Research On The Allocation Of Taxation Right Of Business Profits Of Transnational Cloud Computing Services

In today's technology-driven economic development,especially with the rise of cloud computing,some multinational enterprises have abandoned the model of traditional procurement preprogramming software and server hardware in their global infrastructure and market activities in order to reduce the cost of IT infrastructure.Instead,they have adopted a web-based,third-party hosted application.The increasingly frequent activities of transfer to the cloud will bring a substantial problem,that is,how cloud computing services can adapt to the existing tax system of states.Because of inability to keep up with the pace of technological development,many countries have to employ conflicting and patchwork ways to determine the taxability of cloud computing.Furthermore,They have even applied the existing rules relating to tangible personal property,service,information or data processing to the cloud computing,or directly use the taxation model of traditional E-commerce.In such context,on the one hand,the providers of cloud services and their customers are lack of clear guidance on how to determine their own tax obligations on the basis of a country's tax law.They don't know whether the cloud computing service needs to pay or how to pay taxes.On the other hand,countries may also give different solutions to these problems.This poses a great challenge to the tax treatment of transnational cloud computing services,especially in dealing with the allocation of the right to levy taxes on the business profits.Under the framework of the current international tax system,the principle of pennanent establishment is still the basic rule for the international community to deal with the tax jurisdiction in the era of digital economy.However,the intensifying conflict of international tax jurisdiction has weakened the jurisdiction of the source and also the residents with constant disputes over the distribution of tax right on business profits over cloud.It is obvious that the tax jurisdiction scheme,which is applicable to the traditional physical economic operation model,is hard to solve the problems related to the cloud service.In view of this,it is necessary to find a new tax jurisdiction plan to settle the assignment of the right to tax business profits on transnational cloud.By discussing the Piedras Negras which has a profound influence on the question of jurisdiction in the international tax system,we can obtain the important enlightenment to deal with the distribution of tax rights of the operating profit of cloud service.Therefore,starting from the difficulties faced by the application of the distribution rules of the operating profit tax rights of the cloud,the paper explore Piedras Negras and on its basis the traditional rules of the distribution of the tax rights of the operating profit--the principle of the permanent institution,mainly focuses on the basic concepts,characteristics,main patterns,the difference between the traditional e-commerce and the cloud service and proposes a new way for the tax right on operating profits of the multinational cloud.Finally,considering the current and actual situation of cloud computing in China,the paper puts forward some suggestions for China to deal with the tax jurisdiction of transnational cloud computing.