The natural bonding of the Internet and Offshore stems from the fact that both, of their nature, manage to avoid tax. Businesses which can operate on the Internet without, so to speak, touching ground in a high-tax jurisdiction will naturally migrate to offshore jurisdictions; while businesses that already have offshore existence will find it highly convenient to be able to use the Internet to trade with their high-tax customers without having to make a landing in their countries.
As a major offshore jurisdiction with many tens of thousands of offshore enterprises already installed, including many trading companies, it is only a matter of time before Luxembourg becomes a centre of e-commerce activity. The country's location in the heart of Europe, its good telecommunications links, sophisticated business infrastructure and the English-speaking, highly-educated work-force are all factors which will attract the sales, marketing and administrative departments of retail operations, particularly those trading into other EU countries.
In many countries, the distribution of goods from a warehousing facility does not constitute the carrying on of a trade or business in that jurisdiction, so that even for physical goods, in many case it will be possible to avoid a permanent establishment (taxable presence) altogether in many high-tax jurisdictions where trading activities currently take place.
To see an analysis of the current state of legal and tax issues surrounding offshore e-commerce, click here.