Perfection Of The Recognition Rules Of Permanent Establishment Under The Background Of Digital Economy

The rapid and extensive digital transformation has had a profound economic and social impact and led to significant changes in business models,which has triggered global debate in many legal and regulatory fields,including international taxation.The core of the debate is whether the international income tax rules formulated in the "real" economic environment more than a century ago are still suitable for the purpose of modern global economy.Today,however,three important phenomena promoted by digitization-immeasurable scale,dependence on intangible assets and data centrality-pose serious challenges to the basic elements of the global tax system.On the one hand,the emergence of intangible value drivers has completely changed the whole industry and created a new business model.Permanent institutions are not necessary for enterprise operation.Economic benefits can be obtained in the source country through electronic terminal equipment such as the Internet,which will break the original tax connection point-fixed places and lose the right to tax,resulting in the loss of tax in the source country;On the other hand,multinational enterprises(MNEs)transfer their profits to low tax or non tax jurisdictions,make full use of online digital channels,register in low tax or tax-free countries,and conduct remote control through digital devices for tax avoidance.This is the fundamental meaning of the launch of the tax base erosion and profit transfer(BEPS)project and has become the top priority of the 139 member countries of the OECD / G20 inclusive framework.To sum up,the application of the traditional permanent establishment rules and the right to tax are facing great difficulties.The OECD model puts forward a series of measures to deal with the challenges of the digital economy,including adding a new tax-Digital Service tax,using and improving the recognition standard of traditional permanent establishment,withholding tax scheme,virtual permanent establishment scheme,etc.However,due to the difficulty in coordinating the tax interests of various countries,the international community has not reached an agreed tax scheme for the digital economy for many years.At present,in the situation of coexistence of traditional economy and digital economy,the standard of traditional permanent establishment still has its acceptability.Therefore,on the premise that the OECD has made a perfect revision of the traditional permanent establishment standard,it also proposes to add the identification standard of virtual permanent establishment and puts forward a new connection degree standard-significant economic existence.This paper analyzes and demonstrates the differences in the definition standards and scope of such schemes,draws on each other’s strengths to make up for their weaknesses and adapts measures to local conditions,and puts forward the improvement scheme of the recognition rules of Chinese permanent institutions,including short-term and long-term response measures,continuously refine the recognition rules,strengthen the communication and coordination of the international community,and establish a perfect digital tax collection and management system.