Tax & Technology

Technology is not only disrupting the business world but also the tax space. Technology and especially tech companies have had a significant impact on recent changes and will impact the changes to come.

The Base Erosion and Profit Shifting ("BEPS") initiative, State aid investigations, Pillar 1 and Pillar 2, digital services taxes and the Inclusive Framework have been mainly driven by technological developments and tech companies. Technological developments have also allowed tax administrations to increase the visibility of the relevant facts and circumstances for taxpayers, allowing taxpayers to assess them better and more quickly.

In addition, disruptive technology has caused companies to revise their business models on allocating profits for tax purposes. Transactions and corporations have become more and more specific, and, thus, less comparable. Traditionally, physical presence used to play a significant role in allocating profits. The new rules should determine where tax should be paid (“nexus” rules) and are a fundamentally new way of sharing taxing rights between countries. The aim is that companies pay their fair share in countries where they conduct sustained and significant business, even when they do not have a physical presence. This poses a challenge on allocating taxation rights of profits between countries. Thus, dispute resolution mechanisms will play an even more important role in the future.

The Houthoff Tax Team helps clients to navigate through these rules and their impact. We advise on all tax matters such as corporate income tax, transfer pricing, tax litigation and indirect tax matters.