The main elements of the consensus announced by the 29-member
OECD were:
- a web site cannot, in itself, constitute a permanent
establishment;
- a web site-hosting arrangement typically does not result in a
permanent establishment for the enterprise that carries on business
through that web site;
- an ISP will not, except in very unusual circumstances,
constitute a dependent agent of another enterprise so as to
constitute a permanent establishment of that enterprise; and
- while a place where computer equipment, such as a server, is
located may in certain circumstances constitute a permanent
establishment, this requires that the functions performed at that
place be significant as well as an essential or core part of the
business activity of the enterprise.
The Inland Revenue describes the proposals as too restrictive
for businesses and says corporate taxes should be paid only where
companies are registered and not where they house their
servers.
A spokesman from the Inland Revenue today told OUT-LAW.COM that
the Inland Revenue agrees with the first three points above, but
cannot agree to the final point:
“The UK has taken the view that in no circumstances do servers
of themselves or together with web sites constitute permanent
establishments of e-tailers.”
He added, “We didn’t agree with it at the time it was suggested.
We still don’t agree with it.”
OUT-LAW.COM spoke to Jacques Sassville, the head of the Tax Unit
Treaty Division at the OECD who observed that Spain and Portugal
had joined the UK in taking exception to certain provisions of the
OECD’s proposals.
Mr Sassville said: “This was an Inland Revenue administrative
decision. But it will be up to the UK courts to decide how to
interpret the tax rules.”
