Permanent establishment in corporate taxation in the digital era

2020

Digital economy has significantly grew in the past 15 years, and currently it already accounts for more than 50 percent of the whole market capitalization worldwide. There is no longer a need for physical place to generate profits from the particular jurisdiction if business activity is digital. Nonetheless, the international taxation rules of allocating taxation rights for business profits to non-resident jurisdiction has not changed in way to tackle substantial economic presence, without fixed place of business. Thus, resulting in harmful use of permanent establishment principle for tax planning purposes, which has led to profit shifting away from the high-tax jurisdiction to low-tax juri…