Research On The Identification Rules Of Place-based Permanent Establishments In The Digital Economy

The current international tax rules follow the principle that the country of residence and the country of origin share the right to tax,and the basis for dividing the right to tax is the rules for the identification of permanent establishments.Specifically,when an enterprise of a resident country establishes a permanent establishment in a country to conduct business activities,the country can only levy tax on the profits attributable to the permanent establishment.In other words,the presence or absence of a permanent establishment represents a shared taxing power in the source country or an exclusive taxing power in the residence country.This rule actually gives the source country the right to tax by judging whether the non-resident enterprise meets the economic linkage of the source country through objective criteria.At present,the determination rules of place-based permanent establishments in the tax treaties of various countries are qualitatively judged from the three aspects of "place","fixed" and "business",and there is no quantitative judgment.However,with the increase in the degree of digitization of various business models,countries have begun to question the rationality of the permanent establishment's determination of the allocation of taxation rights,and believe that its qualitative judgment method is difficult to apply in the digital economy.Therefore,international organizations and countries have put forward many proposals from different perspectives in order to supplement or completely reform the original rules for the identification of permanent establishments.Among them,the OECD has been committed to forming a unified plan for global rules.The proposed Pillar 1 plan gives market countries new taxation rights,and finally received a consensus statement from all parties.However,the introduction and implementation of specific policies still require continued consultations by all parties.Therefore,it can be seen that the declarations of various parties do not necessarily mean that these countries(regions)will join the multilateral conventions of the pillar-one scheme in the future.Therefore,in order to deal with the problem of tax base erosion caused by multinational corporations using digital means to engage in profit-making activities in market countries to obtain relevant profits without paying taxes,it is necessary to revise the rules for the identification of place-based permanent establishments based on physical existence,and to construct a more fair and reasonable international tax rules,and provide a fair environment for the sound development of the world economy.This paper takes the three properties of the identification rules of place-based permanent establishments and the characteristics of the digital economy as the starting point of the analysis,and through the typical case method,analyzes the economic connection caused by the two new business models of Apple App Store and Amazon Online Mall to place-based permanent establishments.In view of the problems of invalidation and the difficulty of identifying the value of data,the first stage of reflection is carried out on the challenges to the current international tax distribution rules.Then it sorted out three proposals put forward by various countries to deal with the challenges of the digital economy,introduced the Pillar 1 scheme based on the integration of the three proposals in detail,expounded the breakthroughs and connections of the Pillar 1 scheme to international tax rules,and analyzed the pillars.The tax base that the market country can allocate from Apple and Amazon after a plan gives the market country new taxing powers.On this basis,this paper puts forward suggestions on how to implement the consensus reached on the Pillar 1 plan into the rules for the determination of permanent establishments in tax treaties: in the short term,through the interpretive remodeling of place-based permanent establishments,the expansion of "place-based" and "fixed" and the concept of "business" to make it suitable for new business models;in the long run,a new clause can be added to the tax treaty,or a separate paragraph can be added to the permanent establishment clause to introduce the concept of a digital permanent establishment and related identification standards;To ensure the legal effect of tax treaties,it is also necessary to supplement and revise relevant concepts of domestic tax law.