7th December 2020
Regular readers of our blogs will have no doubt noticed the increase in digital tax issues that are impacting contractors.
Throughout October, for example, there were multiple reports of global developments in the fight against digital tax fraud and moves to implement cryptocurrency regulations. As a case in point, the Organisation for Economic Co-operation and Development (OECD) revealed that the Common Reporting Standard will be expanded next year to include the exchange of data on virtual currencies, and the European Commission outlined plans for its own digital taxes next year.
In the latest developments, reports at the end of November indicated that the OECD is set to implement an international set of standards on the reporting of crypto taxes.
An on-going issue
The issue of taxing and regulating crypto-assets and virtual currencies has been an issue on the OECD’s hit list for some time now. In fact, the organisation published a report in October which highlighted the tax policy and evasion implications of the rise in cryptocurrency usage.
In the analysis, Taxing Virtual Currencies: An Overview Of Tax Treatments And Emerging Tax Policy Issues, the OECD outlined a number of challenges that authorities are facing when it comes to the regulation of virtual assets:
“Virtual currencies are a rapidly evolving form of crypto-asset that pose a number of challenges for tax policy. These challenges arise from a number of factors due to the nature of these assets, including their lack of centralised control, (pseudo-)anonymity, valuation difficulties, hybrid characteristics (i.e. including both aspects of financial instruments and intangible assets). Other challenges arise from the rapid evolution of the underpinning technology and of virtual currencies themselves, including recent developments in the rise of stablecoins and central bank digital currencies (CBDCs).”
While the report provided an outline of considerations for policy makers, it is clear that a standardised reporting structure is needed for authorities worldwide.
Crypto tax reporting standards
It’s perhaps no surprise, then, that the OECD looks set to apply tax standards to police cryptocurrency. According to reports, the Director of the organisation’s Center for Tax Policy and Administration, Pascal Saint-Amans, had revealed that the relevant policy makers were in ‘broad agreement’ that a standard for cryptoassets that is similar to the Common Reporting Standards (CRS) is needed:
“Fundamentally, the idea is to have a standard which would be roughly equivalent to the CRS, if it is not the CRS.”
Although there is still more work to be done to clarify what this standard will look like, Saint-Amans has indicated that it is likely to be delivered next year.
What the latest digital tax news means for contractors
While this latest development highlights the growing trend of global authorities targeting the use of virtual currency exchange and potential tax fraud that could be – and in some instances, certainly is – occurring, it also paints a very clear picture for contract professionals.
International tax compliance is becoming increasingly highly regulated and scrutinised. Governments and global bodies are taking a tough stance on fraud and with the global pandemic continuing to have a detrimental impact on local economies, it’s highly likely that authorities will take greater steps to reclaim much needed funds over the coming months and indeed years.
For contract professionals operating internationally, ensuring you remain on the right side of tax legislation both in your home country and work destination has arguably never been more important. But it’s also never been so complex as it is today.
Contractors are facing an ever-evolving compliance landscape as new regulations come into force globally. While you may have previously operated in one country compliantly, that doesn’t mean that the same requirements are still in place.
And with a number of professionals operating outside of the country the work is being carried out for due to travel restrictions, the potential to unknowingly be operating non-compliantly increases. There’s a lot of complexity when it comes to delivering work for one destination while located overseas. In many instances, you could be facing dual taxation due to how you are being employed remotely. And the duration of the remote working contract will also impact your tax requirements.
Seeking expert help
Given the complex nature of international tax compliance and the potential to face significant fines or even criminal charges for even the smallest of errors, it is highly advisable that individuals seek expert advice.
6CATS International has the experience and global ‘on-the-ground’ connections to ensure that you are operating on the right side of the law no matter where you wish to operate, your country of origin or where you are a tax resident. Our team of tax experts is on hand to help you – why not give them a call today?
And don’t forget to follow us on our social media channels to stay ahead of the latest international tax developments.