Five favourite global tax quirks Five favourite global tax quirks

Five favourite global tax quirks
21 Dec 2017

Working overseas can be of great benefit to everyone’s career. On the one hand, it gives professionals access to new cultures and ways of working that can help enhance their skill set. On the other, international experience is likely to make them much more employable. But it’s not all plain sailing, particularly for those working in global payroll.

In fact, there are a myriad of bizarre and difficultto- understand tax laws to be found in countries all around the globe. Here are five of my favourites:

Sweden

When operating in Sweden, you definitely want to stay on the right side of the tax authorities - it’s not a place to be non-compliant. In many ways, the country’s domestic tax agency has more powers than the police and its agents have the right to enter people’s homes without a warrant if they suspect non-compliance in any area.

Although unarmed, they tend to very enthusiastic and aren’t afraid to tackle organisations of all sizes, or even individual contractors. Just ask telecoms firm, Ericsson. Back in 1999, its headquarters were surrounded after the authorities received reports that it was employing unregistered workers.

As an aside, another notable thing about the country is that all baby names have to be registered with, and authorised by, the tax authorities within five years of a child being born. If parents fail to do so, they can face fines of around $770. The regulation was reportedly put in place to stop citizens from using royal names, but it also protects children from offensive or confusing ones too. And before you ask, ‘Ikea’ is on the reject list.

Neither of these issues appear to perturb the Swedes themselves, however, as the tax agency had the second highest approval rating of any of the country’s public authorities in 2013.

Switzerland

Although the tax authorities in Switzerland may not be quite as rigorous as those in Sweden, it can be extremely difficult to work out employees’ status and what they should be paid. The country is made up of 26 regions, or cantons, each of which has an entirely different employment and tax system. As a result, even if an employee moves to the next street, they could potentially end up in an entirely different tax bracket.

You may also be aware of Switzerland’s status as a tax haven. A law passed in 1934 made it a criminal offence for a bank or financial institution to reveal the identity of its clients. This situation has led to the country holding around 27% of the world’s offshore wealth. It is estimated that, in total, more than $32 trillion in financial assets are hidden in offshore tax havens, which would mean losses of more than $280 billion in global income tax revenue.

Aruba

If you were to guess the place with the world’s highest tax rates, the Nordic countries, or maybe even Belgium or Germany, would possibly be the first ones to spring to mind. But you’d be wrong. The worst offender is actually the Dutch/Caribbean island of Aruba, off the coast of Venezuela.

Professionals working in the country who earn more than $171,149 are subject to income tax levels of 58.95%, although the figure is reduced by 3% for married couples. At the other end of the scale, high earners in Chile or the Czech Republic face income tax rates of only 7% and 5.6% respectively.

Germany

You may not think of Germany as being a particularly religious country these days, but it may just surprise you. If workers declare their religion to be either Roman Catholic or Protestant, they face an additional ‘church tax’, which equates to an extra 8% to 9% on their income tax bill. Atheists are a bit more fortunate in this sense - declaring themselves non-believers will save them from having to fork out for their faith.

But the country is also home to one or two other strange non-tax-related laws, including the fact that it’s illegal to run out of petrol on the autobahn or to tune a piano after midnight.

Russia

If you decide to hire foreign contractors in Russia, you may find yourself in for a treat as you’ll pay significantly lower levels of tax than you would if taking on a local. The reason for this is that it isn’t necessary to pay social security taxes, which stand at 30%, for foreign specialists, making them much more cost-efficient to take on.

On the other hand, the country is apparently considering adopting a similar ‘cow tax’ to elsewhere in Europe, including Ireland and Denmark.

Because cow flatulence is known to be one of the leading causes of global warming, contributing to around 18% of the world’s greenhouse gases, a number of nations have started taxing cattle at varying rates. In Ireland, the fee stands at $18 per cow, while in Denmark it’s a staggering $110. So don’t go hiring any Danish ruminants – or it’ll cost you.

