Offshore Taxation Of E-commerce

International Offshore Financial Centres (“IOFC”), generally do not have double tax treaties. This is because they usually have very low or no corporation tax. Some companies have occasionally attempted to escape tax by earning profits in subsidiary companies in IOFCs and not passing that profit on to the parent company. However, most high-tax countries have anti-avoidance (controlled foreign company) laws which would attribute such income to the parent company. Keeping this mind, a number of questions arises with respect to offshore taxation of e-commerce. For example the tax issues that affect U.S. persons who want to do business outside the U.S. One thing that is obvious, is that the U.S. government would not be making it easy for U.S. tax payers to avoid paying income taxes by merely renting or leasing a space on a computer in an offshore island tax haven such as Bermuda and then operating that remote computer over the Internet from an office or home in the US. There are going to be number of issues that perhaps will make these transactions difficult for the US tax payers to attempt avoiding US taxes on his/her global e-commerce business.

The following questions have been addressed in this article:

Is there a way to avoid capital gains taxes on the transfer of various kinds of appreciated assets to a foreign corporation in exchange for stock in that corporation under the provision of IRC 367?
What is the Impact of Tax Treaties on Permanent Establishment Concept?


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