Tax Jurisdiction Distribution And Value Orientation Of Income From Cloud Computing Services

In the era of digital economy,cloud computing services are booming and developing rapidly.Cloud computing services are products used as services,usually divided into three service modes: Software-as-a-Service(Saa S),Platform-as-a-Service(Paa S)and Infrastructure-as-a-Service(Iaa S),or through three kinds: private cloud,public cloud and hybrid cloud.The international tax jurisdiction mainly consists of the tax jurisdiction of the source and the resident.The principle of permanent establishment differs from the principle of tax jurisdiction of the resident but belongs to the source.The Permanent Establishments are divided into sites and local agents and their profit scope is determined by the principle of "practical connection" and "gravitation".Principle of "economic allegiance" in the 1923 report is the cornerstone of the international tax order and tax jurisdiction.Due to the diversity of service types,the virtuality of service forms,the digitization of transaction contents and the invisibility of transaction subjects,cloud computing services have brought specific problems such as the fuzzy classification standard of taxable income and the inability of the principle of Permanent Establishment,which have exacerbated the conflicts of international tax jurisdiction.Hybrid contracts for cloud computing services should be interpreted exactly as they are interpreted in the OECD Model Tax Convention on Income and on Capital(2017),with flat or separate taxes for contractual purposes determined by whether the services are "interlinked".Payments from cloud computing services should be considered business income in most cases.Unless the cloud computing service provider has a permanent establishment in the user's jurisdiction,it can only be taxed in the country where the cloud computing service provider is registered.In exceptional cases,a small amount may be considered as royalties or property income.Only if the cloud computing service provider owns,operates and has actual control over the server can it become a permanent establishment within the user's jurisdiction.Local agents that perform user support,sales,and marketing activities on behalf of cloud computing service providers will typically constitute a permanent establishment or other taxable presence.The taxation right of payments from digital economy and cloud computing services should continue to be examined and discussed in the perspective of " economic allegiance ".From the perspective of value creation,a new rule of connection degree should be formed to make the closest economic relation clearly between digital activities and payments of source country and enhance the certainty of tax revenue under the trend of breaking through the physical existence of permanent establishment.