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As of 1 July 2024, the Australian Taxation Office (ATO) has implemented new measures to strengthen legal protections for individuals reporting tax avoidance activities.
These new protections now extend to whistleblowers connected with the Tax Practitioner Board (TPB) and establish a robust framework to ensure the safety and confidentiality of those who disclose such information.
To be eligible for protection as a tax whistleblower, the following conditions must be met:
Even if these criteria aren’t fully met, individuals can still provide a tip-off, with the ATO committing to maintaining confidentiality.
Protected disclosures include:
Eligible recipients are usually those with a formal relationship to the entity, such as registered tax agents or BAS agents.
It is illegal to reveal a whistleblower’s identity without their consent. Disclosure is only permissible to authorised bodies like the ATO or an auditor under strict confidentiality rules. Whistleblower identities are protected during court proceedings unless the court deems it necessary for justice.
Communications made to legal practitioners for advice or representation related to tax whistleblowing are protected, even if the whistleblower does not meet the full eligibility criteria.
Whistleblowers are safeguarded against civil, criminal, and administrative liabilities arising from their disclosures.
They are also protected from employer retaliation, such as wrongful termination or contract breaches.
Additionally, while the ATO can use disclosed information for tax assessments or penalties, it cannot use self-incriminating evidence against the whistleblower in criminal proceedings.
It is illegal to inflict any form of detriment on a whistleblower, including dismissal, harassment, or financial harm.
If detriment occurs, whistleblowers can seek legal remedies, including compensation for damages, reinstatement of employment, injunctions to prevent further harm, and formal apologies.
Whistleblowers can report tax avoidance using the ATO’s tip-off form, available online, via the ATO app, by phone, mail, or through tax practitioners.
Whistleblowers have the option to remain anonymous, with confidentiality assured throughout the process.
Since 1 January 2020, public companies, large proprietary companies, and proprietary companies acting as trustees of registrable superannuation entities are required to have a corporate whistleblower policy.
The Australian Securities & Investments Commission (ASIC) offers guidance on how to incorporate tax whistleblower policies into broader corporate governance frameworks.
The ATO’s new measures, effective from 1 July 2024, provide substantial legal protection for tax whistleblowers, including those linked to the Tax Practitioner Board.
These enhanced protections ensure confidentiality, safeguard against retaliation, and offer pathways for compensation, thereby fostering a safer environment for reporting tax avoidance and misconduct.
This strengthened framework highlights the ATO’s dedication to upholding integrity within the tax system and supporting those who contribute vital information.
If you have any queries about this article on Australian Tax Whistleblowers, or tax matters in Australia more generally, then please get in touch.
For years, Israel’s regulators and financial system have faced criticism for their lack of clear guidelines on cryptocurrencies.
However, the Israel Tax Authority (ITA) has been taking steps to establish clearer taxation rules for digital currencies, especially in light of rising inflation, interest rates, and the financial strains of ongoing conflicts.
The ITA treats digital currencies as “assets” for tax purposes, meaning that any sale of such currencies triggers a tax event.
Typically, profits from selling digital currencies are classified as capital income and subject to capital gains tax.
However, if the activity involving these currencies is considered a business operation, the income may be taxed at standard income or corporate tax rates.
For VAT purposes, non-business investors in digital currencies are exempt, but those with business-related activities must register as a “financial institution” and pay VAT accordingly.
The ITA has also clarified its stance on various related topics, such as the sale of NFTs, digital token offerings, and how to record receipts in digital currencies for services rendered.
Despite the ITA’s efforts to clarify tax obligations, many digital currency holders face practical challenges, particularly when depositing cryptocurrency profits into Israeli bank accounts.
The Israeli banking system remains wary of accepting funds from digital currencies, largely due to concerns about tracking the source of funds and potential links to money laundering or terrorist financing.
This reluctance has made it difficult for sellers to deposit proceeds and, consequently, pay their taxes, leading to legal challenges in Israeli courts.
In response, the ITA introduced a “Temporary Order Procedure for Receiving the Payment of Tax for Profits Generated from the Sale of Digital Currencies” in January 2024.
