Identification Of Agent Permanent Establishment In Digital Economy

With the rapid development of digital economy,the ability of centralized management of global business is increasing.More and more multinational groups begin to change from domestic business to regional or even global business.These transnational groups adjust the activities of member companies in the source of income to below the threshold of permanent establishment,so as to avoid forming permanent establishment.At the same time,because these companies mainly rely on intangible assets to complete their business locally,the demand for assets and personnel is very low,and the profits distributed to them by the group are less,which makes their taxable income seriously mismatched with the benefits obtained by transnational groups,resulting in the problem of tax base erosion.As for the agency type permanent establishment,the tax jurisdiction of commission agent arrangement and offshore rubber stamp arrangement is particularly obvious.This paper is divided into three parts.In the first chapter,after explaining the background of the principle of permanent establishment under the digital economy,the author analyzes the specific business model of commission agent arrangement and offshore rubber stamp arrangement,and analyzes the legal problems brought by these two tax avoidance arrangements in combination with relevant foreign cases,tax treaties and domestic laws involved.After that,the second chapter looks for the regulatory strategies of the relevant tax avoidance arrangements of the permanent establishment caused by the digital economy from the seventh action plan of BEPS-preventing artificial circumvention from forming permanent establishment(hereinafter referred to as BEPS7)and the first action plan of BEPS-coping with the tax challenges of the digital economy(hereinafter referred to as BEPS1).For the amendment proposal in BEPS7,the second chapter,after analyzing the regulatory effect of these tax avoidance arrangements and the next tax avoidance arrangements of enterprises,points out that the recognition of permanent establishment needs to proceed from the perspective of economic substance,otherwise it cannot keep up with the update speed of business model in the digital economy.Next,the second chapter begins with the new concept of "significant economic presence" proposed in BEPS1,and examines the relevant practices of India and Israel.In this paper,we find that India and Israel have different applicable premises for the related concepts of "significant economic presence".Under the premise of "no entity presence" in Israel,digital enterprises will evade the tax jurisdiction over their income by means of "limited local presence".Therefore,in the long run,only the concept of "significant economic presence" should be completely replaced The traditional permanent establishment rules can completely regulate the phenomenon of enterprises avoiding permanent establishment under the digital economy.Finally,the third chapter is based on the legal framework of agency type permanent establishment in our country.After combing it,it analyzes the problems of commission agent arrangement,offshore rubber stamp arrangement and "domestic sales" arrangement after BEPS7 under the legal framework of our country,and gives the concrete improvement of the legal framework of agency type permanent establishment in our country Discussion.As far as China is concerned,in the framework of agency permanent establishment,it is not clear whether these tax avoidance arrangements constitute agency permanent establishment,from tax treaty to domestic legislation.In order to deal with the problem of agency type permanent establishment in the digital economy,China should revise the existing legal framework for the recognition of agency type permanent establishment.Specifically,first,the investment structure and enterprise income tax rate of both parties should be taken into account when negotiating and signing tax conventions;second,the interpretation of relevant terms in "Guo Shui Fa [2010] No.75" should be further clarified to expand the agency type in tax conventions At the same time,the domestic tax law should also be improved to promote the long-term and stable development of China's economy.In addition,we should introduce the concept of "significant economic presence" into the legal framework of permanent establishment recognition as a supplement to the existing permanent establishment rules,and ensure our tax jurisdiction in the new situation.