The taxation of non-permanent establishments

The rise of the digital economy has given rise to calls for additional taxes on digitalised businesses which are able to access markets without having a local physical presence. The recent US Wayfair case has decided that an out-of-state seller need not have a physical presence in a state in order to have ‘substantial nexus’ there. A UK company subject to a state or nexus tax may find that relief is not available under the relevant double tax treaty and will need to consider whether unilateral relief is available under TIOPA 2010 s 9(1). In some cases, unilateral relief may not be available and the foreign tax may only be deductible as a business expense under general principles.