India: Concept of Permanent Establishment and Electronic Commerce

Last Updated: 8 April 2003

Gurram Ramachandra Rao

Today, tax administrations throughout the world face the formidable task of protecting their revenue bases without hindering the development of new technologies. The challenges posed to tax systems worldwide by Electronic Commerce (EC) are real. Numerous governments and fiscal organizations and institutions (e.g. the OECD) are focusing on how to address them in a spirit of collective co-operation. The allocation of taxing rights must be based on mutually agreed principles and a common understanding of how these principles should be applied. In addition to the need for consensus between governments, a need for co-operation between governments and business has also been identified.i

Changes in business practice due to the advent of EC will affect taxation in the following ways: (i) Lack of any user control as to the location of activity: As the physical location of an activity becomes less important, it becomes more difficult to determine where an activity is carried out, and hence the source of income. (ii) No means of identification of users: In general, proof of identity requirements for internet use is very weak. The pieces of an internet address (or "domain-name") only indicate who is responsible for maintaining that name. It has no relationship to the computer or user corresponding to that address or even where the machine is located. (iii) Reduced use of information reporting and withholding institutions: Traditionally taxing statutes have imposed reporting and withholding requirements on financial institutions, which are easy to identify. In contrast, one of the great commercial advantages of EC is that it often eliminates the need for intermediary institutions. The potential loss of these intermediary functions poses a problem for the tax administration.ii

The principle that a country has the right to tax the business profits of a resident of another country only if that person has a permanent establishment in that country is one of the primary legal principles in international tax law and is a vital provision in international tax treaties. The concept of permanent establishment is essentially a trade-off between source state and residence state jurisdiction to tax. It determines whether an enterprise carried on in more than one country is subject to tax on its business profits only in the country of residence; or if that enterprise is also subject to tax on the same business profits in one or more of the countries in which the business is carried on.

A taxpayer is generally taxed on its worldwide income in the country of its residence (‘residence based taxation’).iii In the case of a company, this is usually the place where the company is incorporated, registered, or has its place of central management and control. A company may also be taxed in another country if it has a recognized source of income there (‘source based taxation’). Generally tax treatiesiv restrict the use of domestic source rules by requiring a certain minimum nexus to allow taxation in that jurisdiction. Thus, taxation of business income on the basis of the source rule requires the presence, in the country of source, of a Permanent Establishment of the enterprise sought to be taxed.

But when it come EC there are lot questioned that are raised. For instance, whether international trading by an enterprise through EC will result in the enterprise creating a taxable Permanent Establishment (PE) in the other countries in which customers are located. The most important aspect here will typically be whether the existence of a web site and server in a country where no employees are located is sufficient to create a taxable PE. A related question would be whether an Internet service provider can be considered to be a dependent agent? Similarly, if an enterprise provides excess server capacity to another business to operate a web site, is equipment (the webserver) considered to have been leased? If it is determined that an enterprise does have a PE in another country, another important issue then arises: How to attribute profits to the PE? Secondly, EC gives rise to new issues concerning the characterization of payments under double tax treaties. It is often difficult to distinguish whether payments for activities such as searching a computer database and downloading a document represent payment for the sale or lease of property, payment for the provision of services, or royalty payments. If double tax treaties strictly follow the OECD model tax convention, the distinction may have little importance as taxing rights will be allocated to the country of residence of the enterprise unless it has a PE in the other country.v

The concept of permanent establishment was originally developed under Prussian domestic legislation and developed a narrower meaning as the necessity of prevention of double taxation grew among German Statesvi Between 1927 and 1946, a number of draft tax treaties, which included variations of the permanent establishment principle, were introduced by the League of Nations but no commonly accepted definition of permanent establishment was established. In 1958, the Fiscal Committee of the Organisation for Economic Co-operation and Development (the "OECD") published its first report with a draft definition of permanent establishment. This draft definition formed the basis for Article 5 of the OECD Model Convention and, with some modification, was also used for Article 5 of the UN Model Convention of 1980.vii

There are generally three circumstances in which a "permanent establishment" will be found to exist for treaty purposes. The primary rule provides that a permanent establishment exists if there is a fixed place of business through which the business of the enterprise is wholly or partly carried. There are a number of implied conditions that must be satisfied in order to constitute a permanent establishment. If one of those conditions is not met, there is no permanent establishment under the primary rule. Where the conditions of the primary rule are not met, a permanent establishment may be deemed to exist under either a "construction clause" or the "agency clause" in the relevant bilateral tax treaty.

