Sword of double taxation hangs on Big Tech firms

Mumbai | New Delhi: Big Tech companies concern India’s equalisation levy—mixed with comparable digital tax rules in nations such because the UK and France—will result in double taxation, in keeping with business insiders.

A few of the Big Tech firms are working to create extra buildings or know-how infrastructure that may probably block sure jurisdiction-based content material or promoting to keep away from tax problems, they stated.

Google, Fb, Amazon, Apple and Twitter are among the many multinational firms that might see their promoting and content material income being taxed in varied areas because of these rules. In some instances, these firms could also be taxed in two and even three jurisdictions, tax specialists stated.

India, France and the UK have launched unilateral measures to tax digital giants, that means they haven’t been recognised by different nations and will run opposite to the worldwide tax framework.

Take India’s equalisation levy, as an illustration.

India fees 6% tax on any promoting income of multinational corporations if the advertiser is predicated within the nation. There’s additionally a 2% equalisation levy even when the advertisers or multinationals aren’t based mostly in India, however the commercial is seen in India.

Tax specialists stated the query revolves round whether or not the tax is payable in nations the place the advertiser is positioned or the place the commercials are mirrored or seen.

“As of now, India collects taxes on each of those. Nevertheless, with different nations such because the UK that levies DST (digital service tax) on enterprise customers or advertisers and these ELs (equalisation levies)/ DSTs being non-creditable within the house jurisdiction, digital giants are set to see not solely double however multi-layer taxation (payer-linked, access-linked and based mostly on fiscal domicile) on the identical transaction. That too, at gross income stage, which will increase the fee considerably for such tech companies,” stated Rahul Garg, managing accomplice at Asire Consulting LLP.

These digital taxes, that are outdoors the gamut of worldwide taxation, can’t be set off in opposition to different home tax obligations. In taxation terminology, this implies firms is not going to get a credit score for these taxes in different nations.

“Not all digital levies are eligible for international tax credit. The Indian equalisation levy, as an illustration, will not be ruled by the tax treaties and therefore not eligible for credit score in opposition to house nation taxes,” stated Ajay Rotti, accomplice at Dhruva Advisors.

Singapore’s income authorities have permitted firms there to deal with Indian EL as tax deductible expense, however firms is not going to get a credit score for that.

“This basically implies that EL turns into a value and corporations must pay tax of their house nation on complete revenue, together with the revenues on which tax has already been paid in India. This results in double taxation,” Rotti added.

Twitter, Fb, Google, Amazon, Apple and LinkedIn didn’t reply to ET’s queries.

If Rolls Royce, headquartered within the UK, advertises on the Fb platform, however the content material is seen in India too, India will declare {that a} 2% equalisation levy ought to apply on the transaction, whereas the UK will declare that DST ought to apply on the promoting.

Even after paying taxes in India and the UK, the corporate could have to finish up coughing up company taxes within the nation the place it’s positioned.

A few of the firms wish to tweak some present buildings the place home bots will block sure world promoting content material, insiders stated.

“This may be executed simply as a number of the massive platforms already do that to keep away from sure country-specific delicate content material. The one query is that if doing so may result in extra problems,” a senior lawyer who’s advising a big digital firm in India stated.

Many firms have already began passing on these digital taxes to clients.

ET was the primary to report on July 29 that Google
was all set to pass on India’s equalisation levy to all its shoppers whose commercials are seen within the nation, starting October. This might additionally put strain on different digital multinationals to comply with in its footsteps.