,LML4810 ASSIGNMENT 2 MEMO - SEMESTER 1 -
2024 - UNISA - DUE : 19 APRIL 2024
MULTIPLE CHOICE,ASSURED EXCELLENCE
The term ‘Permanent Establishment’ (PE) is defined as “a fixed
place of business through which a business of an enterprise is
wholly or partly carried on”. Write a detailed essay in which you
discuss the impact of electronic commerce on PE. In your
answer describe whether the following can be considered as
PE: a web site; server; and Internet Service Provider.
The Impact of Electronic Commerce on the Concept of
Permanent Establishment
The concept of Permanent Establishment (PE) plays a
fundamental role in international taxation. Defined under
Article 5 of the OECD Model Tax Convention as “a fixed place of
business through which the business of an enterprise is wholly
or partly carried on,” PE determines whether a foreign
enterprise has a sufficient presence in a country to be subject to
taxation on business profits in that jurisdiction. However, with
the exponential growth of electronic commerce (e-commerce),
traditional interpretations of PE have come under scrutiny. The
digital economy challenges the physicality and permanence
historically associated with the concept of PE, necessitating a
re-evaluation of how and when tax obligations arise in the
context of borderless, digital business operations.
, 1. The Rise of E-Commerce and its Challenge to Traditional PE
Principles
E-commerce allows businesses to offer goods and services
across borders without the need for physical premises or
personnel in the source country. In the digital economy,
transactions can be initiated, processed, and completed
electronically, often through automated systems that operate
continuously without human intervention. Traditional PE
definitions hinge on physical presence—such as offices,
branches, or factories—which may be absent in e-commerce
models.
This digital transformation raises questions such as:
Can a web server or website constitute a “fixed place of
business”?
Is it sufficient for the enterprise to have a technological
presence in a country?
What degree of control or permanence is required for a
digital footprint to be taxed?
To explore these issues, it is useful to examine three core digital
elements—websites, servers, and Internet Service Providers
(ISPs)—and evaluate whether they can constitute a PE.
2024 - UNISA - DUE : 19 APRIL 2024
MULTIPLE CHOICE,ASSURED EXCELLENCE
The term ‘Permanent Establishment’ (PE) is defined as “a fixed
place of business through which a business of an enterprise is
wholly or partly carried on”. Write a detailed essay in which you
discuss the impact of electronic commerce on PE. In your
answer describe whether the following can be considered as
PE: a web site; server; and Internet Service Provider.
The Impact of Electronic Commerce on the Concept of
Permanent Establishment
The concept of Permanent Establishment (PE) plays a
fundamental role in international taxation. Defined under
Article 5 of the OECD Model Tax Convention as “a fixed place of
business through which the business of an enterprise is wholly
or partly carried on,” PE determines whether a foreign
enterprise has a sufficient presence in a country to be subject to
taxation on business profits in that jurisdiction. However, with
the exponential growth of electronic commerce (e-commerce),
traditional interpretations of PE have come under scrutiny. The
digital economy challenges the physicality and permanence
historically associated with the concept of PE, necessitating a
re-evaluation of how and when tax obligations arise in the
context of borderless, digital business operations.
, 1. The Rise of E-Commerce and its Challenge to Traditional PE
Principles
E-commerce allows businesses to offer goods and services
across borders without the need for physical premises or
personnel in the source country. In the digital economy,
transactions can be initiated, processed, and completed
electronically, often through automated systems that operate
continuously without human intervention. Traditional PE
definitions hinge on physical presence—such as offices,
branches, or factories—which may be absent in e-commerce
models.
This digital transformation raises questions such as:
Can a web server or website constitute a “fixed place of
business”?
Is it sufficient for the enterprise to have a technological
presence in a country?
What degree of control or permanence is required for a
digital footprint to be taxed?
To explore these issues, it is useful to examine three core digital
elements—websites, servers, and Internet Service Providers
(ISPs)—and evaluate whether they can constitute a PE.
