The tax department is responsible for GitLab’s overall tax strategy including all components of tax compliance, tax planning and accounting for income taxes. Tax regulations taxation differ between countries, which can make this area complex. The tax team is here to support you, make it simple for you and guide you through the landscape of taxes. In case you have any ad-hoc questions please feel free reach out on the #tax channel on Slack. For the sake of clarity please do not use it to seek tax advice for personal matters. We will try to to our best to answer your questions on taxation of your #stock options though. For any in-depth discussions please reach out to the team.
The Tax Department is part of the Finance team and headed by the Director of Tax. The Director of Tax reports to the Chief Financial Officer. For more information please check GitLab’s Org Chart. In addition, the employees responsible for entity finance functions have a ‘dotted’ lines towards the Director of Tax. The table below provides an overview of the responsibilities of the tax function in a RACI-model:
|RACI Model||CFO||Director of Tax||Accounting & External Reporting Manager||VP Legal||Ext. Tax Advisory|
|Tax Risk Management||A||R||I||I||C|
The Accounting and External Reporting Manager has the responsibility to deal with statutory tax reporting. However, the Accounting and External Reporting Manager informs the Director of Tax and keeps the Director of Tax up to date on tax related subjects. In order to ensure the uniform taxation of GitLab and to avoid adverse consequences and tax risks, the Director of Tax is empowered to make recommendations for GitLab. This applies to all areas of taxation, e.g. Corporate Income Tax, Transfer Pricing, Value Added Tax, GST, Tax Accounting, Tax Audits, et cetera.
The scope of the Tax Function includes, but is not limited to continuous evaluation of i) GitLab's effectiveness of GitLab’s tax planning, ii) GitLab's tax risk management and iii) GitLab's tax risk controls; while supporting the Finance team’s stated goals and objectives. In exercising its activities the responsibilities of the Tax Department can be described as follows:
As described in the responsibility section, the Tax Department supports the Finance team to reach it goals and OKR's as set by the Management. To support the goals of using the GitLab Handbook as source of truth, some of the tax procedures have been described below. There are more to come as this is an iterative process.
Maintenance of Corporate Structure covers the following procedure
GitLab's corporate structure per May 2019 is as follows:
GitLab Inc ├── GitLab Federal LLC ├── GitLab Japan (in formation) ├── GitLab South Korea (in formation) └── GitLab BV ├── GitLab IT BV (in formation) ├── GitLab Ltd ├── GitLab GmbH ├── GitLab Pty Ltd └── GitLab Canada (in formation)
What are the prerequisites for a decision to establish a NewCo in a country where GitLab does not have a corporate footprint yet? It basically comes down to a combination of two factors:
Local presence is a result of organic and exponential growth of the GitLab team. At a given point in time the workforce in a country has grown to a substantial level where the demand for an entity is getting too large to ignore.
Sales revenue from certain territories where GitLab is active, can also lead to a demand from the business to establish an entity. A clear reason from tax risk management is to prevent that GitLab runs a permanent establishment risk in any of the territories.
To monitor developments and keeping stakeholders informed, weekly cross-functional meetings are held with Legal, Payroll, People Ops and Tax. FP&A is included about planned hiring for new markets.
One of the consequences of GitLab's global footprint is that intercompany transactions are conducted between GitLab entities. For instance, finance team members in the USA support the German entity with daily activities; or backend engineers support development of GitLab's IP that is owned by GitLab BV. International tax law requires that intercompany transactions are performed at arm’s length. At arm's length means that GitLab's companies should agree on terms and conditions of these services that independent enterprises would also apply (i.e. pay for use of services, goods or intangibles). Intercompany transactions can be grouped into four categories:
At GitLab the supply of tangibles is non-existent while the other transaction categories are available at GitLab. The intercompany transactions between the entities are provided in the table below:
|GitLab Federal LLC||X|
|GitLab South Korea||X|
|GitLab IT BV||X|
|GitLab PTY Ltd||X||X|
GitLab BV owns the IP and therefore all GitLab entities that resell GitLab's products and services are required to pay an arm's length remuneration to GitLab BV. The remuneration is determined as follows:
For consideration of R&D services GitLab BV the arm's length remuneration is determined at cost-plus 6% on R&D costs.
