30th November 2021
Tax authorities, finance ministers and international tax bodies are continuing in their quest to push through global tax reform. Ensuring that organisations pay the right amount of corporate tax and that authorities can collect the revenues that they are owed is a real priority across multiple jurisdictions – and no one can hide from the law. For recruitment agencies placing international contractors, the need to be vigilant and compliant has never been greater, as falling foul of local tax regulations can lead to drastic penalties.
We take a look at some of the more recent tax news.
Latest EU tax developments
Cyprus has long been a favourite retirement destination for British expats – and with good reason. Online financial news service, International Investment, reveals that the Mediterranean island ranks highest of all EU states in the ‘Tax Freedom Day’ rankings, as revealed in an article citing a 2021 report published by the French think tank, Institut économique Molinari (IEM).
The overall national tax burden in Cyprus is far less than in any other EU countries thanks to its generous tax-free income allowance of €19,500 and a top rate tax for higher earners of 35% for income over €60K. “Taxes are a key consideration for anybody considering a move abroad. The combination of income tax, national insurance/social security, capital gains tax, VAT, council tax, excise duties and so on, amounts to a significant amount of money being paid to the taxman every year,” says Jason Porter of specialist financial planning firm, Blevins Franks.
There are significant benefits for expats too, including not having to pay tax on interest or dividends for 17 years. Transferring funds into a Qualifying Recognised Overseas Pension Scheme (QROPS) also means that expats are only taxed in Cyprus – this applies to government pension schemes too until 2024 – thanks to the double tax treaty with the UK.
The same news website also reports on a Times of Malta story about a European Parliament (EP) proposal for a EU tax on so-called ‘golden passports’, such as Portugal’s ‘golden visa’ (which has an extended deadline of 31st December 2021) that allows non-EU foreigners to obtain residency and subsequently citizenship by investing in the country. The EU does not favour such schemes, seen as bringing significant risks and yet further opportunity for tax evasion, with European Commission President Ursula von der Leyen calling for the “closing of Malta’s citizen by investment scheme”.
The EP’s European Value Added Assessment report outlines five options, including a ‘minimum physical presence requirement’ relating to the amount of time spent in the country by the individual investor and a common transparent regulation framework that would help to prevent tax avoidance and money laundering, while reducing the demand for such schemes, with a view to them eventually being phased out. Cyprus, Malta and Bulgaria are the three countries highlighted where ‘golden passports’ can be obtained by investing, with as many as 19 EU countries currently offering ‘golden visas’ in some form.
Latest international tax news in Europe
In more shocking international tax news, The State of Tax Justice 2021 report jointly published by the Tax Justice Network (TJN), the Global Alliance for Tax Justice and the global union federation Public Services International, found that Multi-National Corporations (MNCs) and the wealthy had managed to evade close to half a trillion dollars ($483bn), which shows just how big a problem tax abuse and fraud still is. The article published by the Guardian newspaper also reveals that the UK, its British overseas territories and the City of London account for 40% of the total, which is equivalent to the cost of fully vaccinating the world’s population three times over.
Yet these figures are only “the tip of the iceberg” according to TJN data scientist Miroslav Palanský, as rich nations are once again in the spotlight as the main perpetrators, responsible for facilitating a whopping 78% of fraud and subsequent tax revenue losses. In spite of the fact that the Organisation for Economic Cooperation and Development (OECD) was instrumental in the introduction of the 15% global corporation tax minimum, the report has recommended that the responsibility for setting global tax rules be shifted from the OECD’s 38 wealthy members to the UN (193 nations).
While tax evasion and fraud are still widespread with governments and local tax authorities facing many challenges, there has never been a stronger desire to tackle tax reform. For recruitment agencies planning to tap into the international contractor market or expand their global reach, all matters regarding taxation must be dealt with meticulously. If you should need any advice, our 6CATSPRO experts can help you navigate your international contractor compliance and risk management.