WORLD SERVICES GROUP

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2 WORLD SERVICES GROUP

3 Latin American Regional Meeting E Commerce Taxation Aspects of Electronic Commerce Description Domestic Tax Implications International Tax Issues Conclusions in solving e-commerce tax issues

4 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

5 E Commerce Trends Business Consumer Government Employee Business B2B B2C B2G B2E Consumer C2B C2C C2G Government G2B G2C G2G G2E

6 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

7 VAT: (Value Added Tax) Domestic Tax Implications 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

8 Domestic Tax Implications 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

9 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?

10 International Tax Issues Internet: www (World Wide Web) Web Page Server I.P.S (Internet Service Provider) Consumer: Downloading Where must Withholding Tax be imposed?

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13 E- Commerce Tax Issues

14 Argentine Income Tax Law International Tax Issues 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

15 International Tax Issues 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%)

16 International Tax Issues 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

17 Latin American Regional Meeting International Tax Issues 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

18 Latin American Regional Meeting International Tax Issues 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

19 Latin American Regional Meeting International Tax Issues 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

20 Latin American Regional Meeting 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

21 Latin American Regional Meeting Thank you!

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