Initially set for six months, this procedure was extended to December 31, 2024. The Procedure allows taxpayers who have earned profits from digital currencies to report and pay their taxes through a special bank account managed by the Bank of Israel, bypassing the traditional banking system.
To use this Procedure, taxpayers must prove that an Israeli bank refused to accept their cryptocurrency funds or open an account for this purpose.
Taxpayers wishing to use the Procedure must submit a detailed request to the ITA, including a report of their digital currency activities, the taxable income, and the calculated tax.
This request must be accompanied by Form 909, detailing the purchase and sale prices of the digital currencies, income earned, and the tax due.
Additionally, taxpayers must provide information on currency movements, foreign accounts involved, and agree to waive confidentiality, allowing the ITA to share information with anti-money laundering authorities and law enforcement.
The Procedure also requires taxpayers to declare the legal sourcing of funds used to purchase digital currencies and confirm sole ownership of the assets in question.
If the ITA rejects a request, the taxpayer will be notified in writing, with reasons provided for the decision.
It is important to note that the Procedure does not exempt taxpayers from disclosing unreported income through the voluntary disclosure process, where applicable.
The ITA is expected to release further guidelines on voluntary disclosure, specifically addressing unreported income from digital currencies.
This evolving framework reflects Israel’s ongoing efforts to adapt its tax system to the realities of digital currencies, providing clearer guidance for taxpayers while addressing the complexities of cryptocurrency transactions within the current regulatory environment.
Israel’s evolving approach to cryptocurrency taxation underscores the nation’s commitment to adapting its financial regulations to modern realities.
The ITA’s recent initiatives, including the Temporary Order Procedure, provide a clearer framework for taxpayers while addressing the practical challenges posed by digital currencies.
As Israel continues to refine its tax policies, these measures are crucial in ensuring that the regulatory environment keeps pace with the rapid developments in the digital economy, offering both clarity and compliance pathways for those engaged in cryptocurrency transactions.
If you have any queries about this article on Israel Crypto Tax Update, or tax matters in Israel more generally, then please get in touch.
The Court of Quebec has recently delivered a significant judgment in the case of Neko Trade v RQ.
The decision provides important insights into Quebec’s income tax legislation.
The court ruled that a loan from a corporation to its owner-manager for home refinancing did not constitute a shareholder benefit.
Instead, it fell under Quebec’s equivalent of a provision known as the Employee Dwelling Exception.
Additionally, the court criticized Revenu Québec’s (RQ) aggressive decision to reassess the owner-manager on a statute-barred year concerning this loan.
The Employee Dwelling Exception can reduce a seller’s capital gains tax rate from 20% to 10% for the first £1 million of lifetime qualifying capital gains, offering potential tax savings up to £100,000.
Historically, this provision has been risky for shareholder-employees due to the ambiguity in the criteria, which require the loan to be granted to the shareholder-employee as an employee, not as a shareholder, and that bona fide arrangements be made for repayment within a reasonable time.
Neko Trade provides valuable guidance for shareholder-employees considering this option.
The Canada Revenue Agency (CRA) and RQ often challenge any transfer of value from a corporation to a shareholder that is not reported as salary, dividend, or another taxable transaction.
The tax code prescribes tax consequences for taxpayers receiving such “shareholder benefits,” which include loans from a corporation to an individual shareholder. However, it also creates several exceptions, including the Employee Dwelling Exception.
This exception applies to loans given to a shareholder-employee (or their spouse) to acquire a dwelling for their habitation, provided specific conditions are met.
Neko Trade involved a corporation (Neko) established in 2009 by Dimitry Korenblit, its sole employee and shareholder.
During an audit of Neko’s 2015-2017 taxation years, RQ reviewed a loan made by Neko to Mr Korenblit in 2011 to refinance his home.
Mr Korenblit and his spouse initially financed their family residence with a bank mortgage and a line of credit.
In 2011, following advice from an accountant, Mr Korenblit arranged a loan from Neko to replace this temporary financing.
The loan was disbursed in three tranches, and all payments were duly recorded over the years.
Mr Korenblit transferred the residence title to his wife to mitigate financial risks related to his business, and they took out another bank loan secured by the residence’s value.
