Redefining Permanent Establishment Concept of e-Commerce Cross-border Transaction: A Preliminary Study in Indonesia

Hendri Ning Rahayu,Mila S Setyowati

doi:10.5171/2021.565889

Abstract

The development of e-commerce transaction has created problems in taxation policy. The tendency of tax avoidance occurs when countries place little attention to mitigate the problem. Most countries, including Indonesia, face the problem of tax avoidance practices as e-commerce practices can bypass States' territorial boundaries.

Highlights

The rapid development of e-commerce has made Indonesia a vast potential country for the business community to expand its market
The research believed that Virtual Permanent Establishment approach is the most suitable for Indonesia, as it can maintain the integrity of international taxation system in effect by redefining PE principle, albeit the challenges in convincing other countries to take part in the negotiation
Tax avoidance practices that occur in crossborder transactions of e-commerce arise in the absence of a policy that regulates these cross-border transactions explicitly

Summary

Introduction

The rapid development of e-commerce has made Indonesia a vast potential country for the business community to expand its market. Within a considerable market size in Indonesia, e-commerce is transforming into a business that can fulfill people’s daily needs. E-commerce offers the same services compared to the brick-and-mortar business. The advancement of technology has made e-commerce move wellbeyond the traditional market. The developed country is dominating the use of technology, where most of the primary players are the companies who reside outside Indonesia. This condition will do many international businesses eyeing for Indonesia’s market of e-commerce (Mukarromah 2014)

Objectives

Findings

Conclusion