KPMG has introduced an online resource that examines how tax authorities in 18 different countries are dealing with the challenge of taxing cloud computing services.
The new resource, Country Perspectives on Taxing the Cloud, at www.kpmg.com/taxingthecloud, is designed to help users and providers of cloud computing services as they plan their operations and activities and work to manage their tax exposure while gaining the desired benefits from this new technology.
In the new online tool, KPMG member firms worldwide offer insights into how tax authorities across the globe are approaching the challenge of analyzing cloud computing from a tax perspective by examining the local country provisions in place, the likely interpretations under such provisions, and the potential taxes associated with cloud transactions.
The countries studied include Argentina, Brazil, Canada, China, France, Germany, India, Indonesia, Ireland, Italy, Japan, Luxembourg, Mexico, the Netherlands, Spain, Switzerland, the United Kingdom and the United States. KPMG plans to continue to add more countries to the resource as jurisdictions provide more clarity on the local treatment of cloud transactions.
“Cloud computing is fast becoming an attractive option for managing operational and client service needs of businesses and consumers in the United States and across the globe,” said Steven Fortier, principal-in-charge of KPMG’s U.S. Tax in the Cloud initiative, in a statement. “Yet most tax authorities have yet to develop detailed rules and guidance for cloud-based operating models, and many business executives are neither evaluating the tax implications of cloud nor do they know if these factors are being evaluated within their organizations. Companies should expect added scrutiny as tax authorities become more aware of revenue implications they may face with the switch to a cloud-based operating model.”
KPMG recommends that a company moving to a cloud-based business model should examine its local country tax position to consider the character and source of the cloud income and/or payments and whether the cloud operations result in new or additional income, withholding or indirect taxes. Executives need to be mindful of the location of the servers and other infrastructure to take advantage of local incentives, while managing possible permanent establishment challenges made in the jurisdiction in which the infrastructure is located.
In connection with these points, KPMG’s Fortier advised companies to involve their tax department early in the shift toward cloud technology. “By doing so,” he said, “companies can best manage potential tax risks and help ensure they are not losing out on planning opportunities or subjecting themselves to additional direct or indirect taxes.”
Even at this stage, he added, it is clear that significant tax issues for both providers and users of cloud do exist and that those issues multiply when the transactions cross borders, he added.