RQ argued that the Loan was a “smoke screen” to conceal a shareholder benefit and that a “simple employee” would not have obtained such a loan.
They cited several factors, including deficiencies in the loan documentation and the lack of a hypothec on the residence.
The Court concluded that the Loan qualified for the Employee Dwelling Exception, citing eight key factors:
The Court emphasized that the Loan was not a “smoke screen” and that Mr Korenblit was transparent in his tax returns.
RQ’s argument that the Employee Dwelling Exception cannot apply to refinancing an already-acquired residence was rejected.
The Court found that RQ’s published position allowed for such refinancing if agreed upon at the time of the original acquisition.
The Court also addressed the short possession period of the residence, noting that the Employee Dwelling Exception does not prescribe a minimum ownership period and that the transfer of title did not negate the Exception’s applicability.
Neko Trade offers encouragement to taxpayers in disputes over shareholder benefits, highlighting the importance of strict compliance with loan terms, specifying market rates and terms, and maintaining accurate corporate records.
The decision contrasts with the Tax Court of Canada’s 2013 decision in Mast, emphasising the need for detailed and transparent handling of shareholder-employee loans.
If you have any queries about this article on Neko Trade v RQ, or Canadian tax matters in general, then please get in touch.
As part of Saudi Arabia’s ongoing economic and structural reforms, and in alignment with the Saudi Vision 2030 program, several significant tax developments are anticipated in 2024.
These developments are expected to impact businesses operating within the Kingdom by modifying the current tax framework to better align with international practices and encourage investment.
Announced by the Zakat, Tax and Customs Authority (ZATCA) on October 25, 2023, this draft law aims to overhaul the existing income tax system.
The new law is designed to enhance tax compliance and transparency, and align Saudi Arabia’s tax framework with international best practices.
The public consultation period ended on 25 December 2023, with further announcements expected soon.
Similarly, ZATCA has introduced a draft for new Zakat and Tax Procedures Regulations aimed at unifying and regulating the procedures across Zakat and tax systems.
This includes stipulating the rights and obligations of ZATCA and taxpayers. Like the income tax draft law, the public consultation period for this draft ended on December 25, 2023.
Announced in the previous year, four new SEZs have been established, offering multiple tax incentives to encourage business investments.
These incentives include a reduced Corporate Income Tax (CIT) rate of 5% for up to 20 years, 0% withholding tax on profit repatriation, and various customs and VAT benefits.
Formal guidelines are expected to be released soon.
Effective from January 1, 2024, these regulations aim to enhance the legislative framework for Zakat and clarify payer obligations.
Established businesses in the SILZ can enjoy extensive tax incentives, including a 0% CIT rate for 50 years on eligible income. This zone particularly benefits logistics sector businesses.
Starting January 1, 2024, multinational companies dealing with Saudi authorities or government bodies must establish their Regional Headquarters (RHQ) in Saudi Arabia. This initiative offers a 30-year tax relief, including a 0% CIT rate on eligible activities.
With the recent approval of amendments extending transfer pricing principles to Zakat payers, businesses are encouraged to align with these new regulations as they took effect on January 1, 2024.
ZATCA has extended its initiative to cancel fines and exempt penalties to June 30, 2024.
This aims to alleviate the financial burdens businesses may face due to delays in tax-related obligations stemming from the COVID-19 pandemic.
Businesses are advised to consider how these new regulations and incentives might interact with the BEPS 2.0 Pillar Two rules, and to evaluate their potential fiscal impacts carefully.
This analysis is particularly crucial for companies planning to take advantage of the tax incentives offered by the new SEZs, SILZ, and RHQ initiatives.
The upcoming tax developments in Saudi Arabia reflect the Kingdom’s efforts to modernize its tax system and foster a more inviting business environment as part of its broader economic diversification goals.
Businesses operating in or entering the Saudi market should prepare for these changes and seek professional advice to navigate the new tax landscape effectively.
If you have any queries about Saudi Arabia 2024 Tax Developments, or Saudi tax matters in general, then please get in touch.
On March 28, 2024, the Diet passed the bill implementing the 2024 tax reform proposals, ushering in changes that broaden the scope of foreign business operators subject to Japanese consumption tax (JCT).
