{"id":15489,"date":"2012-07-01T11:03:40","date_gmt":"2012-07-01T09:03:40","guid":{"rendered":"http:\/\/businesstech.co.za\/news\/?p=15489"},"modified":"2012-07-01T11:06:32","modified_gmt":"2012-07-01T09:06:32","slug":"tax-legislation-amid-rapid-tech-growth","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/cloud-hosting\/15489\/tax-legislation-amid-rapid-tech-growth\/","title":{"rendered":"Tax legislation amid rapid tech growth"},"content":{"rendered":"

The rapid development of technology is outstripping the ability of tax legislation to keep pace, with the result that current tax provisions do not cover scenarios, such as just what is a permanent establishment for a business, that are now becoming common in the IT arena, says Deloitte<\/a>.<\/p>\n

The advent of cloud computing, which enables companies to operate without the support of \u2018in-house\u2019 resources, is an example says Louise Vosloo<\/a>, head of international tax at Deloitte, who points out that this technology enables all IT resources, hardware and software to be managed by third parties in the cloud.<\/p>\n

\u201cCompanies can make use of all these services, or just those they need, as and when they require them. Depending on the type of service\/s client would need to consider whether a permanent establishment (PE) which is defined as a \u2018fixed place of business, through which the business of an enterprise is wholly or partly carried on\u2019 is created.\u201d<\/p>\n

Although the requirements of this definition may seem easy to meet, or just as easy to avoid, says Vosloo, the reality of determining whether a permanent establishment has been created for tax purposes is in fact murkier than it appears. \u201cThe reality is that each case has to be individually examined. Applying the requirements of a permanent establishment to the e-commerce business arena is no easy task.<\/p>\n

Those looking to implement cloud computing strategies therefore need to be aware of the legislation regarding the definition of a permanent establishment and consider several risks that could be associated with the technology.<\/p>\n

\u201cMany tax professionals would maintain that no taxable presence can be deemed to have been created if all services are being rendered \u2018up in the clouds\u2019. One of the major considerations, however, rests on whether the server used to deliver the services could be said to be creating a permanent establishment in the country in which it is located. It is the server through which applications are stored and accessed by various users that therefore legitimately raises the concern of a permanent establishment,\u201d Vosloo said.<\/p>\n

\u201cWhen examining and complying with the requirements for a \u2018place of business\u2019 it therefore becomes important that one distinguishes between operating a web site and the situation where the particular server the web site is hosted on is at one\u2019s disposal.<\/p>\n

\u201cIn the latter case, this is indicative of having a permanent establishment. The counter argument that the server in question is not owned, but leased is irrelevant. The primary question arising is whether the server is at the person\u2019s disposal or not.\u201d<\/p>\n

The interpretation of \u2018fixed\u2019 place of business does not mean that the place needs to be \u2018fixed to the ground\u2019. All that is required is that it be at a specific location for a sufficient period of time says Vosloo, whilst \u2018carrying on the business wholly or partly through the fixed place of business\u2019 requires the company to determine whether it has the relevant facilities and, or, premises at its disposal where its business activities are carried out.<\/p>\n

\u201cCareful consideration therefore has to be given to these concerns when considering cloud computing solutions so that it can be determined whether they could potentially result in a permanent establishment for the business in the country in which the server is based,\u201d Vosloo said.<\/p>\n

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The rapid development of technology is outstripping the ability of tax legislation to keep pace, says Deloitte<\/p>\n","protected":false},"author":10,"featured_media":10269,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[33],"tags":[181,26,2887,1107],"class_list":["post-15489","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-cloud-hosting","tag-deloitte","tag-headline","tag-tax","tag-technology"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/15489","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=15489"}],"version-history":[{"count":8,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/15489\/revisions"}],"predecessor-version":[{"id":16000,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/15489\/revisions\/16000"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/10269"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=15489"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=15489"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=15489"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}