Virtual tax reality

12 December, 2023

Can a business be subject to tax in a country where it has no physical presence? 

Yes, it can - and that was the unfortunate news Baker Tilly had to deliver to an online gaming company who turned to us for advice when they received an unexpected letter from the Australian tax authorities informing them they were subject to Australian Goods and Services Tax (GST). 

And it turned out that Australia was just the tip of the iceberg.

Taxing the virtual frontier

The client, based in Canada, sells online games to customers worldwide via various online platforms. 

Tax authorities worldwide have begun imposing taxes on digital services to reflect changing consumer habits. But the client’s indirect tax engine had not picked up on this. So, while they are not physically present in any country outside Canada, operating globally had unknowingly exposed the client to worldwide tax obligations that could potentially lead to multiple financial penalties and sanctions.

Fast track to fiscal fitness

With a cross border team that matched the client’s geographic reach, we put together a comprehensive overview of the client’s position in each country where they are active to determine the local compliance and reporting obligations and other requirements such as invoicing. 

With a complete picture of their global reporting obligations, the client liaised directly with each of our member firms to ensure they were financially and legally compliant – and ensure no more unexpected letters arrived from local tax authorities!

Discover our indirect tax expertise

Good advisors have offices in every territory. Great advisors have people who work across them.

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