Data centres play a significant role in today’s digital economy by hosting and processing the reams of data stored in the cloud. The tax treatment of digital data stored processed and transferred by companies carrying out digital activities has become a modern day conundrum. As the physical manifestation of the cloud the data centre and in particular the recent evolution of the micro data centre stress tests the traditional concept of the permanent establishment (PE). For the last 20 years the UK’s position has been that contrary to the OECD’s advocated approach data centres are not always recognised as PEs for UK tax purposes. Against the backdrop of the UK’s proposed introduction of the digital services tax and the wider challenges posed to international tax policy by the digital economy we consider data centres and tax territoriality and query the extent...
