On March 1, 2016, UK’s HM Revenue and Customs (HMRC) published a policy document explaining how the rules of corporate tax in the country apply to transnational corporations.
The article states that, as a rule, the foreign company must pay UK corporation tax, if it has a permanent establishment (PE) in the UK, or economic profitable activity is carried out in the UK.
The document stresses that the many different elements contribute to the economic activity of the multinational company, including sales, employees, technology, physical assets and intellectual property. It says that if a company has a customer in the UK, it does not mean that it carries out its economic activity there.
The document also explains the example of the fact that the presence of the British web site does not mean that non-resident company has a permanent place of business or a dependent agent in England.
HMRC says that the concept of PE and as a multi-national company are taxed in different countries is not new, but noted that “what has changed is the way in which businesses operate, not least because of their ability to make sales online in many different countries. This raises questions about whether the updated tax rules for the PE in order to solve these fundamental changes needed. ” HMRC is also noted: “This is a complex area of taxation, in terms of whether the non-resident company is really sells through a PE.”