WORLD SERVICES GROUP€¦ · WORLD SERVICES GROUP. E –Commerce •Taxation Aspects of Electronic Commerce • Description ... • Leasing and rendering of services is subject to

WORLD SERVICES GROUP

E – Commerce

• Taxation Aspects of Electronic Commerce

• Description

• Domestic Tax Implications

• International Tax Issues

• Conclusions in solving e-commerce tax issues

Latin American Regional Meeting

E – Commerce Trends

• Internet: changes in how we live and do business

• Internet: new way to reach out to individuals

• E- Commerce and broadband growth

• New business opportunities from constant change in technology (hardware and software development)

• To interact with customers in not dependent on location and it is easier to reach people in many different states and countries

• Products are delivered electronically and payment is made with electronic money

E- Commerce Tax Issues

E – Commerce Trends


Business

Consumer

Government

Employee

Business

B2B B2C B2G B2E

Consumer

C2B C2C C2G

Government

G2B G2C G2G G2E

Domestic Tax Implications

• Location: Existing tax systems tend to determine tax consequences based where the taxpayer is located

• Nature of the product: E-commerce allows, some type of products (such as music, newspapers, etc.) to be delivered in digitized (intangible) rather than tangible form

• New Marketing Techniques: Individuals can offer their unwanted items to a worldwide group of potential buyers

• Way: Indirect: is similar to traditional business. Direct: the whole transaction is carried out in Internet



• VAT: (Value Added Tax)

• Registered Tax Payers (Debit-Credit) or Consumers

• Sales of movable assets on the domestic market. Importation, production and retailing are also levied

• Export of goods are not subject to VAT

• Leasing and rendering of services is subject to VAT

• Import of services (rendered abroad with economic use in AR)

• E-commerce is not specifically treated by the law

• Regulations: VAT Withholding Payments with credit cards



• Turn-Over Tax: Provincial Tax (gross sales)

• Argentina: 24 Provinces

• Multilateral Agreement -Tax Basis: distribution

• E-Commerce: Resolution 83/2003 (CA)

• Tax basis: Internet: (corresponds to the province of the buyer)

• Buenos Aires City: Resolution 142. Web site as Withholding Agent

• Municipal Tax Rates:

• Argentina: Tax basis: Sales

• Servers location


International Tax Issues

• Challenge for Tax Administrations:

• Multi-jurisdictional nature of transactions

• Potential anonymity of the parties

• Tax Residence

• Worldwide income for tax residents

• Income arising in one country of any person not tax resident

• Criteria for considering whether a trade is being carried on within the country

• Can Withholding Tax be imposed on e-commerce payments?



• Internet: www (World Wide Web)

• Web Page

• Server

• I.P.S (Internet Service Provider)

• Consumer: Downloading

• Where must Withholding Tax be imposed?







• Argentine Income Tax Law

• Section 5º: Argentine source: goods situated and economically exploded in our country

• Section 12º: Management fee, Engineering, Know-how, Technical Assistance – Limitation for the deduction

• Section 6º to 11º: Specific tax rules (Freight, International news services, license fees for the use of films)

• Section 93º: Transfer of Technology – Use of Patents and Trademarks: 21% 28% (INPI) Others: 31.5%

• No specific rules for e-commerce



• Double Taxation treaties

• To prevent a taxpayer from being taxed in more than one jurisdiction. Argentine has signed 18 tax treaties

• Permanent Establishment: Section 5º OECD Model

• Royalties: Section 12º OECD Model (Tax rates between 10% and 18%)



• Ottawa Taxation Framework Conditions: International Ministerial Conference on E-Commerce in October, 1998

• O.E.C.D. (Organization for Economic Co–operation and Development)

• Publication in May 2001 “Taxation and Electronic Commerce” includes conclusions and recommendations that allows for “greater certainty among business and consumers in relation to the taxation of electronic commerce”

• T.A.G. (Technical Advisory Group on Monitoring the application of existing treaty norms for taxing business profits) created in 1999



• International Direct Taxation (O.E.C.D.)

• Clarification on the application of permanent establishment

• Definition in E-Commerce. Model Tax Convention on Article 5

• Treaty Characterization Issues arising from E-Commerce

• Attribution of profit to a permanent establishment

• Impact of the communications revolution on the application of “Place of Effective Management” as a tie breaker rule

• Report by the Business Profit TAG: views of the TAG



• Consumption Tax Issues (O.E.C.D.)

• Consumption tax aspects of electronic commerce (Committee's Working Party Nº 9)

• Report by the Consumption Tax TAG: views of the TAG

• Report by the Technology TAG

• Tax Administration Issues (O.E.C.D.)

• Tax Administration Aspects of Electronic Commerce: responding to the challenges and opportunities (Committee's Forum on Strategic Management)

• Report by the Professional Data Assessment TAG



• World Trade Organization

• The second (Geneva) Ministerial Conference: Declaration on Global E-Commerce in May, 1998

• European Union

• Directive 2000/31/EC: Basic legal framework for electronic commerce in the international market

• Expect Group on E-Commerce created in October, 2005


Conclusions in solving e-commerce tax issues

• OECD countries and non OECD countries are firmly committed to the basic principles in the Taxation Framework Conditions (Ottawa) –Taxation neutral and equitable

• Lack of domestic regulations in many countries and need of clarification

• Consumption Taxes: specifically in not developed countries

• Income Taxes: Double Tax Treaties: to include a section, specifically for e-commerce


Thank you!

www.sms.com.ar

[email protected]


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WORLD SERVICES GROUP€¦ · WORLD SERVICES GROUP. E –Commerce •Taxation Aspects of Electronic Commerce • Description ... • Leasing and rendering of services is subject to