Five tax questions to avoid costly implications when operating in the cloud
Tax planning key to anticipating and mitigating tax changes
(Toronto, 5 March 2014) Failing to ask the right tax questions as your company moves into the cloud can cost you, and hurt the bottom line, says EY’s report Cloud taxation issues and impacts.
“When you operate in the cloud, you need to consider that all tax authorities expect that the underlying transactions be grounded and reported,” says Karen Atkinson, EY Tax Partner and Canadian Technology Leader. “Companies must conduct up-front and ongoing conversations to anticipate and manage policies from around the globe so that taxes are an enabler of the business strategy.”
Mitigating potential unwanted tax implications from operating in the cloud begins by bringing together chief information officers, chief digital officers and even marketing and business development to integrate taxes into the business — not just on the IT infrastructure front. That includes answering the following questions:
- Where are your intermediaries and customers located?
- Is your team aware of direct and indirect tax considerations?
- Have you reviewed global contracts to manage local tax issues/expectations effectively?
- Are you engaging with local tax authorities to gain guidance?
- Are you in a position to reassess your tax position periodically?
With insight and up-front planning, technology companies can rise above uncertainty to realize the opportunities, efficiencies and growth inherent in cloud business models.
“Profit margins, partnership arrangements, compliance burdens and brand reputation are all at stake when companies fail to ask the right tax questions,” says Atkinson. “Companies must remember that you can’t get the right answer until you ask the right question. Start asking today.”
EY recently launched its Worldwide cloud computing tax guide. This dynamic online tool tracks national cloud-related tax changes across the world. The guide currently contains relevant tax information for more than 80 countries, making it the most comprehensive compilation of cloud tax rules available.
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