Cross border transactions

16 March 2016

The technology group at MHA MacIntyre Hudson are noticing more and more issues arising from the rules surrounding cross border transactions.

As it becomes more difficult to determine where revenues are derived in the digital environment it becomes harder to ensure revenues and/or profits are not falling within a taxation net in territories where trading occurs in which businesses may not even consider themselves to have a commercial presence.

Permanent establishment has been a test expanding businesses have been aware of for some time where they are able to consider tests to assess if they have a taxable presence when physically entering into a new country to expand their business.  However, for technology businesses trading electronically it is more likely to find a problem appears less obviously.  An example would be the retrospective change in the laws on witholding tax for software sales in India or the changes in the EU VAT rules which can easily be triggered by sales made by download.

Jason Mitchell, Technology Partner at MHA MacIntyre Hudson comments:

“Clearly, technology ideas are generally of global appeal and any form of expansion or growth into new markets is a target strategy for successful businesses.  However, it is key to keep close to your advisors to ensure the risks of any tax exposure are understood early in the process as the business expands overseas."

Jason Mitchell is available for further comment.