The UK Government has announced a new regulation which could impact tech companies, particularly Apple, Amazon and Uber who have been evading taxes by diverting profits to tax havens overseas. UK Chancellor Philip Hammond in his Treasury speech mentioned that royalties stored in offshore accounts will be taxed by the government. The rule applies as long as the companies are earning profits from the UK market.
It must be noted that the U.S. is also planning a similar tax reform which will tax profits stored overseas. As per the proposal by the House Republicans, earnings held in offshore accounts right now will be taxed at 12%, while future profits can be brought back to the country tax free. While the U.S. has only proposed this idea, the UK is on its way to implementing the aforementioned tax reform.
Apple prides itself as one of the biggest tax payers in the world, and justifies storing a large portion of its earnings overseas as it sells most of its products outside the U.S. Tech giants have long been alleged of avoiding taxes via loopholes or favors, as we saw in Ireland. Apple owes Ireland €13 billion in back taxes with the government now expected to take Apple to court following the delay in settling its dues. Keeping this in mind, it’s clear that the UK isn’t going to take tax issues lightly.
The Treasury source cited by Business Insider said “If you’re hosting your intellectual property in a country that doesn’t charge tax, and using that IP to make profit by interacting with UK customers, we will be taxing you at 20%.” The UK Chancellor has mentioned that the changes are coming into effect due to the dawn of the “digital age”.
“Multinational digital businesses pay billions of pounds in royalties to jurisdictions where they are not taxed. And some of these royalties relate to UK sales. So from April 2019, and in accordance with our international obligations, we will apply income tax to royalties relating to UK sales, when those royalties are paid to a low tax jurisdiction,” the Chancellor said.[Via MacRumors]