For consideration for G&A services recepient entities will pay an arm's length remuneration of cost-plus 6% on G&A costs.
Each calendar month the intercompany transactions between GitLab entities are settled in accordance with GitLab's Transfer Pricing Concept.
GitLab's entities are subject to statutory reporting requirements of indirect tax in their home countries (i.e. GST and VAT).
In the USA the filing of GST returns is managed via Avalara software. Avalara AvaTax automatically calculates sales and use tax for transactions, invoices, and other activities registered on Zuora. State returns are automatically filed by Avalara.
All non-US entities are supported by local tax consultants to prepare and file indirect tax returns. The Netherlands, United Kingdom, and Australia have a quarterly reporting cycle. Germany requires a monthly reporting cycle. The GitLab Controller keeps track of the reporting deadlines. The procedure for filing the statutory indirect tax returns is as follows:
|United States||If ISO reporting is handled through filing of Form 3921 as part of year end filing|
|United Kingdom||Difference between fair market value and exercise price is taxed at date of exercise if there is a liquid market for the stock at time of exercise.|
|Netherlands||Difference between fair market value and exercise price is taxed at date of exercise. On monthly basis payroll to send exercise details including grant price, FMV and number of shares exercised to Dutch payroll provider.|
|Australia||Difference between fair market value and exercise price is taxed at date of exercise. On monthly basis payroll to send exercise details including grant price, FMV and number of shares exercised to Australian payroll provider.|
|Germany||Difference between fair market value and exercise price is taxed at date of exercise. On monthly basis payroll to send exercise details including grant price, FMV and number of shares exercised to German payroll provider.|
For additional information relating to taxation in other countries
All GitLab entities have engaged tax consultants in their country of establishment that prepare and file Corporate Income Tax returns. The filing statutory filing deadlines in the countries of establishment are as follows:
|Entity||Filing Deadline||Final Payment Deadline||Estimated Instalments Deadline|
|GitLab, Inc.||15 April||By the 15th day of the 12th month of the tax year||Equal estimated instalments due on the 15th day of the 4th, 6th, 9th, and 12th month of the tax year|
|GitLab Federal LLC||See above||See above||See above|
|GitLab Japan||Within two months after the end of company's accounting period||Within two months after the end of company's accounting period||Within two months after the end of the sixth month of the corporation's accounting period|
|GitLab BV||Five months after the end of the company's fiscal year||Within two months of the date of the assessment notice||N/A|
|GitLab IT BV||See above||See above||See above|
|GitLab GmbH||July 31||Stated on the assessmment notice||Quarterly instalments due on the tenth day of March, June, September, and December|
|GitLab Ltd||January 31||Depends on profitability > e.g. when annual taxable profit exceeds 1.5m GBP, Ltd is required to make quarterly instalment payments||Idem dito|
|GitLab Pty Ltd||15th day of the 7th month following the end of the income year||1st day of the 6th month following the end of the income year||Monthly or quarterly|
|GitLab Canada||Six months after the end of the fiscal year||Two months months after the end of the fiscal year||Monthly|
|GitLab South Korea||Within three months after the end of the fiscal year||Along with the filing of the return||N/A|
The procedure for filing the statutory indirect tax returns is as follows:
In the Netherlands a tax credit applies to qualifying research and development activities ("WBSO"). In order to qualify for the WBSO companies need to file an application with the Netherlands Enterprise Agency. In order to qualify, it needs to be proved that the R&D activities meet the following conditions:
When the application is approved, the R&D tax credit can be deducted from the wage tax due through the monthly basis payroll. The process for the WBSO from filing the application to applying the deduction in the payroll are described below.