Permanent Establishment and Virtual World

The first question to ask is "What is the difference between the taxation of an Internet-based international transaction and a conventional transaction?" The answer should provide tax administrators with reason for optimism: where a sale results in the physical delivery of goods, there is generally no difference. Shipments must still go through customs, are subject to import duties, and may be subject to income or consumption taxes based on rules that have been around for decades.viii

The growth of international electronic commerce will undoubtedly pose real—though often exaggerated—difficulties for the administration of national tax systems as they are currently structured. The list of possible issues is a lengthy one, but at least four have been the focus of much recent concern and analysis:

  1. Should Internet content be subject to customs duties or new taxes?
  2. Is the concept of "permanent establishment" valid in cyberspace and, if so, is the existing definition adequate to ensure that different jurisdictions do not tax the same income?
  3. Will electronic commerce increase the incidence of non-compliance with or avoidance of consumption taxes? How will the characterization of intangible products and services affect that trend?
  4. Will the ease of conducting business electronically lead to "harmful" tax competition among countries?

But for the purposes of this article we are concerned is with the aspect of permanent establishment.

OECD’s Permanent Establishment Concepts in Cyberspaceix:

Tax treaties have created the concept of a "permanent establishment" in order to establish a nexus for local country taxation. The OECD Model Treaty defines a permanent establishment in Article 5 as "a fixed place of business through which the business of an enterprise is wholly or partly carried on." There is a clear attempt to distinguish substantive economic activity, which creates a taxable presence, from mere "preparatory or ancillary" activity; the latter, although conducted through a "fixed place of business," does not create a taxable permanent establishment. Although not free from doubt, the permanent establishment concept, with its requirement of a fixed place of business, tends to lend some certainty to the circumstances in which a foreign person will be subject to tax in a host country. Moreover, as described in the business profits article, Article 7, of the OECD Model Treaty, the income that is sought to be taxed by the host country must be "attributable to" the economic activity of the permanent establishment.

Article 5 of the OECD Model Tax Treaty also distinguishes when, and under what circumstances, the activity within the host country of an agent of the foreign person will establish the requisite nexus to permit direct taxation of the foreign person’s business activities by the host country where there is no "fixed place of business." A foreign person will not have a taxable presence solely by reason of using an agent, regardless of the type of activity carried out on behalf of the foreign principal. Rather, the agent must be "dependent," that is, dependent both legally and economically, on the foreign person. Beyond that, the agent must be able to enter into contracts in the name of the foreign person, which, at least, means that the agent must be able to bind the foreign person to a contract as a matter of local law. If these indicia are not present, the OECD Model Treaty takes the view that the agent is one of independent status and the principal cannot be taxed by reason of using the agent. In such a case, the host country, in effect, is conceding that the taxation of the agent’s income is an appropriate amount of taxing jurisdiction for it to have in the context of the overall transaction.

As noted, no "fixed place" of business is required if the foreign person is using a dependent agent. By requiring that the agent be dependent and conclude contracts in the name of the foreign principle, the dependent agency concept is trying to link taxing jurisdiction to the notion of significant economic activity occurring in the host country in relation to the transaction under scrutiny. Because of its insistence on a "fixed place" of business, the permanent establishment rule should not create taxation for those taxpayers planning electronic commerce transactions with customers in countries where they have no other business activity. For example, selling widgets over the Internet should not, in and of itself, result in a United States company having a permanent establishment in another country; the economic functions creating the income simply would not have occurred in that country.

