LINKS IN THIS SECTION

- US Sales and Use Taxes and E-commerce
- European Union VAT and E-commerce
- Corporation Tax and E-commerce

RELATED SECTIONS

- Regulation of Offshore E-commerce
- Offshore E-commerce Facilities
- Offshore Professional and Financial Services
- Offshore E-commerce Applications

This section is designed to present a basic outline of the taxation of e-commerce, and specifically offshore e-commerce, for those involved in it. The term 'e-commerce' is understood here to mean, commercial transactions taking place on the Internet.

E-commerce has raised many new issues for governments, tax authorities, legislators and the courts, and of these by far the most challenging has been the question of taxation. The growth of offshore e-commerce has added an extra layer of difficulty.

As the sector began to develop, both internationally and domestically, rich-country (high-tax) Governments began to feel seriously threatened by tax leakage via e-commerce, especially the offshore variety, tending to share the view that e-commerce undermines key concepts used in the existing structure of taxation.

The US has extended its moratorium on new e-commerce taxation until November 2007, but individual states have found a way to impose existing taxes on electronic transactions. Both the EU and the US, along with other OECD countries, have attempted to limit the activities of offshore jurisdictions, partly in response to fears about the growth of offshore e-commerce.

Pending global legislation (and it may be a long wait) e-commerce is taking place under the law as it stands. Difficulties and ambiguities arise because many of the terms and concepts used in current tax law, such as 'source of supply' or 'permanent establishment', lose their clarity when applied to e-commerce. The two types of taxation that raise most issues for those doing business on the Internet are corporation tax, and VAT or sales tax.

Government attempts to limit the benefits to be gained from offshore e-commerce have so far mostly been ineffective, although the EU's proposed e-commerce VAT reforms may have an impact on low VAT jurisdictions within the EU, such as Madeira. However, as a general proposition, almost any business involved in e-commerce can gain from moving partly or wholly offshore, not just on a fiscal level but also through increased flexibility. The Offshore E-commerce Business Guide offers specific guidance on the use of e-commerce to many different types of business depending on their situation.

LINKS IN THIS SECTION

- US Sales and Use Taxes and E-commerce - US taxation of onshore and offshore e-commerce transactions including recent legislative developments.
- European Union VAT and E-commerce - EU taxation of onshore and offshore e-commerce transactions including recent legislative developments.
- Corporation Tax and E-commerce - The impact of corporate taxes (income or corporation tax) on the profits of e-commerce, the location of servers and business units onshore and offshore.