Tax in the Cloud – A Different Perspective 

Mike Camburn, Indirect Tax Partner, KPMG in the UK:

The Cloud is essentially a means by which companies are able to source computing and IT by means of a service as opposed to having to buy goods or products themselves.

It’s a dynamic, fast changing environment which allows a great deal of flexibility for the organizations concerned and ultimately can help to drive down the costs of IT procurement very significantly.

From a tax perspective this means change, business models are evolving and they’re changing to fit in with how the cloud is actually developing. What that means on a very practical level is that organizations might have different tax obligations and at the same time may have different tax advantages that they are able to benefit from on the basis that they structure their arrangements as effectively as possible.

Deborah Green, Transfer Pricing Partner, KPMG in the UK:

Companies need to be thinking about their value chain, where the value lies in that supply chain. So what are the value adding activities? What are the routine activities? Where those functions at it’s risks being carried out from and those will be changing over time as people move into a Cloud service and it’s very important to revisit that because their old business models are unlikely to work in this new environment of Cloud.

Mike Camburn, Indirect Tax Partner, KPMG in the UK:

Companies should be talking to their advisors; they should be looking at the contracts, looking at their strategy for the next 5 to 10 years in terms of determining how they’re going to be using Cloud. It’s important to do this in order to generate cash benefits wherever possible and also from a longer term corporation tax perspective to maximise the effective tax rate.

Deborah Green, Transfer Pricing Partner, KPMG in the UK:

Companies should be undertaking a functional analysis to understand that value chain where the functions assets and risks are, understand the nature of the transactions because again sometimes it’s not very obvious what those transactions should be whether they’re a service whether they are actually a provision of intellectual property or whether they’re a provision of storage space in effectively a computer environment.

Mike Camburn, Indirect Tax Partner, KPMG in the UK:

KPMG firms have been working with a number of large corporations over the last few years in order to help them to understand how best to benefit from the Cloud.

Deborah Green, Transfer Pricing Partner, KPMG in the UK:

We’ve built up a lot of expertise around this both from a tax perspective and more generally across our advisory practice. We feel we’re uniquely placed to provide advice to clients who are looking at these issues and we can bring an experienced perspective to them.