We’re protected from digital taxes and other fallacies…
The new e-commerce tax landscape is getting more cluttered all the time. It can affect most businesses that use the internet. Here is a discussion about a few tax fallacies.
- We are too small, aren’t we?
Not really. The VAT rules in the EU and other countries target B2C businesses of any size.
The same applies to the OECD’s income tax measures dealing with BEPS (base erosion and profit shifting), including rules that may make you taxable wherever you have a warehouse, fulfillment house, commissionaire agent, or subsidiary company. The OECD Multilateral Instrument (MLI) governs the above and is complex.
- We are too big and decent, aren’t we?
The Two Pillar initiative of the OECD are targeted at the largest multinational groups regardless of their ethics and contribution to humanity. They make a substantial profit in a way not contemplated by the old tax rules. So, the tax rules are being modernized.
- We’ll get a foreign tax credit, won’t we?
We expect several issues when trying to avoid multiple taxes on the same income, including:
- Different countries measure profit in different ways – different expense rules, different currencies, etc.
- You generally cannot credit foreign sales tax or VAT against corporate income tax.
- Complex e-commerce taxation means complex foreign tax credit calculations and limitations in most countries.
- Our online marketplaces (Amazon, eBay, Shopify, etc.) will cover our digital taxes, won’t they?
That may not be accurate. The online marketplaces may take care of local VAT or sales tax liabilities quite efficiently, but:
- They usually don’t address income tax
- Digital service taxes may prove challenging
- They may not address expenses and input VAT/GST, especially in other countries.
- They don’t deal with your intercompany transfer pricing
- They don’t deal with losses.
To sum up, let us help you mitigate e-commerce taxes.
Next Steps:
Please contact us if you need to discuss the above or any other matter.
Always consult experienced professional advisors in each country concerned – we can help arrange this.
© November 15, 2024