E-commerce is the biggest innovation of the 21st century and is one of the main pillars of many countries' economy. Thanks to e-commerce, companies and entrepreneurs can sell their services or products all over the world without leaving their offices. E-commerce has caused the modification of tax laws in many countries since it is difficult to determine where a company is operating physically and what taxes it should pay. Today registering an offshore company for e-commerce is not a complicated task and is a very beneficial option to save taxes and delay the payment of them. That is to say, a company can sell a non-tangible service in Europe or the United States without being present in the country physically, but through a company and bank account opened in Hong Kong the company could receive the money from sales and make purchases with a single click. In this particular case, in reference to taxes, the Hong Kong government will not consider the company as a resident if it does not carry out activities on its territory involving local companies or individuals. As a result the company will not pay any tax if it complies with these conditions.
Types of E-Commerce
E-commerce can be classified into 2 types. On one hand there is an e-commerce of tangible products and on other hand e-commerce of intangible products. Depending on the type of e-commerce carried out by a company, it will be easier or more difficult for tax authorities to identify whether corporate taxes should be paid or not.
E-commerce of intangible products
It is the type of e-commerce that gives most headaches to the tax authorities since it is very difficult to determine where the company is operating, where the director is residing fiscally and to where the goods are sent. In the e-commerce of intangible products there is no physical delivery of a product to a customer and everything is done online. That is, the client will receive his service by email or on the screen of his computer. There is no way to know in which country the company operates physically.
E-commerce of tangible products
The e-commerce of tangible products is also done online but the only difference is that there is a shipment of a physical product to a specific country, from and to a particular address. Therefore the tax authorities can determine the location of a company by transport agencies. For example, depending on where you are storing the product before shipping them, the tax agencies could determine whether the company operates in one or another country. However, this can be complicated if the company makes dropshipping and sends the product from tax haven even though its country of registration is a high tax country.
In this section of frequently asked questions the client will know all the secrets of e-commerce, the ways to make payments, receive payments and the appropriate steps to expand his business online complying with all tax laws of his country of residence.