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What are the tax implications of doing business on the Internet?

United Kingdom
13/12/2000
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In November 1999, the Inland Revenue and HM Customs and Excise published "Electronic Commerce: The UK's Taxation Agenda", which detailed what these two departments are doing to meet the Government's policies on e-commerce in the UK.

In the UK, direct taxes are levied on the worldwide income of a resident taxpayer, and on the national source of a non-resident taxpayer. Double tax treaties reduce double taxation. However, if the taxpayer has a permanent establishment (i.e. a branch) in the source country, this relief may not be available.

Some countries, e.g. Italy, have indicated that presence of intelligent software which concludes simple contracts may constitute a permanent establishment. The UK government acknowledges that clarification is needed on this issue in the UK.

It may be possible to reduce VAT exposure if contracts concluded are located in a tax haven outside the European Union.

E-tax within the UK and worldwide is still evolving and specific tax advice is essential.

For further information please contact senior Tax assistant, Simon Meredith by e-mail at [email protected] or by telephone on +44 (0)20 7367 2959.

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