Digital Sales and Distribution
Of all the products that can take advantage of e-commerce, those that can be put into digital form are probably the most ideal. Change is coming rapidly, as vendors and customers alike begin to understand the benefits of digital delivery, and the necessary technology becomes more widely available.
'Technology' here means both the systems to store, handle, process and download digital product files, and also the availability of high-capacity communications channels into people's homes and workplaces.
Subject only to the technology constraints, a rather wide range of products and services are suited to digital, and thus, offshore, distribution. A partial list includes:
- Computer softwares
- Booking services
- Publications including books, magazines, newspapers, directories
- Professional services
- Training courses
For any of these products and services, it is clearly feasible to supply a customer in a high-tax area without incurring any local import duties, VAT or sales taxes, when these might apply. As much as national taxing authorities would like to be able to capture taxes on such transactions, they understand that it is not possible under current rules; and it is not clear when any agreement is likely to be reached among OECD countries about a mechanism for taxing digital downloads of products or services. The EU has adopted a directive which would extend VAT to digital downloads by consumers; but the proposal has been attacked as unworkable and premature by the US.
The situation regarding corporation (income) tax is clearer, but equally satisfactory for an offshore business: profits made in Luxembourg will be taxed under the corporation tax in Luxembourg (See our Tax Law ).