Nevertheless, there can be no assurance that contemporary international taxation principles lead, inevitably, to such a result. As a practical matter, it can be expected that taxing authorities of net consumers of products and services marketed through Cyberspace will seek out ways in which to tax these transactions. In view of the fact that prior to electronic commerce, most of such transactions would have been readily taxable by the purchaser’s country, at least to some extent, under traditional principles, because the seller would need to have distributors within the country to market and sell its products or services there.x Reaching for such a position, taxing authorities will seek to develop analogies and analyses that relate electronic commerce transaction flows to fixed places of business that can be found "in-country." In this regard, attention needs to be drawn to two potential "hooks" upon which a finding of permanent establishment existence could be supported. First, there is the issue of whether the geographic presence of a server with the relevant Web site is adequate to create a permanent establishment. Second, there is the issue of whether the ISP creates a dependent agency permanent establishment for the foreign merchant.

The Commentary to the permanent establishment article of the OECD Model Treaty has something arguably applicable. Paragraph 10 of the Commentary on Article 5 contains a discussion of the circumstances under which activities conducted through automatic equipment such as "gaming and vending machines and the like" may constitute a permanent establishment. In these cases, a permanent establishment may exist if "the business of the enterprise is carried on mainly through automatic equipment, the activities of the personnel being restricted to setting up, operating, controlling, and maintaining such equipment."xi

The key factor, according to the Commentary, is "whether or not the enterprise carries on a business activity other than the initial setting up of the machines." The Commentary suggests a "facts and circumstances" approach:

A permanent establishment does not exist if the enterprise merely sets up the machines and then leases the machines to other enterprises. A permanent establishment may exist, however, if the enterprise which sets up the machines also operates and maintains them for its own account. This also applies if the machines are operated and maintained by an agent dependent on the enterprise.xii

Clearly, as the nation most likely to be selling to foreign customers through servers based abroad, India should maximize its taxing jurisdiction by adopting a policy that a server geographically present in a country does not create a permanent establishment. It is also possible to see how other countries, whose tax revenues may be perceived to be threatened, could look to the OECD Commentary for some support, at least by analogy. Nevertheless, as mentioned earlier, ultimately an attempt to treat a server as a taxable permanent establishment must fail, in the face of the ease with which the server with the Web site can be relocated offshore.xiii

In late 1999, the OECD’s Working Party No. 1 on Tax Conventions and Related Questions released a discussion draft of comments ("OECD Draft") that would clarify the definition of permanent establishment in Article 5 of the OECD Model Treaty. In that document, the authors distinguish between a Web site, which consists of computer programs and data, and computer equipment on which the Web site is hosted. The OECD Draft proposes that a Web site, without more, cannot create a permanent establishment because it has no "fixed place." However, if the Web site owner owns or leases the server on which the Web site resides, the combination of the two can create a "fixed place of business" for purposes of Article 5.xiv

Under the OECD Draft, the fact that the Web site is hosted on a server owned and operated by an ISP is not enough to analyze the situation as combining the Web site and the server. Moreover, the OECD Draft notes that even in the case where the server is owned/leased by the Web site provider, the server must remain in one place long enough to become "fixed" for purposes of Article 5.xv Finally, the OECD Draft states that even where a "fixed place of business" exists, a permanent establishment will not exist if the activity conducted through the computer equipment is "preparatory or auxiliary." Unfortunately, the OECD Draft offers only vague guidance on this point, directing the reader to a "facts and circumstances" analysis.xvi

Moreover, there is the issue of whether the ISP providing a server creates a "dependent agent." Where the Web site accepts orders after, in effect, establishing all the terms of the sales or services contract with the customer through interactive, but pre-programmed, decision software, and then, again automatically, directs the shipment of the goods or the provision of the services, a basis may exist for analogizing the ISP’s server to an agent of the nonresident seller. Arguably, however, the ISP should be an "independent agent." In the typical case, the ISP will be analogous to an independent broker with myriads of "principals" with respect to any one of whom it is not dependent either legally or economically. Beyond that, the computer programs that operate to engage in the transaction probably have been created and installed on the Web site (and thus the server) by the foreign merchant, itself, and not by the ISP; accordingly, it cannot be said that it is the ISP that is entering into contracts in the name of the foreign merchant, although it may provide the equipment--the server--that enables this to occur.

