2nd May 2023
With multiple countries around the world suffering from macroeconomic and inflationary pressures, it’s hardly surprising that so many governments are tightening their tax laws in order to balance the national books, particularly in the wake of the pandemic and ensuing lockdowns. However, for contractors operating overseas this means it’s probably never been more challenging, or more important, to remain on the right side of the law. We’ve outlined some of the latest cases from recent weeks that overseas professionals should be aware of if they’re to remain compliant with regulations wherever they’re working.
Spanish tax authority cracks down on crypto firms
One of the areas that has faced the most scrutiny in recent months has been the, up to now, largely unregulated cryptocurrency market. According to new reports, the Spanish Tax Administration Agency (AEAT) is intensifying its efforts to ensure local cryptocurrency holders pay taxes on their finances. The agency is planning to contact over 300,000 warning notices for the 2022 financial year alone, specifically targeting those who they believe have not fully declared their assets. With more individuals choosing to be paid in other currencies, including those within various crypto markets, it’s likely that this number will climb only further in the coming years, with a 40% rise seen between 2021 and 2022. The AEAT’s crackdown isn’t just limited to cryptocurrencies. The agency will also send more than 660,000 notices to individuals who have underreported their rental income and, perhaps most notably for international contractors, 807,000 notices to those with undeclared income from abroad. Spain is one of the most popular destinations for professionals and tourists alike, however it’s clear that anyone operating here will need to keep a close eye on their legal status if they are to avoid any potential sanctions.
Zimbabwe joins OECD Global Forum to help fight tax evasion
We recently looked at the impact that widespread tax evasion was having on the wider economy of Zimbabwe, and it appears that the domestic government is making moves to tackle the issue that has been accused of worsening child poverty in the country. Last month, the Zimbabwean government announced that it was joining the international fight against tax fraud by becoming the 176th member, and 36th African member, of the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes. Gael Perraud, Chair of the Forum, commented on the announcement, saying, “”We are very happy to welcome Zimbabwe as the latest Global Forum member […] the steadily growing Global Forum membership underlines the significance given to tax transparency by the international community and demonstrates the resolve of governments to collaborate in the fight against tax evasion and avoidance.” Zimbabwe also plans to join the ‘Africa Initiative’, a project designed to support domestic revenue mobilisation and the fight against illicit financial flows on the continent through enhanced tax transparency and increased exchanges of information.
Indonesia audit finds alleged tax evasion by mining firms
The mining industry is one of Indonesia’s largest, however a recent investigation has found a number of extreme cases of alleged tax evasion. The Indonesia Audit Watch (IAW) submitted a report to the government where its secretary, Iskander Sitorus explained that over 50 of the country’s firms had been suspected of committing major fraud where they had been aided by existing government officials. Sitorus alleges that these companies have underreported their extraction rates, with the finances saved through this process being kept by the firms and the allegedly corrupt officials, which have been hidden through changes in ownership models. He said the firms had, “covered up working capital and didn’t disclose it, while in fact, it is their right and obligation to return it to the country.” A major investigation is underway and reports suggest that a number of individuals, along with the firms themselves, will be included in the prosecution’s cases, highlighting the potential risks to contractors operating within the Indonesian mining arena.
China fines Bitmain $3.6m for tax violations
And finally, in yet another case from the cryptocurrency arena, authorities in China have fined one of the largest crypto mining firms in the world, Bitmain, a combined $15.5m for tax violations including misrepresenting its profits and using illegal accounting practices. According to reports, the company’s misconduct took place between 2017-2020 with the Chinese state ordering Bitmain to rectify its tax filings, pay the fines and reorganise its business practices to ensure they’re complaint with the domestic tax legislation. Bitmain’s tax troubles with Chinese authorities began in 2017 when the company was accused of violating local regulations on cryptocurrency mining and was forced to stop operations in the city of Chengdu. The company subsequently relocated some of its offices to the United States and Canada. Bitmain is not the only cryptocurrency mining company to have faced regulatory scrutiny in China. In 2019, the government cracked down on Bitcoin mining in the Xinjiang region, citing concerns over energy consumption and environmental impact as well as tax fraud allegations. China is already one of the most challenging locations in which to work overseas, as a result of its complex tax system and any professionals operating here, particularly with involvement within the crypto arena, should ensure they partner with a specialist firm if they’re in any doubt over their knowledge of domestic tax legislation.
Even the most experienced contractors can easily be caught out by the rapidly changing world of international compliance regulations and, if you want to avoid major fines an even prison sentences in some cases, then ensure that you remain up to speed with the latest legal changes. If you’d like to speak to us about how to operating in a fully compliant manner, in whichever jurisdiction you are working in then don’t hesitate to get in contact.
6CATS International is part of WorkwellTM Group
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