Legal Structuring of Web Based Trading and Tax Complexities in Pakistan A Comparative Study

Abstract

The information technology has brought revolution in everything and the cyber world makes it possible to have access any information by one click. It has changed the entire structure of the commerce. The world trade now mostly comprises on services industry. The concept of permanent establishment has changed. The revenue is now generating in virtual word without having physical presence. The principle of taxation linked revenue generation, but existing tax laws has no provision for digital revenue. The OECD realized this problem and gave a framework of digital taxation under the project of BEPS. The BEPS give proposition about the amendment of double taxation treaties after ratification of multilateral treaties. Many OECD countries changed their tax laws and levied taxes on web-based trading companies. The principle of significant digital presence provides bases of these taxes on digital services. Pakistan as sovereign state faces many difficulties in tax collection. The double tax treaties(DTT) are also big hurdle in collection of taxes from foreign digital companies. There are no proper legal provisions exist in Pakistan tax law about in order to levy taxes on web- based trading entities. Pakistan has become the signatory of the multilateral treaties in 2017 and in 2020 it has been ratified. This article will discuss the legal structure of the Web Based Entities(WBE) and high light the tax complexities in Pakistan. This article will also discuss about the proposed framework and tax structure of the Web Based trading entities. It will give way forward for tax legislation that how to bring these WBE in tax circle in Pakistan keeping in view the best practices of developed countries.

Keywords: Based Erosion Profit Shifting, Significant Digital Presence, Digital Tax Regime, Tax Complicities, Web-Based Trading, Digital Market Challenges, Technology-based Transactions and Business