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Selling goods and services online is a minefield from a tax planning perspective. In particular, it involves a consideration of the issues involved with supplying goods and services internationally.
The international tax system is essentially based on a ‘bricks and mortar’ business. The application of these rules to digital supplies is not a simple process. The two key general principles of the current international tax system are that:
Foreign companies do not become subject to a country’s corporate income tax until they have created a permanent establishment (PE) there; and
Income should be taxed wherever the value of a good or service is created.
As such, most countries require some form of permanent establishment (PE) in their jurisdiction in order to give rise to a right to tax income. In addition, double tax treaties, which overlay the domestic law, generally require a PE.
This means the concept of a permanent establishment, doesn’t really apply to the digital sector. If taxing rights are computed from the profit collected from a fixed presence within a country, the business model of most tech and digital companies means they can generate large revenues with little to no actual physical presence in a country. Defining a taxable presence, is therefore far more complicated.
Additionally, the intangible nature of the goods and services sold makes it difficult to both define value creation, and then link this value creation to a specific tax jurisdiction. For instance, in the case of the usage of user data, how do you calculate the value that arises from the generation, storage and use of the data?
The OECD has been struggling with how to apply these concepts to the digital economy, and this guide looks at the tax issues and opportunities that apply to digital activities.
This guide is not tied to any specific jurisdiction and is therefore relevant irrespective of your current country of residence.
Whether you’re based in the US, UK, Europe, Asia or the Middle East the principles in this guide apply to consider the tax treatment of international digital supplies.
What is covered in this guide?
The importance of both where you live and where your income arises
How different jurisdictions tax digital supplies and how you can use this to your advantage
Why simply moving to a low or nil tax jurisdiction doesn’t necessarily work
After reading this guide you will have a good understanding of the interaction between tax in your country or residence and a source jurisdiction
When digital supplies give rise to a taxing right both in the country or residence and a source jurisdiction
Everything you need to know about:
Digital withholding taxes
Digital permanent establishments
Digital service taxes
How double tax treaties impact on the tax you pay on your online/digital supplies and how to use them to your advantage
The general approach to VAT on digital supplies and how they are treated internationally
The OECD approach and how it is planning to change the tax treatment of the digital economy from 2023
The key jurisdictions that allow low or nil tax for digital nomads, including preferential residence schemes
And much more…
From the Publisher
Tax Planning Books
Tax Planning Books from a Chartered Accountant and Chartered Tax Adviser
The author of these book is Lee J Hadnum. Lee is a rarity among tax advisers having both legal and chartered accountant qualifications. After qualifying a prize winner in the Institute of Chartered Accountants exams, he also went on to become a chartered tax adviser (CTA).
He worked in Ernst & Youngs Entrepreneurial Services department for a number of years before setting up his own tax planning practice. He is now a full time tax author.
During his career, Lee has had exposure to international tax planning in over 200 jurisdictions. Allowing unparalleled knowledge as to the differences in tax treatment between differing jurisdictions, as well as the tax opportunities available.
ASIN : B09D686N5S
Publication date : August 18, 2021
Language : English
File size : 1529 KB
Text-to-Speech : Enabled
Screen Reader : Supported
Enhanced typesetting : Enabled
X-Ray : Not Enabled
Word Wise : Enabled
Sticky notes : On Kindle Scribe
Print length : 76 pages
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