In today’s technology-driven economy, many multinational enterprises are
beginning to take advantage of cloud-computing technology in their global
infrastructure and market facing-activities. What is cloud computing? Various
definitions of clouding computing exist, perhaps the most concise is the one
provided by the research firm Gartner, Inc., which calls it “a style of
computing where massively scalable and elastic IT-related capabilities are
provided ‘as a service’ using Internet technologies to multiple external
customers.”
Despite its rapid acceptance by the business community, little guidance has
been issued on how U.S. federal income tax principles may be applied to
businesses operating “in the cloud.” In addition to creating difficulties in
evaluating potential tax issues, the lack of guidance may impede a corporate
taxpayer’s ability to determine its appropriate U.S. federal income tax return
positions and reporting obligations. This challenge may be even more difficult
for U.S. multinationals with foreign subsidiaries that enter into cloud
computing transactions cross-border.
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