ATJ Asian Tax Journal

Asian Tax Journal

Print ISSN 1738-3323 Online ISSN 2733-9270

The Trend of Corporate Tax Systems Pertaining to International Electronic Commerce, and Appropriate Solutions33)

  • Chung, Ji-Sun University of Seoul Graduate School of Taxation

Asian Tax Journal Vol. 16 No. 1 (2015), pp. 99-127

Abstract

This study is to review controversies surrounding electronic commerce (e－commerce) classifiedinto the transaction of physical and that of digital goods, with consideration for the corporate taxacts that are enforced in each country, as well as to find ways to improve the current system. As regards permanent establishments (PEs) conducting electronic commerce, attempts are madeat alterations with the expansion of business on the premise of the revision of the internal tax lawor tax treaty, another interpretation of the place of effective management and a new definition ofPE. In major countries, meanwhile, radical changes have not been seen regarding PEs. Thosecountries tend to include the e－commercial PE in the place of effective management rather thanto impose a new regulation. That way they levy a tax in part. ‘Permanent establishment (PE)’ hasbeen clearly defined by Organization for Economic Cooperation and Development (OECD), butthe definition may not encompass e－commerce that is conducted within computer servers orwebsites. In this regard, there is the need to frame a new regulation factoring in the characteristicsof e－commerce. In relation to PE, it needs to keep a close watch on the aspects of OECD andto thoroughly review the characteristics of e－commerce that covers digital goods in terms ofbusiness activities. In classifying incomes generated by digital goods, Korea needs to itemize them and establishdetailed criteria. In particular, it is imperative to separately arrange items that can be classified asroyalty incomes in order to distinguish them from other items. Korea’s tax laws have notidentified between e－commerce and digital transaction (the former is referred to transactions thatare conducted by the use of electronic devices, but the latter means what information is traded). Hereat, it is necessary to define them exactly. In the case of digital goods, however, new typesare produced continually, and accordingly it is problematic to apply monolithic definition. Instead,multilateral definition is needed as to transaction type.

Keywords

  • Electronic Commerce
  • Physical Goods
  • Digital Goods
  • Permanent Establishment
  • Income Classification

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