The OECD Draft essentially agrees that a typical ISP cannot provide a "dependent agency" permanent establishment with respect to the provider of the Web site. More importantly, the OECD Draft is conclusive that the Web site itself cannot be a dependent agent. This is because a dependent agent must be a "person," according to the OECD Model Treaty, and a computer program, no matter how sophisticated, is not a "person."

ISPs providing online or database services in their own right may themselves be treated as having a permanent establishment where they actively provide such services, e.g., America OnLine’s extensive organization of electronic information and provision of "front end" entry into the Internet, particularly if those activities are classified as "services" for tax purposes. By contrast, if the activities are treated as the sale of property, the ISP can argue that it does not have a permanent establishment, but merely a facility used "solely for the purpose of storage, display or delivery of goods."xvii

As the OECD Draft concludes, a Web site, alone, should not qualify as a "fixed place of business." As noted, it is, by its nature, ephemeral, a collection of electrons organized into bits of data. It can be moved from one server to another with great ease. Thus, it does not have the "permanence" envisioned by the concept of a "fixed place of business." One is tempted to apply the analogy of the tax treatment of sales through a mail-order catalog to electronic commerce transactions through a Web site. At first blush, this seems an extremely apt analogy; some Web sites don’t arise to much more than a listing of products coupled with an order form. In those cases, the Web site isn’t much more than an electronic catalog, advertising products and soliciting sales. However, as electronic commerce becomes more interactive, customers will, in effect, be inquiring about specific products and terms of sale, and the transaction looks less and less like a purchase from a mail order catalog. As one commentary has put it:

Computers and telecommunications equipment at present, and in the future, may do more than routinely execute commands. This equipment may perform credit checks, enter into purchase and sales agreements and perform other functions that, if performed by individuals located in the United States, would be found to comprise a U.S. trade or business and permanent establishment.xviii

Clearly, the technology and the marketplace that takes advantage of it are going to present challenges to the simple adaptation of traditional permanent establishment concepts to the world of electronic commerce. The OECD Draft has already been criticized for not addressing a number of the issues surrounding its general principles.xix

A Critique Analysis of the OECD Permanent Establishment Model

The shift in business models to incorporate electronic commerce, as well as the constant use of Internet as a means of business attracted the attention of both private sector tax professionals and government tax authorities. Corporate tax executives recognized several years ago that e-commerce would create both compliance challenges and planning opportunities while tax authorities became concerned that the freewheeling, jurisdiction-blind nature of e-commerce would erode their tax bases. The current general consensus among business tax professionals is that existing tax rules can accommodate e-commerce transactions and therefore the compliance challenges will be resolved and planning opportunities will be pursued in the normal course of business. While tax authorities also tend to agree that existing tax rules can be applied to e-commerce, they are not yet convinced that they have identified all of the potential chinks in their armor and quantified the related potential loss of tax revenue. This uncertainty continues to fuel a significant policy debate on the taxation of e-commerce at the international, national and sub-national levels. xx

Electronic commerce may pose problems for the definition of permanent establishment that existing tax treaties do not address. The most obvious question concerns the ability to access a Web site from within a particular taxing jurisdiction. Does the fact that consumers can place orders through a foreign firm’s Web site subject that firm to income taxes in the country where the customer lives? The answer to that question is almost certainly "no." A Web site has no physical presence, and thus cannot be considered as a permanent establishment in any meaningful sense. To say that the ability to access a Web site, without some other more substantial contact, is sufficient to create permanent establishment is to say that online businesses are liable for income taxes in every country where their customers happen to reside. Such a broad definition would be virtually useless. If anything, the ability to access a foreign Web site is a lesser degree of contact than is the solicitation of orders via catalog or telephone. Under existing tax principles, mere solicitation does not create a permanent establishment. That principle should not be abandoned—and indeed should be clarified—with regard to electronic commerce.

