Recruitment agency tax compliance news

Recruitment agency tax compliance news

29th October 2020

In a pandemic hit global economy, staffing companies are turning to international markets to best remain competitive in these tough times. However, while the global contractor placement arena can certainly prove lucrative, there are compliance risks that – if not managed correctly – could expose recruiters to significant financial risks.

In our latest blog, we outline the latest international recruitment agency tax news that you need to be aware of.

The Virgin Islands takes a tougher stance

Long-considered a tax haven, The British Virgin Islands (BVI) has been battling to revamp its image for a while now. As part of this, the BVI premier and minister of finance revealed recently that the Government is planning to work “towards a publicly accessible register of beneficial ownership for companies”. While this move isn’t expected to be completed for a few years yet, should it be implemented it would remove the veil of secrecy that has enticed fraudsters in the past.

It’s still early days yet, but a public register of company owners could help authorities clamp down on tax evasion and reshape the British Virgin Islands reputation. As Ava Lee, anti-corruption campaign leader from the non-profit Global Witness, explained in recent reports, the BVI’s name is often associated with tax fraud:

“Every time that there’s a global exposé on illicit finance, the BVI’s name comes up. The recent leak of files from FinCEN showed that at least 20% of the occasions when banks in the US raised suspicions of money laundering involved BVI companies, and half the companies exposed by the Panama Papers were registered there.”

Fiji taking action

In Fiji, authorities are allegedly on ‘high alert’ for any businesses that are misusing the relaxed taxation rules announced as a support measure during Covid-19. In order to help struggling businesses, the Fiji Revenue and Customs Service (FCRS) had implemented a number of changes, including access to loans.

This move led to an increasing number of firms actively registering with the FCRS in order to gain access to additional funds – a move which the authority welcomed. However, the Tax Office is remaining vigilant during this time to ensure no organisations are taking advantage of the support unnecessarily. According to reports, the FRCS teams are regularly gathering compliance information in order to prevent fraudulent behaviour.

In an interview with FBC News, the Fiji Revenue and Customs Services Revenue Management Director, Fazrul Rahman, commented:

“We have information on economic sectors with regards to how many taxpayers are out there and how many of them are lodging returns and how many are not lodging returns. Certainly, we do inspections, we do field visits and we do use third party information to verify their business operations and just trying to establish whether they’re in the system or not”.

German authorities target Panama Papers law firm

While the Panama Papers may be old news for some, in Germany prosecutors have issued arrest warrants for the co-founders of the law firm behind the scheme, Mossack Fonesca. Jürgen Mossack and Ramon Fonseca are being pursued on charges of accessory to tax evasion and forming a criminal organisation.

Cologne prosecutors are not the only ones to have targeted the two owners, however. US federal prosecutors have also pursued Mossack and Fonesca under claims that their firm had “conspired to circumvent US law to maintain the wealth of its clients and conceal tax dollars owed to the Internal Revenue Service.”

Recruitment agency tax compliance news: compliance trends

The above are just a few examples of the latest international tax compliance news updates that recruitment agencies need to be aware of and we expect there are plenty more to come in the immediate future. Prior to the Covid-19 outbreak we were already seeing Governments worldwide taking a tougher stance on tax compliance. But, with local economies hit during the pandemic, authorities are taking greater action to recover some much-needed funds, pushing tax compliance further up the agenda.

For staffing companies placing contractors internationally, the complex nature of global legislation and the challenges of local nuances in tax laws have the potential to expose your firm to financial and legal risks if not managed correctly. But given the lucrative opportunities that are on offer globally and the sheer need for many agencies to tap into overseas markets in today’s economic climate, recruiters shouldn’t shy away from international contractor recruitment.

Instead, partnering with an expert in compliance solutions is the best approach to ensure you not only benefit from global opportunities, but also mitigate any risks to your firm. At 6CATS International, when using our full solutions, we fully indemnify recruitment businesses and end users from any tax compliance liability – something no one else offers – taking the stress and uncertainty out of engaging contractors across the globe.

Why not contact our expert team today to find out how they can help your staffing businesses and the contractors you place?

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