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Do your facts stack up? Don’t Google it!

Author: Iain Bradley and Bronwyn McDonald

Last month, Google executives were recalled to a British parliament committee to testify on taxation matters, after a Reuters investigation found inconsistencies in the way that Google has been portraying its business activities in the UK.

While Google executives have maintained that its head office in Dublin is responsible for contracting with UK-based clients, and that the operations of Google staff in the UK do not include making sales locally, a recent investigation by Reuters suggests something different. This story has recently gone public in a news article released by Reuters.

Reuters took a closer look at Google’s company website, London-based job advertisements and even the descriptions of Google’s London-based employees on the professional networking site LinkedIn.

This information suggests that Google’s business activities in the UK include an extensive sales force, whose duties include negotiating and closing deals and achieving sales quotas. If that is the case, it could have significant implications on Google’s tax status in the UK.

The situation faced by Google highlights the importance of ensuring that all the background facts are accurate and robust when considering an entity’s tax position, for example in determining whether an organisation has a taxable presence (or permanent establishment) in a country under a Double Tax Agreement between the relevant countries.

For such analyses, it is important to be aware that the set of tools and information available to tax authorities such as Inland Revenue can extend to social media and other publically available online information.

We recommend that taxpayers maintain a level of diligence in relation to documents which feature a description of its business profile in New Zealand and overseas, including web pages, advertising and marketing materials, social media and employment contracts. These documents should be reviewed and amended if a material change in the business occurs.

For more information, please contact your usual Deloitte tax advisor.

Tax Alert June 2013 contents:

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