A second, more complex question concerns the location of computer file servers: should the mere presence of a server in a particular taxing jurisdiction be considered sufficient contact to create permanent establishment? Again, the best answer to that question is "no." In most cases, the existence of a foreign-owned server does not require employees to be present in the host country—traditionally a prerequisite for permanent establishment. But even when a business maintains its own server through its own employees, the level of contact with the host country would rarely rise above the "storage, display, or delivery of goods" standard that exists in the OECD Model Tax Convention. Following the OECD’s guidelines, most tax treaties do not consider facilities that are used in that manner as a permanent establishment. A computer file server is essentially used for exactly the same purpose.

There are additional reasons why an in-country file server should not be defined as a permanent establishment, not the least of which is Article 5 of the Model Treaty. Article 5 has generally been interpreted to exclude mail-order activities as insufficient to create permanent establishment. Functionally speaking, a Web site that displays product information and takes orders from customers is the equivalent of an electronic catalog and should thus receive the same tax treatment as postal solicitations.

Another more practical problem is that defining servers as permanent establishments will open the door to tremendous complexity in the allocation of income between competing jurisdictions. It is all but impossible to determine the income attributable to any one server, and many Web sites are housed on multiple servers located throughout the world. Apart from the jurisdictional headaches, the location of a server is simply not a good proxy for where economic activity takes place and would therefore be a largely arbitrary tax standard.

Finally, countries that do not tie tax strings to the placement of servers within their borders will clearly benefit from increased server presence as companies seek the best treatment available. Because the location of a server is irrelevant from a technical standpoint, shifting servers would be an irresistible way to minimize liabilities. Indeed, tax advisors are already telling their foreign clients that in order to "avoid the possibility of an inadvertent permanent establishment in the India, [they should] use a Web server located outside of the India," which suggests India should clarify its position on the issue.xxi Despite this reality, tax authorities in several countries and at least one OECD discussion paper have indicated that the presence of a server might be sufficient to create permanent establishment.xxii

Regardless of what individual governments decide to do, the classification of computer servers as permanent establishments is not likely to survive without an international agreementxiii The borderless nature of electronic commerce means that countries which make taxation contingent upon Web server location will encourage the migration of servers beyond their borders. Few governments would be willing to adopt such a policy unilaterally. An example of such policy competition can seen within the United States, where some states have been thwarted from taxing based on server presence by others that have disavowed that tactic.

Conclusion:

The notion of a "permanent establishment," as embodied in tax treaties, is a crucial one. Where the concept is applicable, one treaty partner relinquishes its jurisdiction to tax the business profits of residents of the other treaty partner unless local activities rise to a certain threshold, i.e., unless they amount to a permanent establishment. Thus, the purpose of the permanent establishment concept is to define when a nonresident has established sufficient presence in a jurisdiction so as to warrant direct taxation of his business profits there. When a taxpayer’s presence is not sufficient (i.e., when no permanent establishment exists), source-based taxation is ceded in favor of residence-based taxation.

The development of electronic commerce (EC) has revolutionized the way businesses operate. It has also challenged the adequacy and fundamental validity of principles of international taxation such as physical presence, place of establishment etc., that have formed the basis for assessing tax liability.

With the advent of EC, even smaller corporations and individuals can aspire to have a global presence. Correspondingly EC has also bridged the gap between developed and developing countries. It has therefore become extremely essential to provide a legal and tax environment that is conducive to the growth and development of these technologies. The implications of the growth of EC on domestic and international tax systems has already been felt and considerable work on this subject has already been done by countries like U.S., U.K., Australia, Canada etc. They have identified the issues arising out of EC and have attempted to lay down the fundamental principles of taxation of EC. Most countries have advocated principles of neutrality, certainty, avoidance of double taxation and low compliance cost. This paper has examined the positions taken by these countries and other multilateral agencies like the Organization for Economic Co-operation and Development (OECD) in order to identify the options available for Indian tax authorities.

