The Taxation of Royalties in E-commerce

Abstract

This paper analyses in which cases e-commerce payments qualify as royalties for the purposes of applying the agreements for eliminating international double taxation. Firstly, the general characteristics and the problems of classification posed by royalties in international taxation are examined to understand the importance such income has in e-commerce. Secondly, two issues are addressed that directly affect e-commerce: on the one hand, the classification of payments for software and, on the other, the classification of payments from downloading digital products. The legal analysis of these transactions is fundamental for determining if the income from e-commerce can be classified as royalties. Thirdly, Spain's posture on royalties and e-commerce is examined to highlight the difference between the criterion agreed upon internationally in the OECD and the particular interests of Spain. Lastly, in a manner of reflection, conclusions are drawn on the treatment of royalties from e-commerce and the OECD’s focus.