Operating in the cloud and not being aware of the tax implications can hit a company’s bottom line, according to a March 5 EY report.
It is critical to ask the right tax questions for any company moving to the cloud, said the report.
“When you operate in the cloud, you need to consider that all tax authorities expect that the underlying transactions be grounded and reported,” said Karen Atkinson, tax partner and Canadian Technology Leader at EY.
“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.”
IT infrastructure issues are not the only implications to the business; chief information officers, marketing representatives and business developers need to be involved.
The report said that companies should consider the following when moving to the cloud:
- where the company’s intermediaries and customers are located;
- whether or not key employees are aware of direct and indirect tax considerations;
- whether or not global contracts have been reviewed to effectively manage local tax issues/expectations;
- whether or not the company has been speaking to tax authorities for advice; and
- whether or not the business is in a position to periodically reassess its tax position.
“Profit margins, partnership arrangements, compliance burdens and brand reputation are all at stake when companies fail to ask the right tax questions,” Atkinson said.
More information can be found in EY’s tax guide for companies moving to the cloud, which can be found here.
