OECD Issues Key Report On Classifying E-Commerce Payments For Taxation

Tax-news.com

28 March 2000

The OECD has issued a consultative draft dealing with the nature of payments made in e-commerce transactions, with a view to establishing a basis for their tax treatment. One very important distinction is between royalty payments and purchase payments, since they receive very different tax treatment under many tax treaties and in many tax regimes.

The OECD's press release follows.

See also a very informative article by David Hardesty at
http://www.ecommercetax.com/doc/032700.htm

The text of the consultative draft report is available in Tax-news.com Resources as
OECD TAG Report: Characterisation of E-Commerce Payments

or at
http://www.oecd.org/daf/fa/treaties/tcofecom.pdf

OECD Press Release

Technical Advisory Group on Treaty Characterization of E-Commerce Payments
Draft for Comments

The OECD Committee on Fiscal Affairs (CFA) has undertaken a major consideration of the taxation issues raised by e-commerce and its underlying technologies. The OECD has recognized that the input of the business community and economies outside of the OECD area is an essential element of its deliberations on this issue.

The CFA, through its subsidiary bodies, has therefore engaged in a broad consultation process with the business community and non-OECD economies. This process has been carried out primarily through the use of Technical Advisory Groups (TAG). One of these TAGS, the TAG on Treaty Characterization of Electronic Commerce Payments, has received the general mandate "to examine the characterization of various types of electronic commerce payments under tax conventions with a view to providing the necessary clarifications in the Commentary."

The TAG met in September 1999 and in February 2000. During these meetings, it identified various categories of typical e-commerce transactions and discussed the treaty characterization issues arising from these transactions. The attached document describes the categories already identified and presents the preliminary conclusions of the Group, and their underlying analysis, on how the payments arising from these transactions should be classified for tax treaty purposes.

The Group invites comments from interested parties on both the list of transactions identified, their description, and the conclusions and views expressed on the characterization issues that they raise. The TAG intends to revise the document in light of these comments at a meeting to be held in July 2000. It will aim to release a revised version of the document after that meeting so as to be able to prepare its final report at a subsequent meeting to be held towards the end of the year.

Comments on the attached document should be sent before 31 May 2000 to: Jeffrey Owens Head, Fiscal Affairs OECD 2, rue André Pascal 75775 Paris FRANCE

e-mail: jeffrey.owens@oecd.org

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