UK says website doesn't create PE

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"Having a UK website does not mean that a non-resident company has either a fixed place of business in the UK or a dependent agent in the UK. All of the trading activity could be taking place outside the UK".  


This HMRC's issue briefing dated March 1 on "taxing the profits of companies that are not resident in the UK", would give a breather to foreign MNCs.  Apart from providing clarity on the current taxation provision, the clarification also  provides a possible direction on taxing digital economy transaction.


The also clarifies situation relevant for e-commerce i.e. where a company from outside the UK sells to UK customers via the internet and a UK group company provides warehousing, distribution or other services and support to the selling company. The HMRC release states that "Where this takes place, the UK service company will be taxed only on the profits of its own business, ie the services it provides to the selling company. This is not tax avoidance: it is simply the way that Corporation Tax works, ie it applies to individual companies."


In contrast, India has advocated that website could create a PE, in its reservations to OECD Commentary.  India has also now introduced "equalisation levy" to tax b2b online advertisement payments made to non-residents. It will be interesting to see how different countries deal with digital economy transactions in upcoming Budgets in 2016 and if OECD will be able to work out a resolution in the remaining 9 months !

 

Read more on HMRC's briefing - https://www.gov.uk/government/publications/issue-briefing-taxing-the-profits-of-companies-that-are-not-resident-in-the-uk/hmrc-issue-briefing-taxing-the-profits-of-companies-that-are-not-resident-in-the-uk

 

 

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