive (EU) of 10 October 2017 on tax dispute resolution mechanisms in the European Union Council Directive (EU) of 10 October 2017 on tax dispute resolution mechanisms in the European Union was published in the Official Journal of the European Union on 14 October This initiative is driven by the European Commission under the commitments made in the Action Plan published in June 2015, with the Commission having submitted a package of tax measures to the European Parliament on 25 October 2016, including a Draft Directive on double taxation dispute resolution mechanisms as a follow-on from the EU's previous work in relation to the Convention on the elimination of double taxation in connection with the adjustment of profits of associated enterprises (90/436/EEC). The publication of this Directive coincides with the implementation of BEPS Action 14 (Making Dispute Resolution Mechanisms More Effective) by the member states. The purpose of the Directive is to improve existing mechanisms within the European Union in order to ensure the effective resolution of tax-related disputes via the interpretation and unilateral application by the member states' tax authorities of the Conventions to remove double taxation and the regulation of transfer pricing. Amendment of the declaration of withholdings and income on account of Personal Income Tax (form 190) and the deadline to submit the Pension Plan Tax Form (form 345) Order HFP/1106/2017 of 16 November amending form 190 used for the submission of the annual summary of withholdings and income on account of the Personal Income Tax charged on employment and trade income, awards and certain capital gains and allocations of income was published in the Official State Gazette on 18 November. The ADP logo and ADP are registered trademarks of ADP,. All other trademarks are registered to their respective owners. Copyright 2017 ADP,

7 Tax-free grants Since 2014, public entities have had to list all the persons or entities to whom subsidies, aid or benefits have been paid - regardless of the amount - in their annual statement of transactions with third parties (form 347). Nevertheless, all transactions on which regular information must be provided to the Tax Authority and which have been included in specific statements other than the one regulated under this subsection and with matching content are excluded from the duty of declaration set out in form 347. Moreover, with regard to tax-free grants under the terms of article 7.j) of the Personal Income Tax Act 35/2006 of 28 November, those lower than EUR 3,000 per year shall not be included in form 190. An amendment of Order EHA/3127/2009 is required in order for all amounts paid to the same recipient as tax-free grants to be reflected by the granting entity in one statement; hence, section 2, article 2 of the Order is removed, as well as any references to such exemption in the recipient's registrations. Regardless of the fact that it is currently compulsory to submit form 190 online as opposed to on printed paper (unless in the case of summary sheets in a format which computers are able to pick up), the approval of a new form 190 aligned to the latest regulatory amendments updating and replacing the form approved under Order EHA/3127/2009 of 10 November is deemed pertinent, as well as the physical and logical designs of such form. New designs The new designs include an additional field of « address of the person concerned» in Registration Type 1: «Declaring Party Registration» in order to associate an address therewith, as well as a modification relating to the obligation to provide details in the form of all tax-free grants defined as such in the aforementioned article 7.j) of Act 35/2006. The appropriateness and pertinence of introducing new fields into the form, as well as its physical and logical designs, to reflect the differentiation between monetary benefits and benefits in kind derived from occupational disability or when not derived therefrom has also been assessed, which would provide a more accurate and error-free view of such payments when both types are received by the same person. Tax form 345 The deadline to submit this tax form changes to 31st of January instead of 20 th of February. The ADP logo and ADP are registered trademarks of ADP,. All other trademarks are registered to their respective owners. Copyright 2017 ADP,