Expats should put their financial affairs in order while they have the chance as governments around the world prepare a global tax net aimed at wiping out avoidance.
The operation is headed by the Organisation of Economic Co-Operation and Development (OECD) and closely follows the lines of the controversial US Foreign Account Tax Compliance Act (FATCA) laws.
Under FATCA, any foreign financial institution with an American customer holding offshore accounts worth $50,000 or more have to report the details to the Internal Revenue Service (IRS) each year to allow the tax service to compare the report with the customer’s tax return.
FATCA is due to start from July 1, 2014 after a series of misfires and delays.
Australia tax amnesty
The plan already has the green light from more than 40 nations and is due to start by December 2015.
The states have all signed up to automatically share tax and financial information about expats or taxpayers with offshore accounts with their home nations.
In advance of the network switch-on expats and offshore investors can expect to see a number of tax authorities offering deals in return for revealing previously undeclared bank accounts and investments.
Australia is already leading the way by announcing a tax amnesty called Project DO IT.
The project is a voluntary disclosure scheme and the initials stand for ‘Disclose Offshore Income Today’.
The scheme is open to expats and offshore investors until December 19, 2014, and offers significant penalty discounts to anyone declaring previously hidden wealth.
Italy to reduce tax avoidance penalties
“Now is the time for anyone with undeclared offshore income to put their tax affairs straight. If they do, they will avoid the usual hefty penalties and run no risk of any criminal prosecution for tax avoidance,” said commissioner of taxation Chris Jordan.
The Italian government is expected to announce a similar tax amnesty soon.
“We are looking for self-declaration of offshore assets in return for reduced penalties,” said a government spokesman.
The declaration has to be made by September 30, 2015, and excludes anyone subject to a tax audit or inspection. Anyone coming forward under the proposed amnesty will have to reveal details of their investments or financial assets held offshore up to December 31, 2013.
The amnesties are tied in with laws to allow the tax network to exchange financial information without breaching banking or privacy laws.