30th May 2023
Contractors operating overseas may find it challenging to keep up to speed with the rapid pace of change in tax systems around the world, and who can blame them. Barely a week goes by without new legal changes being announced, with considerable efforts being made by governments to tackle any individuals or organisations that are suspected of breaking tax regulations. Take a look at our overview of some of the latest legal shifts and taxation-related cases that you should be aware of if you operate overseas.
EU to crack down on crypto tax evasion with greater surveillance
In recent weeks we’ve spoken extensively about growing legislation designed to tackle cryptocurrency related tax evasion, and it now appears that the EU has come to a collective agreement that will provide greater surveillance designed to curb these issues.
All EU member states are now in support of the Directive on Administrative Cooperation (DAC8), a crypto-tax framework to decrease tax evasion that will increase surveillance of crypto exchanges, marketplaces, and other crypto-related services. DAC8 will be consistent with other EU crypto legislation, as well as OECD guidelines on proper implementation of crypto-tax regulation.
The amendment will “expand the reporting and exchange of information between tax authorities within the European Union to cover income or revenue generated by users residing in the EU while operating with crypto-assets.” DAC8 will also help EU tax authorities monitor EU citizens who hold crypto? in hard-to-find places, usually overseas, which would otherwise be unknown to tax authorities.
The legislation will also require crypto-asset services providers, such as exchanges and marketplaces, to report customer transactions?, as well as grant EU bodies additional powers to monitor those who hold over one million euros in online assets. Anyone operating in this space will now be aware of the growing pressure placed on crypto investors, however the commitment to DAC8 is possibly the first time that EU governments have formed such a large-scale agreement, highlighting the importance they are placing on professionals looking to evade taxes by using cryptocurrencies.
Shakira’s Malta tax evasion trial set for November
In what is possibly the most high-profile tax evasion related case at the moment, it has been announced that the tax evasion trial of Columbian pop sensation, Shakira is set to take place in November this year. Spanish prosecutors have accused the singer of allegedly evading taxes through a corporate framework that utilised a company set up by her in Malta. This organisation supposedly manages her income and will come under the spotlight when the trial kicks off in Barcelona on 20 November 2023.
Shakira will be attending the trial, which is predicted to last for a number of months and will see over 200 witnesses called to testify, in person. Prosecutors are seeking a sentence of up to eight years and two months in prison along with a major fine of €23.8m if she is found guilty of evading taxes by wrongly claiming that she did not live in Spain between 2012 and 2014. Shakira’s lawyers have argued that all of her income is managed via this Maltese company and that it complies with all legal requirements laid out of by the government as well as suggesting that she switched her country of residence from The Bahamas to Spain in 2015, one year after the period that Spanish authorities are investigating. The case highlights that even one of the most successful recording artists of all time cannot escape the reach of tax authorities, even with a series of fairly reputable companies that have been accused of being designed to avoid investigation over tax matters.
Finance ministry introduces AI-powered software to detect tax evasion
And in the second of our Malta-related stories this week, it was announced last month that domestic tax authorities on the central Mediterranean island are introducing new AI-powered software that will be used by tax authorities to alert them when a person or business’s declared income does not align with their wealth.
This process has previously been managed manually, however according to Finance Minister Clyde Caruana the system will “make it far easier and quicker for the authorities to immediately detect tax evasion and act on it.” The software is already in use in the UK, New Zealand, the Netherlands, Ireland and Canada and will begin analysing VAT returns by the end of this year and all other forms of taxes within the next three years. It will draw on information from a range of sources including registries and bank accounts to assess the individual’s cash deposits and liquid assets in a bid to help the tax department keep tabs on income and tax dues far more quickly and efficiently.
The adoption of new AI-powered technology designed to tackle tax evasion highlights the extent that Malta, and other countries around the world, are going to in order to prevent illegal activity and again should act as a warning for any contractors who may be treading a tightrope with their tax matters.
As more international authorities look to build out their tax evasion defences, it’s never been more important for professionals operating internationally to ensure they are compliant with the dizzying array of new rules and regulations that are being put in place. If you’re at all unsure about your status, or are struggling to keep apace with new laws, then speak to the experts before it’s too late.
6CATS International is part of WorkwellTM Group