 

By Michelle Reilly, managing director,
CXC Global EMEA

Working overseas can be of great benefit to everyone’s career. On the one hand, it gives professionals access to new cultures and ways of working that can help enhance their skill set. On the other, international experience is likely to make them much more employable. But it’s not all plain sailing, particularly for those working in global payroll.

In fact, there are a myriad of bizarre and difficultto- understand tax laws to be found in countries all around the globe. Here are five of my favourites:

Sweden

When operating in Sweden, you definitely want to stay on the right side of the tax authorities - it’s not a place to be non-compliant. In many ways, the country’s domestic tax agency has more powers than the police and its agents have the right to enter people’s homes without a warrant if they suspect non-compliance in any area.

Although unarmed, they tend to very enthusiastic and aren’t afraid to tackle organisations of all sizes, or even individual contractors. Just ask telecoms firm, Ericsson. Back in 1999, its headquarters were surrounded after the authorities received reports that it was employing unregistered workers.

As an aside, another notable thing about the country is that all baby names have to be registered with, and authorised by, the tax authorities within five years of a child being born. If parents fail to do so, they can face fines of around $770. The regulation was reportedly put in place to stop citizens from using royal names, but it also protects children from offensive or confusing ones too. And before you ask, ‘Ikea’ is on the reject list.

Neither of these issues appear to perturb the Swedes themselves, however, as the tax agency had the second highest approval rating of any of the country’s public authorities in 2013.

Switzerland

Although the tax authorities in Switzerland may not be quite as rigorous as those in Sweden, it can be extremely difficult to work out employees’ status and what they should be paid. The country is made up of 26 regions, or cantons, each of which has an entirely different employment and tax system. As a result, even if an employee moves to the next street, they could potentially end up in an entirely different tax bracket.

You may also be aware of Switzerland’s status as a tax haven. A law passed in 1934 made it a criminal offence for a bank or financial institution to reveal the identity of its clients. This situation has led to the country holding around 27% of the world’s offshore wealth. It is estimated that, in total, more than $32 trillion in financial assets are hidden in offshore tax havens, which would mean losses of more than $280 billion in global income tax revenue.

Aruba

If you were to guess the place with the world’s highest tax rates, the Nordic countries, or maybe even Belgium or Germany, would possibly be the first ones to spring to mind. But you’d be wrong. The worst offender is actually the Dutch/Caribbean island of Aruba, off the coast of Venezuela.

Professionals working in the country who earn more than $171,149 are subject to income tax levels of 58.95%, although the figure is reduced by 3% for married couples. At the other end of the scale, high earners in Chile or the Czech Republic face income tax rates of only 7% and 5.6% respectively.

Germany

You may not think of Germany as being a particularly religious country these days, but it may just surprise you. If workers declare their religion to be either Roman Catholic or Protestant, they face an additional ‘church tax’, which equates to an extra 8% to 9% on their income tax bill. Atheists are a bit more fortunate in this sense - declaring themselves non-believers will save them from having to fork out for their faith.

But the country is also home to one or two other strange non-tax-related laws, including the fact that it’s illegal to run out of petrol on the autobahn or to tune a piano after midnight.

Russia

If you decide to hire foreign contractors in Russia, you may find yourself in for a treat as you’ll pay significantly lower levels of tax than you would if taking on a local. The reason for this is that it isn’t necessary to pay social security taxes, which stand at 30%, for foreign specialists, making them much more cost-efficient to take on.

On the other hand, the country is apparently considering adopting a similar ‘cow tax’ to elsewhere in Europe, including Ireland and Denmark.

Because cow flatulence is known to be one of the leading causes of global warming, contributing to around 18% of the world’s greenhouse gases, a number of nations have started taxing cattle at varying rates. In Ireland, the fee stands at $18 per cow, while in Denmark it’s a staggering $110. So don’t go hiring any Danish ruminants – or it’ll cost you.

 

By Michelle Reilly, managing director,
CXC Global EMEA

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