The territoriality principle as a basis for the taxation of online businesses
Posted: Wed Dec 18, 2024 4:57 am
The emergence and development of online businesses has added enormous complexity to the tax treatment of commercial transactions. Now there are multiple business models, so different situations can arise, and also the freedom to carry out operations between different countries.
Until now, the principle of territoriality was quite clear, since the situation of the seller and the buyer were perfectly defined, but now other conditions come into play. Even so, the tax treatment of the operations continues to depend on the location of the parties involved.
The concept of territoriality
Territoriality indicates, in each case, the geographical canadian colleges universities email list location of the seller and the client and defines the taxes involved in each transaction depending on where each one is located.
In a sale transaction of a certain merchandise, the seller declares his profit in the country from which he operates and where he has a permanent establishment . He will apply the VAT of his country if it is a national transaction or if the client is within the EU and is not registered as an intra-community operator. If the client is outside the VAT territory, the operation is considered an export and is not subject to VAT, but it is subject to the corresponding tariffs.
How can this change in e-commerce?
But, leaving aside the general criteria, it may be the case that the selling company is located in one country, the client in another and the transaction takes place in a third. Let's suppose a Spanish company that sells to the whole world but does so through a website hosted on a server in another country. What is the treatment of this type of business ?
Until now, the principle of territoriality was quite clear, since the situation of the seller and the buyer were perfectly defined, but now other conditions come into play. Even so, the tax treatment of the operations continues to depend on the location of the parties involved.
The concept of territoriality
Territoriality indicates, in each case, the geographical canadian colleges universities email list location of the seller and the client and defines the taxes involved in each transaction depending on where each one is located.
In a sale transaction of a certain merchandise, the seller declares his profit in the country from which he operates and where he has a permanent establishment . He will apply the VAT of his country if it is a national transaction or if the client is within the EU and is not registered as an intra-community operator. If the client is outside the VAT territory, the operation is considered an export and is not subject to VAT, but it is subject to the corresponding tariffs.
How can this change in e-commerce?
But, leaving aside the general criteria, it may be the case that the selling company is located in one country, the client in another and the transaction takes place in a third. Let's suppose a Spanish company that sells to the whole world but does so through a website hosted on a server in another country. What is the treatment of this type of business ?