Corporate Tax And E-commerce

International governments are making an effort to remake rules to deal with E-commerce. Efforts are being made to insure that foreign E-vendors register and pay corporate tax on profits on sales into the jurisdiction. An example of this effort is, Article 5 of the OECD Model Tax Convention that defines a Permanent Establishment as a “fixed place of business through which the business of an enterprise is wholly or partly carried on”, and includes the presence of a dependent agent and a branch as a Permanent Establishment. However, because most tax treaties exclude from the definition of a Permanent Establishment functions and activities which are merely preparatory or auxiliary to the activities of the company, therefore, such differences could create excess costs and problems in various areas that would impose a significant detriment to trade and investment between the countries. These detriments are based on the complexities of differing definition, and varying allocation formulas which ultimately will rise to conflicts that involve double or excess taxation, to intentional or accidental discrimination against foreign taxpayers.

The following questions have been addressed in this article:

What are the tax consequence when a Business only doing business within a particular country?
How do we determining whether a business is carried on within a country?
Whether it is necessary to know what type of a physical presence you have in target countries?


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