International Income Taxation of Cross-Border Electronic Commerce Transactions - a United States-German-New Zealand Case Study

With the growth of electronic commerce tax authorities were faced with the challenge of applying traditional tax principles, which have been developed in times where business comprised the delivery of physical goods and services were provided in face-to-face transactions, to cross-border transactions carried out over the Internet. This article outlines the main issues income characterisation and permanent establishments in the international taxation of cross-border transactions in an electronic commerce environment. It analyses the tax consequences in detail along the lines of a case study considering the United States, Germany, and New Zealand. Moreover, the article deals with the current discussion on the attribution of profits between a head office and its permanent establishment of a business involved in electronic commerce. In the final chapter the work describes tax planning strategies and opportunities that are available to an electronic commerce business to further minimise the tax burden