The “Google” Tax
The proposed 25% “Google”, or to use the official term “diverted profits tax” (“DPT”) is set to apply from 1 April 2015.
The DPT draft legislation is long and complicated; very broadly though it will only apply to associated companies or groups that have combined total annual UK sales of at least £10 million. In addition it will not apply to small or medium-sized enterprises (under the EC definitions).
Otherwise, there are three instances where the tax will apply:-
- Where a foreign company operating in the UK other than via a genuine third party, supplies goods or services to UK customers without creating a UK permanent establishment;
- Where a UK company creates a tax mismatch by using entities or transactions that lack economic substance;
- On an extension of the second in that it essentially applies the same provisions to a foreign company that trades in the UK through a UK permanent establishment.
As always the devil is in the detail and for companies that fall outside the exemptions a careful review of UK and overseas operations will be required.
Date: 19th January, 2015
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