A substantive issue raised by these technologies is identifying the country or countries, which have the jurisdiction to tax such income. Whether a web server and an Internet Service Provider (ISP) will constitute a Permanent Establishment (PE) or not are questions which have been haunting policymakers. The traditional concept of source-based taxation may lead to a global migration to low tax or tax haven countries. Any attempt to artificially tax E-commerce will also accelerate such migration. Therefore residence-based taxation is being advocated by many countries, with the U.S. being one of its main proponents. However, determining residence itself is likely to be problematic.

Classification of income arising from transactions in digitized information, such as computer programs, books, music, or images is also an issue that requires consideration. The distinction between royalty, sale of goods, and services income must be refined in the light of the ease of transmitting and reproducing digitized information.

Footnotes

i Basu S, 'Taxation of Electronic Commerce', Commentary, 2001 (2) The Journal of Information, Law and Technology (JILT) .

ii Report of the Electronic expert Group to the Attorney General (Australia), Electronic Commerce: 'Building the Legal Framework', (1998), <http://www.law.gov.au/aghome/ advisory/ecag/single.htm.

iii Report of the Electronic expert Group to the Attorney General (Australia), Electronic Commerce: 'Building the Legal Framework', (1998), <http://www.law.gov.au/aghome/ advisory/ecag/single.htm.

iv See OECD Tax treaties <http://www.oecd.org//daf/fa/treaties/tcecommpay.htm; 1996 Treasury Paper. November 1998 'Selected Tax Policy Implications of Global Electronic Commerce', A Discussion Paper. United States Treasury Department Office of Tax Policy..

v GIIC New Delhi. 'A White Paper on India's Legal Regulatory Frame Work for E-Commerce', Seminar paper, International Conference on Electronic Commerce, 15- 16 June 1999. <http://www.giic.org (path: events/ec990615india.html);

vi GloriaJ.Geddes "Rethinking the concept of permanent establishment in the light of an e-commerce driven international corporation."www.smithlyons.ca,practiceareas/Tax/Shorex_North_America_2001_conference /Rethinking_The_Concept_Of_Permanent_Establishment_In_The_Light_Of_An_Ecommerce_Driven_International_Corporation.htm.

vii PE Implications When Furnishing Consulting Services under OECD and U.N. Model Treaties, May 21, 2001, www.gattiassociates.com/developments/imde_291.htm; Chissick, M and Kelman, A (2000), 'Electronic Commerce Law and Practice', 2nd Edition, para 3.07; Report of the Electronic expert Group to the Attorney General (Australia), Electronic Commerce: 'Building the Legal Framework', (1998), <http://www.law.gov.au/aghome/ advisory/ecag/single.htm; Pitt, L F, Berthon, P R, and Berthon, J P (1999), 'Changing Channels: The Impact of the Internet on Distribution Strategy', Business Horizons, 42, 2 (March-April), 19-28; EU Committee (2000), 'Position Paper on the Taxation of electronic Commerce', see <http://www.eucommittee.be, February 1, 2000.

viii See David E. Hardesty, "Struggling to Tax E-Commerce," Siliconindia, September 1998.

ix See Appendix 2 for the definition of permanent establishment.

x It is not particularly relevant whether the distributor is owned by the foreign seller, or is independent; some profit would be available for the distributor’s country to tax in the normal course.

xi Compare the discussion of gaming and vending machines in the Commentary to the OECD Model Treaty. The Commentary notes that, where an enterprise merely sets up such machines initially, and then leases them to other enterprises, no permanent establishment exists. On the other hand, the Commentary provides that a permanent establishment "may exist" if the enterprise that sets up the machines also operates and maintains them for its own account. Paragraph 10 of the Commentary to OECD Model Treaty, Article 5. Vending or gaming machines are unlike servers, however, in that the gaming or vending machines may in themselves constitute a business operation. In contrast, a server, like telephone equipment, is merely a communications device.