The 2024 Tax Reform introduces significant amendments to the Japanese consumption tax regime:
Previously, a business operator became taxable if their taxable transactions exceeded JPY 10 million in the base period. Under the reform, foreign business operators established for more than two years are deemed taxable if their share capital is at least JPY 10 million (or equivalent) upon commencing operations in Japan.
While offshore developers of digital content were already required to collect JCT from Japanese users, the reform imposes new collection rules. Digital platforms with transaction volumes of JPY 5 billion or more between offshore developers and Japanese users are now responsible for collecting and remitting JCT on behalf of these developers.
The 2024 Tax Reform expands the JCT obligations for foreign business operators, including those not previously subject to such taxation.
Foreign companies planning to enter the Japanese market and digital platforms serving Japanese users must evaluate how these changes will affect their operations.
These reforms reflect Japan’s efforts to adapt its tax framework to the evolving digital economy and ensure fair taxation across borders.
Businesses should proactively assess their compliance obligations to mitigate potential risks and ensure continued success in the Japanese market.
If you have any queries about this article on JCT Reform Proposals, or other Japanese tax matters, then please get in touch.
The Common Reporting Standard (CRS), initiated in 2017, has significantly enhanced HMRC’s ability to track overseas financial assets and income.
This article explores the implications of HMRC’s “nudge” letters, which prompt UK taxpayers to verify their offshore tax affairs.
Under the CRS, most countries, including traditional tax havens, now exchange information with the UK.
This global initiative aims to combat tax evasion and reduce non-compliance.
HMRC receives detailed annual reports from participating countries about UK taxpayers’ offshore assets and income.
Since 2017, HMRC has been sending “nudge letters” to taxpayers. These letters inform recipients that HMRC has data suggesting they may have undeclared overseas income or gains taxable in the UK.
The letters ask taxpayers to either declare additional tax liabilities via HMRC’s Worldwide Disclosure Facility (WDF) or confirm that there are no undisclosed liabilities by signing a declaration certificate.
A response is typically requested within 30 days.
While there is no legal obligation to respond within 30 days or sign the declaration, ignoring these letters can lead to a formal investigation.
It is crucial for taxpayers to seek professional advice before responding to minimize the risk of an invasive investigation and potential penalties.
Determining tax liabilities can be complex, especially for individuals who may not have been UK residents or domiciled for tax purposes.
Non-UK residents are not required to report overseas income in the UK.
However, UK residents are taxed on their worldwide income, which can lead to misunderstandings and non-compliance.
Penalties for undeclared taxes are calculated as a percentage of the “potential lost revenue” (PLR) and can range from nil to 200% or more.
Factors influencing the penalty include the behavior causing the non-compliance, cooperation during the investigation, and whether there was a “reasonable excuse” for the failure.
HMRC’s “nudge” letters serve as a reminder for taxpayers to review their offshore tax affairs. Professional guidance is recommended to navigate the complexities of tax compliance and avoid potential pitfalls.
If you have any queries about HMRC nudge letters, or UK tax matters in general, then please get in touch.
The UK has long been a premier destination for internationally mobile individuals due to its stability, legal system, educational opportunities, and cosmopolitan lifestyle.
However, recent policy changes have reshaped the immigration landscape, necessitating careful planning for those considering relocating to the UK.
In February 2022, the UK closed the Tier 1 (Investor) route, significantly impacting high-net-worth migration.
The focus has shifted towards visa categories that require active engagement with UK businesses and often need endorsement from third-party organizations.
On 6 March 2024, the UK Chancellor introduced major tax regime changes affecting UK-resident, non-UK domiciled individuals.
These changes will influence decisions for those already in the UK or considering a move, highlighting the importance of integrated tax and immigration planning to achieve long-term residency or citizenship goals.
Both routes offer accelerated paths to indefinite leave to remain (ILR) after three years, unlike the standard five-year requirement.
Visas are also available for those with a family connection to the UK, including partners of British citizens or permanent residents and individuals with UK ancestry.
This newly launched program allows significant investment in approved Hong Kong assets, leading to residency and potential permanent status after seven years.
