Companies are going to have a lot to do in 2018
Several major changes are happening around tax, finance, privacy and network security. The Global Connect Admin B.V. team has put together the most important changes for you in a to-do list.
US tax reform is leading to the reversal of the tax situation
The speculation about the US tax reform in 2017 has already caused many headlines. US President Donald Trump’s master project has been in force since 21 December. The historic reform is not only polarising the United States – it’s also having a massive impact on many foreign companies that are active in the US market. The consequences are already being felt by many companies for the 2017 financial year: For example, the valuation of deferred taxes in the balance sheet must be adjusted to the new tax rate.
As a result, the real loser is Deutsche Bank, for example, as its result is 1.5 billion lower than expected due to the tax reform. The lowered US corporation tax from 35% to 21% means that Deutsche Bank can no longer claim tax deductions for its billions of dollars’ worth of debt incurred during the 2007 financial crisis. In principle, the tax reform is leading to a reversal of the tax relations between Germany and the USA. This entails both new opportunities and financial burdens that need to be thoroughly examined by the companies concerned.
PSD2: Serious changes for payment transactions
From 13 January, the Directive on Payment Services, an EU Directive on the regulation of payment services and payment service providers throughout the European Union (EU) and the European Economic Area (EEA), will enter into force. The aim of the Directive is to increase Europe-wide competition and participation in the payments sector, including by non-banks, and to create a level playing field by harmonising consumer protection and the rights and obligations of providers and users of payment services. Brussels wants to make European payments safer, more convenient and cheaper. The market is to be opened for third-party suppliers, so-called FinTechs, and is to enable new business models. Experts expect a price war for financial services, which will create a difficult situation for the banks.
The IASB Completes the Last of Its Four Major Projects
The International Accounting Standards Board (IASB) continually seeks to optimize its guidelines with the goal of standardizing international accounting procedures, while making them more transparent. In addition to continuous minor adjustments, the Board has also worked for several years on four fundamental new regulations in international accounting. On May 18, 2017, the last of these large projects was completed with the publication of the International Financial Reporting Standard 17 (IFRS 17).
The four new standards, IFRS 9 – Financial Instruments, IFRS 15 – Revenue from Contracts with Customers, IFRS 16 – Lease Accounting and IFRS 17 – Insurance Contracts, replace the previous standards in each category and present such fundamental changes that almost every publicly traded company must now adapt to procedures that may intervene in its business processes. The reforms, however, have not been met with a warm welcome at all companies.
As welcome as the increasing level of transparency and a standardization of consolidated financial statements have been, they could lead to considerably increased burdens for the industries and companies affected. Since the four discussed standards apply to nearly every publicly traded company in any form, with these projects the IASB has launched a comprehensive structural transformation of international accounting procedures.
On top of all this, time is of the essence: Even if the new mandatory guidelines will only apply to the financial years starting on January 1, 2018, 2019 and 2021, respectively, companies must quickly implement the reforms now, because comparative figures for the previous financial year must also be reported when using the new standard for the first time.
The EU’s New Network Security Strategy
In addition to the General Data Protection Regulation, the Directive concerning measures for a high common level of security of network and information systems across the Union (NIS Directive) is another important component of the EU’s new network security strategy. It will also take effect in May 2018, and the Member States will have to implement the requirements laid out in the Directive into their national legislation by this time.
Essential services within the meaning of the NIS Directive are services that are essential for the seamless provision of critical social and economic activities, such as for example energy operators, drinking water utilities, hospitals, but also operators of financial market infrastructures. These providers must be specifically named by Member States before the Directive enters into effect, and they will then have to comply with strict safety requirements according to the state of the art and record any incidents and errors based on precise guidelines.
New EU General Data Protection Regulation Much Stricter
The EU’s General Data Protection Regulation, which will enter into effect next year on May 25, 2018, affects essentially any company that stores customer data in digital form. Standardizing the data protection legislation across the EU should provide better protection of personal data while guaranteeing the free movement of data within the European single market.
This new standard will also have global consequences: The required measures relate not only to companies based in the EU but are rather based on the principle of lex loci solutionis, or the law of the place where the relevant performance is carried out. This means any company that markets its products or services to EU citizens is subject to the new requirements.
It is clear that the EU is quite serious about data protection when looking at the penalties that will be in force for failure to comply with the new regulation. Companies risk up to 4% of their global profit or up to 20 million euros.
Companies have to Implement CSR Reporting for the Financial Year 2017
Starting in the financial year 2017, all capital market-oriented companies, major banks and insurers will be obligated to report non-financial aspects of their business activities for the first time. CSR stands for corporate social responsibility.
The EU Directive that includes CSR (2014/95/EU of October 22, 2014) will now take effect, requiring public-interest entities with an average number of employees over 500 to include detailed information on sustainability in their reports.
The new EU Directive aims to gather comprehensive information on a company with a view to strengthening confidence among investors and consumers.
The directive allows for a comparison of different practices in all EU countries, thereby making business activities more transparent.
Topics that are to be included in the reports are
- environmental issues (level of greenhouse gas emissions, water consumption, use of renewable energies, or air pollution)
- working conditions
- gender equality
- human rights
- anti-corruption and bribery matters
- diversity in management and supervisory bodies
CSR Reporting can be issued as a separate publication. This form provides the greatest freedom in presenting the sustainability concept and specific key figures. In addition, by choosing this option companies may be able to buy some time, since the reports need only be published up to 6 months after the deadline for their annual reports.
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