Direct Tax Considerations Of Offshore E-Commerce

Factors such as source and character of income, and whether a permanent establishment exists, are the principles of international taxation and must still apply to e-commerce in the absence of other specific laws. It is relatively straightforward to ascertain whether a permanent establishment has been created or whether a company is deemed to be trading within a given country if the business in question is a traditional trading entity. It is not so easy, however, for tax authorities to establish where the tax nexus of a cyber company lies. The existing concepts such as management and control, permanent establishments etc have been confused to the extent that it has become increasingly more difficult to pinpoint the tax "nexus" of a particular business operating, in whole or part, across the world-wide web. Under existing principles taxing rights will be established using the source of the income as the basis, income is thus allocated to particular countries