Remaining compliant as an international contractor

25th November 2022

If you work internationally, it’s probably never been more important to maintain an interest in global tax developments and ensure you’re remaining compliant as an international contractor. As you will have noticed, a number of major economies are introducing new laws and legislation designed to remove loopholes and tackle tax evaders at a corporate and individual level. We’ve highlighted just a selection of some of these cases, as well as outlining what you need to be aware of to remain compliant wherever you’re operating.

Trump tax evasion trial begins

The business of former US President Donald Trump, The Trump Organisation, is on trial for criminal tax fraud in what prosecutors argue was a 15-year scheme led by Allan Weisselberg, to avoid paying taxes on luxury perks for top executives. The former CFO of the firm has separately pled guilty to 15 counts of tax fraud and has been named as Trump’s ‘most trusted lieutenant’. He is alleged to have played a key part in the company evading tax by paying a key executive $1.76m through perks including a free apartment, a leased Mercedes and tuition fees for his grandchildren. The case could land the Trump Organisation’s over 500 different business entities with criminal convictions that will make it significantly harder for the former president’s companies to do business in the US. The Trump Organisation could also be hit with $1m in additional fines.

Prosecutor Susan Hoffinger opened the prosecution by saying, “This case is about greed and cheating – cheating on taxes,” and argued that evidence would show that the fraud implicates Trump’s organisations, with the majority of the illicit activity taking place between 2005 and 2017. It was only after his inauguration as President in 2018 that the companies were placed in a trust and, according to Hoffinger, “finally had to clean up these fraudulent tax practices.” While we often highlight stories of high-profile individuals being caught up over their tax affairs, they don’t come much more high-profile than a former US President. This story shows, yet again, that status, wealth and rank are meaningless to tax authorities around the world, that will hunt down any evidence of tax evasion, regardless of who is behind it.

Bankers land suspended sentences in German tax fraud case

A court in the German district of Wiesbaden sentenced two former bankers to suspended prison sentences in cases connected to the ongoing, multibillion-dollar ‘Cum-Ex’ scandal. Both were tried and convicted for tax evasion and will also face additional €60,000 fines as well as covering all legal costs. This follows several months of negotiations after prosecutors were keen to see both men serve significant time in prison.

The Cum-Ex scandal, which has been linked to a number of major banks, involved a huge volume of transactions that all exploited a loophole on divided payments that enabled a range of parties to claim dividends on the same tax refund. There have been a number of raids on international banks in recent years which have led to prosecutions of British and German bankers and at least one director – of private Hamburg Bank, Warburg – facing several years in prison. Despite reclaiming much of the lost funds through prosecutions and other legal agreements, legal authorities in Germany and across Europe do not appear to be slowing down their fight to tackle anyone involved in this rolling tax fraud case. Firms like Deutsche Bank and Credit Suisse have significant resources at their disposal to fend off legal claims, however if they’re not able to keep prosecutors at bay, what chance does the average contractor have if accused on non-compliance with domestic tax regulations?

China bans celebrities with ‘lapsed morals’ (which includes tax charges) from endorsing products

And finally, in one of the more unusual legal changes in recent times, the Chinese Government has announced that it has banned celebrities with what it calls ‘lapsed morals’ from endorsing products within the country. The definition of ‘lapsed morals’ appears to be fairly broad and encompasses aspects like public drunkenness, drug addiction, fraud and tax evasion. The legislation effectively bars Chinese celebrities from publicly endorsing or advertising health, education, social and financial commodities. Regulators said the push was to ensure China’s society was “guided by Xi Jinping thought on socialism with Chinese characteristics for a new era”, referring to the ideology that underpins the rule of the Communist party. They also added that, “Celebrities should consciously practise socialist core values in their advertising endorsement activities, and endorsement activities should conform to social morals and traditional virtues.”

This isn’t the first and likely won’t be the last time the Chinese Government has cranked up pressure on its entertainment industry. Last year, actor Zheng Shuang was fined nearly 300m RMB ($46m) for tax evasion, while Fendi brand ambassador Zhao Wei had her name removed from all works on major entertainment platforms for reasons also believed to have been linked to taxes. Operating in China is already a particularly complex task and requires navigating a challenging regulatory landscape. And as the country’s authorities appear to be making an example of celebrities in order to tighten their grasp over its colossal population, it’s highly likely that they would also be on the hunt for any foreign contractors who appear to be breaking regulations.

It’s clear to see that authorities around the world are increasing pressure on anyone suspected of tax evasion in order to recoup lost funds, balance domestic economies and to dissuade others from committing similar crimes. This means it’s probably never been more challenging to work as an international contractor. If you’re looking to avoid financial risk and require assistance with your contractor compliance management wherever you’re operating in order to enable you to continue working in a compliant way, then get in touch with a specialist firm before it’s too late.

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