If a company were to place a server on the Moon and use it to generate a commercial profit, would it be taxable? Are worldwide taxation systems in many countries space-wide too?
The same question arises with regard to the territories not recognized as countries such as the high seas, the Arctic, Antarctic, Native “Indian” reservation in North America and so forth.
The real question is whether the Moon is a separate country?
Following is some conjecture on the subject – readers are invited to provide their comments.
The Moon’s Status:
The UN Committee on the Peaceful Uses of Outer Space considers itself the forum for the development of international space law. The Committee has concluded several treaties including an Outer Space Agreement and a Moon Agreement.
The Outer Space Agreement was passed by the UN General Assembly in 1966 and is formally known as: Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space Including the Moon and Other Celestial Bodies (http://www.unoosa.org/oosa/en/ourwork/spacelaw/treaties/outerspacetreaty.html).
According to the Outer Space Agreement, the exploration and use of outer space, including the Moon and other celestial bodies, shall be carried out for the benefit and in the interests of all countries and shall be the province of all mankind (Article 1).
Outer space, including the Moon and other celestial bodies, is not subject to national appropriation by claim of sovereignty (Article 2).
International law and the UN Charter apply (Article 3). The Moon and other celestial bodies shall be used by all States Parties to the Treaty exclusively for peaceful purposes. (Article 4).
A State Party to the Treaty on whose registry an object launched into outer space is carried shall retain jurisdiction and control over such object, and over any personnel thereof, while in outer space (Article 8).
The UN reports that 109 countries ratified the Outer Space Agreement as of January 1, 2019.
The Moon Agreement was passed by the UN General Assembly in 1979 but the few countries that signed up have yet to apply it. It called for an international regime be set up to ensure safe and orderly development and management of Moon resources and equitable sharing of benefits from them. No such regime has yet been established and few countries signed up.
Can Moon profits be taxed?
As mentioned, the Outer Space Agreement says that no country can claim sovereign rights – these are considered to include taxation rights.
However, most countries can still tax their residents (or citizens in the case of the US) on all their income, wherever generated. That includes profits on the Moon or using a satellite orbiting the planet Earth. This is a personal not geographic tax matter.
Other factors:
Other issues abound including the following.
Radio signals from a supplier on the Earth to a server on the Moon and back to a user on Earth would apparently take around 1.5 seconds each way, i.e. 3 seconds in total. This is probably unacceptable commercially.
Legal issues may also arise. Is there any legal protection for intellectual property such as software and data located on the Moon if no country can assert sovereign rights there?
To Sum Up:
Offshore tax planning probably does not extend to lunar or outer space activities…..
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© November 15, 2024