Programs in countries like Antigua and Barbuda, Grenada, and St. Kitts and Nevis offer fast-track citizenship through investment, with benefits including visa-free travel to over 145 countries.
For clients considering international relocation, it’s crucial to navigate the complex interplay of immigration laws, tax implications, and family considerations.
With expert guidance from specialized immigration and tax advisors, clients can make informed decisions about their relocation strategies, ensuring compliance and optimizing their relocation outcomes.
If you have any queries about this article on High Net Worth Immigration Options then please get in touch.
Malta, renowned for its strategic Mediterranean location and stable political environment, offers an attractive residence option through the Malta Permanent Residence Programme.
This program allows non-Maltese individuals to acquire a permanent European residence permit, providing a path to living in an EU country and enjoying visa-free travel within Europe’s Schengen Area.
The Malta Permanent Residence Programme comes with several significant benefits:
Applicants must meet specific requirements to be eligible for this program:
The application process for the Malta Permanent Residence Programme is managed by the Residency Malta Agency. The procedure involves:
The process is designed to be straightforward and efficient, ensuring that qualified applicants can start their new life in Malta with minimal hassle.
The Malta Permanent Residence Programme offers a unique opportunity for non-EU nationals to gain a foothold in Europe.
With its comprehensive benefits, including the ability to live indefinitely in Malta and travel visa-free across the Schengen Area, coupled with a manageable investment requirement, this program stands out as an appealing option for those seeking to invest in a stable, culturally rich, and strategically located European country.
If you have any queries about this article on Malta’s Golden Visa, or any Maltese tax matters, then please get in touch.
The Portugal Golden Residence Permit Program, often referred to as the Portugal Golden Visa Program, offers a compelling five-year residence by investment opportunity for non-EU nationals.
This program allows investors to live, work, and study in Portugal while enjoying visa-free access to the Schengen Area.
With a minimal physical presence requirement averaging just seven days per year, this program not only facilitates ease of living but also paves the way for citizenship eligibility after five years.
The Portuguese Golden Visa is laden with benefits:
Investors can secure their Portuguese Golden Visa through several investment options:
The application process includes:
The first permit is issued for two years due to adjustments made during the Covid-19 pandemic, with subsequent renewals every two years.
The entire process to secure a residence permit through investment typically extends beyond 18 months due to administrative procedures.
The Portugal Golden Residence Permit Program stands out as a highly attractive option for investors seeking not only a European residence but also a straightforward route to citizenship.
With flexible investment options and a lenient residency requirement, the program offers a practical solution for global investors aiming to enjoy the lifestyle and benefits Portugal has to offer.
If you have any queries about Portugal’s Golden Visa, or tax or other matters in Portugal, then please get in touch.
Introduced in the 2023-2024 Budget and launched on 1 March 2024, Hong Kong’s revamped Capital Investment Entrant Scheme (New CIES) is designed to attract substantial new capital and enrich the city’s talent pool.
This initiative is a part of eight policy measures to develop Family Office Businesses, as outlined by the Financial Services and Treasury Bureau in March 2023.
The New CIES is tailored for natural persons who meet specific criteria:
Applicants must invest in both of the following categories:
The application process requires that the investment assets be managed by approved financial intermediaries and kept in accounts under the applicant’s name.
Compliance with ongoing portfolio maintenance is essential, and applicants must not withdraw any capital gains if the value of their investments exceeds HK$30 million, though they are allowed to withdraw dividends, interest, and rental income.
This streamlined scheme emphasizes capital investment without the added requirements of educational background or work experience, unlike other immigration pathways such as the Top Talent Pass Scheme.
The New CIES not only raises the threshold for permissible investments to HK$30 million but also broadens the scope of acceptable investment assets.
This approach is expected to draw high-net-worth individuals to Hong Kong, bolstering its reputation as a global hub for asset and wealth management.
The New CIES has generated significant interest among financial institutions, underscoring its potential to transform Hong Kong’s economic landscape by attracting new capital and fostering the growth of strategic industries beneficial to long-term development.
As this scheme progresses, it is poised to make a marked impact on Hong Kong’s position in the global financial arena.
If you have any further queries about Hong Kong’s Capital Investment Entrant Scheme then please get in touch.