30th July 2020
As an international contractor, tax compliance is difficult at the best of times. But during a global pandemic, with different countries in varying stages of lockdown and authorities taking steps to amend and update legislation to ensure it’s relevant with the current climate, staying on top of the changes that are relevant to your individual situation is, to put it bluntly, almost impossible without expert help.
For those of you once again turning your attention to international opportunities as border restrictions are slowly lifted, here’s the latest in global tax legislation that could impact you.
EU regulation delays
With the pandemic disrupting most of Europe, the Council of the European Union has announced that it will postpone a number of tax rules to ease some of the burden for businesses and professional contractors alike. This includes allowing more time to comply with the stipulations previously outlined for the exchange of cross-border information and e-commerce VAT registration.
In an announcement last month, the Council revealed amendments to the directive in administrative cooperation in the area of taxation (DAC). This allows member states to defer time limits to file and exchange information on:
- reportable cross-border tax planning arrangements
- the automatic exchanges of information on financial accounts of which the beneficiaries are tax residents in another member state
The full text of the amendment to this directive cited a number of factors that drove this decision, including:
- The impact that lockdown measures and international states of emergency have had on the capacity of businesses and Member States’ tax authorities to carry out some of their reporting obligations
- Work-related hinderances, with the likes of remote working negatively impacting the capacity of tax authorities to collect and process data
- The disruption Covid-19 has caused to financial institutions and individuals responsible for reporting cross-border arrangements, with the majority prioritising urgent tasks related to the pandemic
While this deferral is currently for a six-month period, it will provide some much-needed relief, and should the pandemic continue to disrupt the EU, there is the possibility that the deferral period may be extended once more for a maximum of three months.
Postponing e-commerce VAT applications
While the full details are yet to be publicly released, the Council also revealed that ambassadors to the EU had also reached a preliminary agreement for a six-month postponement to the application of the VAT regime for online businesses. Under new rules adopted in December 2017, the Council extended the EU-wide portal for the VAT registration of distance sales, making it easier to record online transactions overseas and ensure virtual traders register the correct VAT status. The latest developments would extend the deadline for this registration from 1st January 2021 to 1st July 2021.
Seeking international contractor tax compliance advice
It’s important to add, though, that while there may be extensions being offered to original deadlines and easing of restrictions to support international contractors in their tax compliance processes, any relaxation of rules is temporary and it is not an invitation for complacency. Despite what some may think, authorities aren’t going to turn a blind eye to non-compliance or rein in their efforts to clampdown on evasion because of Covid-19.
In fact, in the amended directive on administrative cooperation document mentioned above, it is clearly stated that:
“Any deferral should not affect the essential elements of the obligation to report and exchange information under Directive 2011/16/EU and it should be ensured that no information which becomes reportable during the period of the deferral remains unreported or unexchanged.”
Clearly, regulations still apply and initiatives such as the Criminal Finances Act 2017 and the Common Reporting Standards are still in place, so you can rest assured that failure to comply with local legislation and the requirements in your home country will result in some form of penalty. In fact, with governments across the globe facing financial difficulties as a result of the pandemic, it’s highly likely that recovering funds lost through tax evasion and avoidance schemes will move higher up the priority list for many international authorities.
Authorities taking a no-nonsense approach
In fact, we’ve already seen an international movement to target unscrupulous behaviour in order to bolster budgets. As we reported just last week, for example, the European Union is taking steps to address multinational tax avoidance by once again targeting those member states with lower tax rates.
If the European Commission is able to go ahead with implementing Article 116 of the European treaty, Brussels will have the power to correct ‘distortions’ in the single market – enabling the Commission to push through changes to favourable tax schemes without the unanimous agreement of all member states. While this may be a long way off at the moment – and will certainly require careful planning in order to prevent any loopholes being utilised to keep low-tax schemes available to those multinationals that have long taken advantage of these rates – the effects will certainly prove valuable.
With a fairer playing field in terms of tax rates, other global authorities will be able to gather much needed finances that are arguably owed to them due to the location of the work being carried out.
What contractors need to know
While we’re all certainly facing increasing uncertainty and constant change as a result of the continued impact of Covid-19, the benefit and value of international contracting opportunities makes it highly appealing to professionals from a wealth of backgrounds. And with various skills shortages being noted across multiple countries, there’s certainly no lack of work for overseas experts across the likes of technology, pharmaceutical, life sciences, engineering and much more.
As a contractor, you’re the expert in your field, so why not let us be the expert in what we know best: international contractor compliance. Our team of experts have a wealth of knowledge in the legislative landscape across more than seventy countries in Europe, the Middle East, Africa and further afield.
We take the stress and uncertainty out of tax compliance for international contractors, so why not contact us today to find out how we can help you with your next assignment?