25 September 2019

Advanced Technologies and The Facebook Libra

The revolution has already begun, and now technology and communications giants are joining the party. Trump, naturally, feels threatened and uncomfortable.

Understand what has put fear into Trump and the institutional financial system. You will see how it will impact your company, and in what ways you can benefit from the changes and future technology.

Trump tweets on Twitter are his way of showing the market the “right way” (according to his perception)…

The technology is already mature and it is in use not only in the fields of currency and finance. The technology is already penetrating the fields of logistics, medicine, agriculture, and more.

Numerous domestic and international tax issues have arisen together with technological development. For the most part, tax authorities and legislation have not kept pace with the changing and evolving technological reality. In this environment, we can take advantage of the legislative vacuum for the benefit of our clients. We can set precedents or reach understandings and agreements with the tax authorities as part of the taxation strategy or strategic planning package we develop for our clients.

Every Person has a Currency

With current technology enabling any medium-sized body with monetary resources to create a currency of their own, our experts are receiving requests from medium-sized companies to examine the possibility of integrating virtual currencies in their business activities, from employee remuneration systems to operating systems and customer products.

One part of the solution we offer customers is an analysis of the benefits and tax liabilities associated with entering this field.

We see two main types of benefits:

1. Employees can receive bonuses in the form of currencies traded on online stock exchanges.

2. Employees receiving payment using the company’s currency can treat these earnings as part of the company's capital distribution, comparable the receipt of company shares.

In both cases, the employees receive a benefit that requires reporting and are liable for income tax payments. The main issues we address are the value of the benefits received by employees, the taxes owed, the billing date, and in which country they are obligated to pay taxes, in cases of international companies.

Partnerships between Competitors and Colleagues

An interesting phenomenon is collaborations between business partners and in some other cases between business competitors, joining forces to develop a currency or a product based on the new technology. The Libra currency is one out of many examples of collaboration, in this case between Facebook and its business partners.

In recent months, we have developed several models that will enable international groups to determine and allocate taxation in of this kind, following the local laws of the country where the profits are made or the technology was developed. Dividing profits among the different partners and splitting ownership of the capital among different countries are key factors when determining taxation liabilities and creating an international tax policy for these transactions.


* Network of partners, from https://libra.org/en-US/partners/


Taxation of Digital Currencies

The new technological tools pose a challenge to traditional reporting and recording fields, such as accounting and the state taxation systems.

A significant portion of the solution provided by our team of experts explains the technology to the various tax authorities. In a large number of the cases, the proposed solution involves agreements like “ruling” taxation decisions in favor of taxation law infrastructure in areas where lawmakers have not yet enacted legislation. We can work concurrently with multiple tax authorities in different countries for international business.

One case in which we provided a customized solution in this complex environment involves a company providing an array of international shipping and payment solutions between Asia and Europe using a platform and application. Our experts contacted few countries concurrently with a taxation solution addressing issues of “transfer prices” (the ability to distribute taxes among companies) in a way that would be acceptable to tax authorities wherever the application is used. The various tax authorities in each country have accepted our innovative solution and have approved the international tax arrangement.

Ofir Angel, CEO of Auren Israel

 

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