Tax analysis of e-Commerce transactions
We have tabulated below some categories of typical e-commerce transactions and their tax implications. The list is not intended to be exhaustive. We have provided examples for a few categories by giving a brief outline of a typical transaction scenario and then discussing the direct tax implications. If you are interested in knowing the tax consequences of any of the stated categories or indeed of other e-commerce transactions not on the list please contact us. We will be pleased to discuss both the direct and indirect tax implications of e-commerce or internet transactions.
| Category of e-Commerce transaction | Scenario | Tax analysis |
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Buyer selects & orders physical goods from an online catalogue/website. Goods delivered by mail/courier. No charge for using catalogue/website. | The income from such sales is “business profits” in the hands of the retailer as the sale does not involve use of copyright. |
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Buyer selects & downloads software from website onto a hard disc or other media | Is income “business profits” or “royalties” connected with payments for the use of or right to use a copyright? Business income not royalty as payment is for personal use |
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Buyer downloads the product onto a hard disc or other media and acquires the right to commercially exploit the copyright in the product | The income is a “royalty” as the payment is for the right to use the copyright in the digital product |
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Seller agrees to provide buyer with updates and add-ons to digital product. No agreement to produce updates or add-ons specifically for a given customer | Whether delivered on a tangible medium or electronically the income from transaction is business profits. |
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For the categories below please contact us for details | For the categories below please contact us for details |
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