xii OECD, Committee on Fiscal Affairs (1997), The Communications Revolution and Global Commerce: Implications for Tax Policy and Administration.; OECD, The Application of the Permanent Establishment Definition in the Context of Electronic Commerce: Proposed Clarification of the Commentary on Article 5 of the OECD Model Tax Convention, Revised Draft for Comments, Revised Draft for Comments, OECD, March 2000, Paris; OECD OBSERVER NO. 208 (1997), Organization for Economic Co-operation and Development (1998). Electronic Commerce: a discussion paper on taxation issues, 17 September. http://www.oecd.org//daf/fa/e_com/e_com.htm#top_e_commerce.

xiii Lukas, Aaron (1999), Tax Bytes A Primer on the Taxation of Electronic Commerce, Cato Institute, 17 December 17 1999, 26-27, and Judd A. Sher, A Band-Aid or Surgery: It is time to evaluate the health of the permanent establishment concept, Tax Management Journal, Washington, 9 July 1999, 415-26; Drake, W.J and K. Nicolaids (1999), "Global Electronic Commerce and the General Agreement on Trade in Services: The "Millenium Round" and Beyond, in P. Sauve and R.M. Stern (eds.), GATS 2000: New Directions in Services Trade, Washington, D.C: Brooking Institution Press.

xiv "E-Commerce Taxation Principles: A GIIC Perspective," GIIC Focus, not dated, available at http://www.giic.org/focus/ecommerce/ectax.html;

xv Electronic Commerce: Taxation Framework Conditions, A Report by OECD Committee of fiscal Affairs, www1.oecd.org/daf/fa/e_com/framewke; On the Application of the Permanent Establishment Definition in E-Commerce: Changes to the Commentary on the Model Tax Convention on Article 5, OECD Committee of fiscal Affairs www1.oecd.org/daf/fa/e_com/ec_1_PE_Eng; Tax Reforms to Promote E-commerce in India, www.giic.org/pubs/IndiaTaxpaper.pdf.

xvi Mann, Catherine L (2000), 'Transatlantic Issues in Electronic Commerce', Working Paper, para. Tax Issues, available at: http://www.iic.com/WP/2OOO; Davies, LJ (1998), 'Model For Internet Regulation', available at: http://www.scl.org/content/ecommerce; Report of the Electronic expert Group to the Attorney General (Australia), Electronic Commerce: 'Building the Legal Framework', (1998), available at: http://www.law.gov.au/aghome/advisory/ecag/single.htm

xvii See article 5(4) of the OECD Model Treaty.

xviii See Revision of the Commentary on Article 12 Concerning Software Payments, OECD Committee on Fiscal Affairs, 29 September 1998; OECD Government/Business Dialogue on Taxation of Electronic Commerce, Hull, Quebec Canada, 7 October 1998; Electronic Commerce: A Discussion Paper on Taxation Issues, a discussion paper prepared by the OECD Committee on Fiscal Affairs, 10 October 1998.

xix Michael P. Boyle; John M. Peterson; Milliam J. Smaple; Tamara L. Schottenstein; and Gary D. Sprague, "The emerging international tax environment for electronic commerce," Tax Management International Journal, June 11, 1999, p. 357.

xx See, Thomas A. O’Donnell, Mark M. Levey and Pat J. Powers, "International Tax Issues for Cyber Transactions", www.bmck.com/ecommerce/cyber.doc, p. 8; "Selected Tax Policy Implications of Global Electronic Commerce," Department of the Treasury paper, November, 1996, sec. 7.2.5, available at http://www.fedworld.gov/pub/tel/internet.txt; Michael R. McEvoy, "Feds Suggest Policies for Internet Commerce," Rochester Business Journal, December 13, 1996.

xxi David Hardesty, "Treasury Comments on International Taxation of Digital Products," November 11, 1998, available at http://www.mshb.com/EC/110998.htm.

xxii See the discussion in Electronic Commerce, par. 93-103.

xxiii The OECD is reportedly planning to provide discussion of this possibility in forthcoming Commentary on the Model Tax Convention.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

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In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions