Tag Archive: Tax evasion

1. Hong Kong Removed from EU Watchlist Following Tax Regime Amendments

   21 March 2024 4:47 am Leave a Comment

   Hong Kong Removed from EU Watchlist – Introduction

   Hong Kong has been officially removed from the European Union’s list of non-cooperative jurisdictions for tax purposes, commonly referred to as the EU Watchlist.

   This took place with effect from the 20 February 2024.

   The development comes after the Hong Kong government introduced the Foreign-Sourced Income Exemption (FSIE) regime in January 2023.

   This is aimed at addressing the EU’s concerns over tax cooperation and aligning with international tax standards.

   Background of the FSIE Regime

   The FSIE regime was established in response to Hong Kong’s inclusion on the EU Watchlist in 2021, marking a concerted effort by the local government to ensure the jurisdiction’s compliance with global tax norms.

   The regime applies to certain types of passive income, including dividends, interest, income derived from intellectual property (IP), and disposal gains related to equity interests.

   To benefit from the profits tax exemption under the FSIE regime, multinational enterprises (MNEs) operating in Hong Kong must meet specific economic substance, nexus, and participation requirements relevant to each income type.

   Refinements and Compliance with EU Standards

   Following the EU’s updated Guidance on Foreign-sourced Income Exemption Regimes in December 2022, which called for adequate substance requirements for all passive income types, the Hong Kong government expanded the FSIE regime.

   This expansion included broadening the scope of disposal gains to encompass gains from the disposal of all asset types received by MNE entities in Hong Kong.

   These adjustments, which took effect on 1 January 2024, played a crucial role in demonstrating Hong Kong’s commitment to adhering to international tax standards.

   EU’s Decision to Remove Hong Kong from the Watchlist

   The EU’s decision to remove Hong Kong from the Watchlist was based on a comprehensive review of the amendments made to the territory’s tax regime concerning foreign-sourced passive income.

   By fully aligning with the EU’s requirements and international tax standards, Hong Kong has successfully addressed the concerns that led to its initial inclusion on the Watchlist.

   Implications and Future Developments

   Hong Kong’s removal from the EU Watchlist is a positive development for the region, enhancing its reputation as a cooperative jurisdiction in tax matters and potentially improving its attractiveness as a business and investment destination.

   Stakeholders in Hong Kong and international businesses operating within the territory will benefit from the clarity and stability this resolution provides.

   Hong Kong Removed from EU Watchlist – Conclusion

   As Hong Kong continues to implement and refine the FSIE regime, further updates and guidance are expected to ensure that the territory remains in compliance with evolving international tax standards.

   This proactive approach underscores Hong Kong’s dedication to fostering a transparent and cooperative tax environment on the global stage.

   Final thoughts

   If you have any queries about this article on ‘Hong Kong Removed from EU Watchlist’, or tax matters in Hong Kong more generally, then please get in touch.

2. Higher stakes? HMRC’s crackdown on tax evasion & avoidance

   29 January 2024 1:31 pm Leave a Comment

   HMRC COP8 and COP9 – Introduction

   In its pursuit of greater tax compliance, HMRC seems to have significantly ramped up its efforts to combat tax evasion and avoidance.

   The past year saw the opening of 1,091 of HMRC’s most serious tax investigations, known as ‘COP8‘ and ‘COP9′.

   A Closer Look at HMRC’s Hand

   HMRC’s strategic approach involved 417 investigations under ‘COP9’ targeting severe suspected cases of tax evasion, alongside 674 ‘COP8’ civil investigations focusing on suspected tax avoidance.

   These numbers contribute to a total of 3,300 ongoing COP8 and COP9 investigations, representing HMRC’s activities in clamping down on major tax evasion and avoidance.

   Non-Compliance: Playing for High Stakes?

   The behavior-based penalty structure employed by HMRC ensures that penalties escalate with the severity of the taxpayer’s actions.

   These penalties potentially reach up to 100% of the tax for UK matters, and even higher for offshore issues.

   However, there is a silver lining for those willing to cooperate.

   Full cooperation with HMRC’s investigations can lead to significantly reduced penalties, provided taxpayers make a comprehensive and truthful disclosure of all irregularities in their tax affairs.

   The Last Chance Saloon for Taxpayers

   A COP9 investigation, reserved for suspected tax fraud cases, offers a final opportunity for individuals to rectify their tax affairs.

   Such an investigation comes with the assurance of remaining under civil investigation if they cooperate fully.

   Conversely, failure to cooperate, as seen in high-profile cases like that of former Formula 1 boss Bernie Ecclestone and Dominic Chappell, former owner of BHS, can lead to staggering fines and even imprisonment.

   When faced with these types of issues, it is important that you engage a specialist in tax investigation matters to assist you.

   HMRC COP8 and COP9 – Conclusion

   HMRC’s intensified efforts in conducting serious tax investigations underscore a stern warning against tax evasion and avoidance.

   While the investigations pose significant risks, they also offer a final chance for individuals to regularise their affairs.

   Again, if you are faced with a COP* or COP9 then please take this seriously and appoint a specialist adviser to assist you.

   Unlike a hand of Texas Hold ’em… You won’t be able to bluff your way to victory!

   Final thoughts

   If you have any queries over this article on HMRC COP8 and COP9, or UK  tax matters in general, then please get in touch

3. EU Blacklist: Back to black

   7 February 2023 10:09 am Leave a Comment

   EU blacklist – Introduction

   On February 14, 2023, the Council of the European Union made changes to the list of countries that do not cooperate with the EU on tax matters.

   This is called the “EU blacklist”.

   New additions to EU Blacklist

   Four new countries were added to the list:

   • British Virgin Islands,
   • Costa Rica,
   • Marshall Islands, and
   • Russia.

   With these additions, the EU blacklist list now has 16 countries on it. The other countries are as follows:

   • American Samoa
   • Anguilla
   • Fiji
   • Guam
   • Palau
   • Panama
   • Samoa
   • Trinidad and Tobago
   • Turks and Caicos
   • US Virgin Islands
   • Vanuatu

   The Council gave reasons for adding these countries.

   Marshall Islands

   For example, the Marshall Islands was added because they have a tax system that encourages businesses to move profits offshore without any real economic activity.

   Costa Rica

   Costa Rica was added because they do not provide enough information about tax matters, and they have tax policies that are considered harmful. Russia was added for the same reason.

   Bahamas

   The Bahamas was previously removed from the EU blacklist in 2018 but was added back in 2022 and remains on the list.

   Conclusion

   The new list will be officially published in the Official Journal of the EU, and the next revision will take place in October 2023.

   If you have any queries relating to the EU Blacklist or tax matters more generally, then please do not hesitate to get in touch.

   The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.