Facebook tax – how does it affect you?

7 March  2016

On Friday, Facebook agreed to pay millions of pounds in UK tax, after agreeing to fundamental changes to its corporate structure in Europe from April 2016.

In very simple terms, Facebook’s corporate structure was such that the jurisdiction in which revenue was generated did not marry the jurisdiction it was taxed in. And the same goes with Google.

It is all a great propaganda but what is the fuss really about?

To quote: ” The mission of the Organisation for Economic Co-operation and Development (OECD) is to promote policies that will improve the economic and social well-being of people around the world.  The OECD provides a forum in which governments can work together to share experiences and seek solutions to common problems. We also look at issues that directly affect everyone’s daily life, like how much people pay in taxes and social security…”

Therefore, bearing in mind the revolution to come, it is important that companies, especially those trading internationally, should bear the key points in mind;

  • ensure that what you say is actually what you do;
  • corporate structuring should be of commercial substance and not purely for tax avoidance. This should not hinder set up of good structures where one of the purposes can be tax saving;
  • compliance with the domestic and international tax systems (transfer pricing, diverted profits tax, etc); and
  • wording your commercial, trade and employment contracts correctly!

If you seek some assurance on your existing corporate structure, or wish to re-think the current one, feel free to contact us.