Income Tax And Electronic Commerce

The two main principles generally in which countries tax income are source and residency. The Income that is generated by a person is taxed by a country because of a connection between the country and the generation of that income (“source jurisdiction”). In general, the countries assert source jurisdiction to tax income on the basis that the income was generated from economic activity within the country. Also, countries may tax income (wherever derived) of the person who earned the income who is also a resident of that country (“residence jurisdiction”). However, most countries tax income on both a source and residence basis. This means that, a resident person is usually taxed on income from both domestic and foreign sources, while non-residents are only taxed on domestic source income. That is the reason for the focus of Double Tax Conventions is to avoid such double taxation which, if not addressed, may obstruct cross border flows of trade, investment and capital.

The following questions have been addressed in this article:

How would you determine a “place of effective management” in a traditional environment?
Is there any Guidance from “Place of Management”?
Are there any other options in solving the residence-residence conflicts


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