The Research Of The Application Of The Permanent Establishment Rule To Electronic Commerce

The digital age has been witnessing the growth of an international, digital and paperless commercial model. Electronic commerce has been experiencing an unprecedented development. Compared with the traditional commercial model, electronic commerce has its intrinsic advantages. However, the international taxation rule founded in the frame of traditional commercial mode—the permanent establishment rule—is being challenged by the features of electronic commerce. How to apply the permanent establishment rule to electronic commerce and, accordingly, distribute the taxation interests between countries equitably gradually becomes a problem that the international taxation legal professionals, countries and related international organizations pay much attention to.Under the current permanent establishment rule, the source-state can introduce both "place of business" and "dependent agent" criteria to find the existence of a permanent establishment and, accordingly, obtain the priority taxation right over the cross-border income. But the features of electronic commerce, such as virtualization, has brought forth different opinions about the application of the permanent establishment rule to electronic commerce and the possibility of the falling apart of the existent international taxation system. For instance, the different opinions may lead to the double taxation on the cross-border income by both source-state and residence-state. The development of electronic commerce depends on not only the information infrastructure, but also a healthy legal circumstance. The electronic commerce in China just started, and in addition to the broadly acknowledged rules and the importance of active participation in the rule-making process, we should pay attention to the current situation of China. We should also analyze the effects on the small-medium sized enterprises in electronic areas by the permanent establishment rule from a long-term perspective and establish opinion of our own about the application of the permanent establishment rule to electronic commerce in order to be prepared for the arrival of the electronic commerce age.