Below are some case studies illustrating some of the e-commerce tax complexities of our time.
Case study 1
The Great Widget Group, headquartered in the UK, has global revenues of EUR 100m and global profits of EUR80m. It uses a Cayman Islands offshore subsidiary company to buy cheap widgets from China and sell them onwards at a profit to consumers (B2C) in California, New York state, France, and Germany.
Our software program TOM (Tax Overseas Model) crunched the numbers and estimates, based on various assumptions, the total tax hit at around 30%% of profits if no action is taken and around 20% if basic action is taken.
Case study 2
The Giant Widget Group carries out similar activities but on a bigger scale. It has global revenues of EUR 20bn and global profits of EUR 16bn. That puts it in the firing line for the OECD Two Pillar Tax proposed package.
Given this, our software program TOM (Tax Overseas Model) estimates, based on various assumptions, the total tax hit at around 46% of profits if no action is taken and around 29% if basic action is taken.
Case Study 3
Jeanette buys all her jeans and fashion clothing online from a well-known store in another country. That way, she saves VAT of 20% in her home country as the delivery firm is not required to collect the VAT. Every day she goes to work in a different outfit.
One day the tax law in her home country is amended to require online marketplaces to collect 20% VAT on all sales they facilitate to customers in that country.
The result: Jeanette must start paying VAT on all her clothing purchases, local or imported. The local stores in Jeanette’s home country are delighted, so is the government at its increased tax revenues.
Next Steps:
Please contact us if you need to discuss the above or any other business matter.
Always consult experienced professional advisors in each country concerned – we can help arrange this.
© November 15, 2024