International Tax / Tax Havens

What is a tax haven or offshore finance center

Tax havens and offshore finance centres are often spoken about as being in the same category, although this is not necessarily always the case. There are significant similarities with key features being that they may be used to avoid tax laws of other countries. People can be drawn to these kinds of structures because of elements such as strong bank secrecy, concealment of legal entities or the beneficial owners.

The Organisation for Economic Corporation and Development (OECD) further defines a tax haven as having:

1. no, or only nominal, taxes, therefore, lending itself to be considered a place to be used by nonresidents to avoid tax in their home country
2. adopted legislation which specifically prevents the exchange of information
3. a lack of transparency in its dealings with nonresidents

A further trait shared by tax havens is no formal requirement that investment activities be substantial, with the argument being that this would attract such investments which are exclusively tax driven.

However, these structures are not illegal if they are transparent and reported to the ATO with tax paid on any income earned. There may be a good reason to implement an offshore tax structure which includes the use of a tax haven which does not include tax evasion. The problem is that, for various reasons, the ATO will view the use of such structures with suspicion. Notwithstanding the high risk of unwanted attention, such structures can be used legally and efficiently for people who trade in the international market.

Voluntary Disclosure of offshore structures

Some people unwittingly find themselves in a position where they may not be tax compliant. This could be for of reasons including inheriting a beneficial ownership in an offshore structure that was previously unknown to them or, as commonly occurs, receiving poor advice and acting upon it without a complete understanding of the consequences.

In many cases, it is possible to make a voluntary disclosure to the ATO in a genuine effort to come forward and correct earlier mistakes. Whilst you are exposing yourself completely to the ATO a methodical approach will initiate a platform to promote negotiation and settlement. Although the ATO have promoted so-called tax amnesties in the past, such as Project DOIT, there is always an opportunity to obtain similar generous discounts and concessions with a strategic and planned approach.

Will the ATO prosecute me

If you are found to have deliberately avoided your tax obligations and you do not effectively engage the ATO in meaningful negotiations, you may be referred to the Commonwealth Director of Public Prosecutions for criminal prosecution. Even in the absence of direct evidence against you a charge may be proved when the facts and circumstances support an inference that you acted with an intentional disregard for the law. Such findings can lead to a custodial sentence (prison) being imposed by the court.

Am I personally liable for offences committed by a company or trust

You may be asked to appear before the Court in your individual capacity even if the tax offence was committed by a company or trust, leaving you with a criminal record. The deeming provisions in the Tax Administration Act 1953 allow the ATO to attack the individual responsible for the tax offence of the company or trust and bring them before the Court to be punished.

What can you do to ensure you only pay what you owe

CharterLaw Legal has extensive experience in dealing with tax fraud, evasion and avoidance by utilising a solid network of high ranking contacts within the ATO to achieve results that can only be obtained by tax professional who understand ATO policies and procedures. Working constructively with the ATO in way that robustly protects your interests can result in potential ATO criminal prosecutions being avoided and to a negotiated settlement with the ATO.  Our objective is that you pay what is fair but as little as possible.