OECD 2014 IP tax structuring changes on the horizon

“Boom! Zoom! … it’s the big smashup! …” – the opening words of Louis-Ferdinand Céline’s Guigno’s Band explains this best.

The OECD discussion documents published on 16 September 2014 will wreck most tax structures used by software developers. It is a body blow, head-butt and low-blow, wrapped in Theodora’s shroud and presented with a +1000 page Dear John letter.

Many of the proposals are so left-field, you can’t help admire them. The people who put this package together did a proper job, and then went the extra mile. This is Hobbes’ Leviathan unleashed. Google, Apple and Amazon are running the gauntlet over Tony Danza’s toe.

Previously, controlled-foreign-company (CFC) legislation was easily circumvented by earning business profits. Now, receipts from the remote sale of digital goods and services are regarded as “passive income”. That hurts!

Next, payments for the remote sale of digital goods and services attract withholdings tax. Winded!

And, if your sale of digital products is supported by independent contractor activities within a country, congratulations on your new “permanent establishment”. Salt!

This is not a sniper shot. It is a chamber of Zyklon-B – there’s no dodging it.

The OECD prepared this set of measures in less than a year. The bit is firmly between the teeth. So, don’t expect the usual dilly dallying in implementation – at most, only one hand is required to count the remaining seasons of hay-making.

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