The Research Of The Issues Of Internet-based Transactions And Permanent Establishments

In the first chapter of this article,the case of the satellite company shows that the Internet economy has caused the ambiguity about the conventional the Permanent Establishment(PE)principle.The international tax rules based on the OECD Model Tax Convention usually use the PE principle to determine the allocation of taxing rights between the residence country and the source country.In order to reduce the cost of transportation between countries,the traditional transnational enterprises usually through a Permanent Establishment which facilitate personnel management and capital operationHowever,with the development of the Internet economy,the traditional PE principle based on the physical location of the permanent establishment,which status is directly replaced by transnational administration of networks.In this example of case,the necessity of existence of the traditional PE principle is challenged.It is more and more difficult to define trading profit of non-resident enterprises in trading countries.Under the influence of the Internet economy,whether the trading profit via Internet has a specific form as the classic type of income is questionable.To answer all the questions above-mentioned,it is necessary to analyze how the non-resident enterprises pay taxes under the Internet trading model,and how to define the property of the taxes.Through the discussion on the uncertainty of tax collection brought about by the Internet economy,the following article try to figure out an exploitation plan called the Virtual Permanent Establishment Approach.Here the article also enumerates the superiority and rationality of the Virtual Permanent Establishment Approach under the Internet-based multinational business model.At the end of this article,it combined the Virtual Permanent Establishment Approach with the practical application in China under the Internet economy.Then it explores the possibility if the Virtual Permanent Establishment Approach can be applied in China.It also discussed the problems and disputes which can be existed in the application of the Virtual Permanent Establishment Approach.Last but not least,through the above analysis,this article want to figure out some appropriate methods to handle the taxation problem in China which are caused by the Internet economy.