Research On The Legal System Of The Recognition Of Permanent Establishment Under The Background Of Digital Economy

The identification of permanent establishment and the ownership of profits are the basic and core issues of international taxation.It relates to the tax rights and interests of the place where the permanent establishment locates on,that is,the income source country,and also concerns whether the resident country provides tax exemption for multinational enterprises and avoids double taxation.Thus,it can be said that the recognition of the existence of a permanent institution is a prerequisite for the exercise of the right of the State of origin to tax,but the development of the digital economy poses a challenge to the recognition and application of the traditional concept of permanent establishment.Under the traditional economic form,there is a one-to-one corresponding relationship between commercial trade and geographical location.Each transaction can determine the transaction object and location.therefore,profits can be determined through the location of the permanent establishment and tax rights can be divided.Digital economy has the characteristics of invisibility,occult,occurred in the online trading activity,could not determine where the transaction object is located,ana the transaction is not limited to tangible commodity trading goods but aiso intangible goods and services online,the traditional concept of permanent establishment could not be identified and applicable,and can’t effectively identify profits belonging,divide tax jurisdiction internationally.Faced with the challenge posed by the development of digital economy to permanent establishment,international organizations and major countries have introduced corresponding programs or legal policies,including amending the concept of permanent establishment,introducing rules of significant digital existence and levying digital service tax.It should be noted that the reconstruction and exploration of tax challenges and rules in the digital economy should not be divorced from the main theme of multilateral cooperation.A good tax rule of law should not affect the independent operation of industrial policies,and should not hinder the global flow of capital,labor and goods resources,contribute to the rational use of resources in the international scope,and promote the global investment and business activities.National tax system should not become barriers hindering the development of the science and technology innovation and the digital economy,unilateral tax actions in the short term will not help manifest the principles of tax fairness and tax neutrality,and may significantly increase the compliance burden of multinational enterprises,double taxation risk,trigger tax retaliatory measures,and even hinder the innovative development and technological progress of the digital economy.Facing the challenge of applying the rules of permanent establishment in the context of digital economy,At the domestic level,China should harmonize the concept and definition of permanent institutions,reform the rules for the recognition of permanent institutions and the principles and methods for the attribution of profits to keep pace with the Times,carefully consider the introduction of a digital services tax in the short term,at the same time,we will accelerate the construction of a digital tax collection and administration system,provide modern intellectual support for tax collection and administration,and safeguard national tax sovereignty and interests.At the international level,we will conduct extensive negotiations and consultations on bilateral and multilateral tax treaties,actively participating in relevant action plans represented by international organizations such as the United Nations and OECD,strengthen international tax cooperation,communication and coordination,seize the initiative and voice in the formulation of international tax rules,and contribute Chinese wisdom and proposals to global tax governance and order reconstruction in the new era.