Australia

Details

  • Service: Tax, Indirect Tax, Topics, Base Erosion and Profit Shifting
  • Type: Regulatory update
  • Date: 17/03/2014

Tax Insights

KPMG's analysis of tax issues and developments.

Dermot Gaffney

Dermot Gaffney
Head of Indirect Tax

+61 2 9455 9398

dgaffney1@kpmg.com.au

BEPS and Indirect Tax – snake in the grass? 

by Dermot Gaffney, Indirect Tax Specialist

As an Irishman I sometimes feel the eyes of the world drilling down on my homeland and on structures such as the by now infamous 'Double Irish Dutch Sandwich'. On this St Patrick’s Day let me move the base erosion and profit shifting (BEPS) debate to the goods and services tax (GST) / value added tax (VAT) world – remember there are no double tax agreements for indirect taxes, so our 'sandwich' could produce an indirect tax rate of 63 percent – blarney did I hear you say? Well maybe, or maybe not...

Whilst current European Union (EU) law would prevent the doubling up mentioned above, the same cannot be said in other jurisdictions – the solution to date has always been to register in the offshore jurisdiction and reclaim the tax – you just have to live with the admin burden. However we are now seeing a number of jurisdictions (including Australia) making it increasingly difficult for non residents to get registered and in some instances the introduction of special rules which can lead to potential double indirect taxation.

 

I recently advised a client who has outsourced its IT support function to a third party. Because of proposed new VAT legislation for ecommerce supplies in South Africa, the supplier may be required to charge VAT at 14 percent on the services to the South African subsidiary. However the cost is billed to the Australian head office, which recovers it with a range of other costs by way of a management fee. Head Office is not currently registered for VAT in South Africa, and under the equivalent of the Australian legislative “connected with” provisions would not be entitled to register. If the legislation is enacted the VAT cost on the business process outsourcing (BPO) provider fee will not be recoverable.

 

So whilst you consider your position under the BEPS debate from a corporate income tax position, don’t neglect the many potential indirect tax impacts.

 

Share this

Share this

Indirect Tax

KPMG can assist in all aspects of indirect tax, from education and training, policy, compliance and technology through to audits and disputes.

Base Erosion and Profit Shifting (BEPS)

Are companies paying their 'fair share' of tax? KPMG addresses the Base Erosion and Profit Shifting (BEPS) debate.