Standard Of Determination Of Permanent Establishment Under The Condition Of Digital Economy

Research on permanent establishment is a vital basic part among various research targets in international taxation as well as the definition for it, an important conception which should be clearly stated and particularly specified in mutual or multilateral tax treaties. Generally, tax conventions concerning two countries or more will be established by the terminology in international taxation for the levy duty of one party in the other. Since permanent establishment usually refers to a stationary position for entire or partial business, then affiliation will be underpinned by principles of permanent establishment. However, as long as digital economy sweeps the world, “fixed business sites” and “visible business activities”, two core factors in traditional concept of permanent establishment have gradually disappeared. In this case, a feasible standard for determining the attribution of business incomes and profits has become an influential element for permanent bodies to establish principles.Firstly, the background of digital economic development is introduced in the text with the statement for the diametric differences lie in business principles, organization charts, and ways of profit in new-style companies established in digital economic era from those of traditional enterprises operated in conventional trade terms. Moreover, classification of enterprise types and business modes in digital economy has been made to clarify that traditional levy mode and current domestic.Secondly, definition and detail standards for permanent establishment in prevailing regulations, issues in implementation of related legislations in different countries and deficiencies in specifications for the concept are summed up. With comparative analysis on the purposes and basis for OECE and UN template to define permanent establishment, the paper has concluded inherent defects and shortcomings in international tax in current system.In addition, it has surveyed features of enterprises applying such economic mode and profit mechanism by studying some typical economic modes generated by digital economy. It is found that digital economy is changing the operation mode of traditional international business and the definition for permanent establishment has significantly changed in existing new corporate structures.After a thorough investigation on cases with the combination of development trend of digital economy, it has summarized new principles which should be followed in defining permanent establishment and recommended modifications and improvement for the defining standards.