Taxing e-commerce transactions: Sweeping non-residents into the Philippine tax dragnet

• Main Author: Zantua, Maria Felicia T.
• Format: text
• Language: English
• Published: Animo Repository 2008
• Subjects: Electronic commerce—Taxation—Philippines; Electronic commerce—Taxation—Law and legislation—Philippines; Tax Law; Work, Economy and Organizations
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/6863
• Institution: De La Salle University

The changing business environment brought about by the rise in E-commerce presents challenges to the existing system of taxation. Hence, the government faces the challenge of adapting the existing tax system to an economy that increasingly ignores physical borders. This study will address the main issue of what E-commerce transactions should be taxed. It will also deal with related issues such as permanent establishment rules, doing business, situs of the transaction and income, and characterization or treatment of digitized (intangible) products. This study is qualitative in nature. This paper applies the case study method to a project designed to examine how the existing tax laws can be adapted to E-commerce transactions to ensure effective and fair imposition of taxes. In taxing E-commerce it should be considered whether the non-resident has established a traditional permanent establishment or by owning, operating and maintaining a server in the Philippines. Another important consideration is the characterization of the transaction. It should be determined if a sale of goods is involved, which results to business profits or one involving payment of royalty. This is to be determined by the use to which the resident buyer will apply to the digitized information. The income tax and VAT liability resulting from the two vary.