Research On The Taxation Of Cross-border Royalties In The Digital Economy

In recent years,the rapid development of the digital economy has provided new impetus for the overall growth of China’s economy.Under the digital economy,products and services among enterprises can be traded without any entities.The intangible and virtualized nature of the digital economy has impacted traditional business models.The digital economy has spawned new business models such as cloud computing,e-commerce,and 3D printing technology.In this model,intangible assets have become the main trading object,making cross-border royalty taxation one of the difficult issues.At the same time,the impact of the development of the digital economy on China’s business model has challenged traditional cross-border royalty taxation rules,leading to erosion of the tax base of the source country.That is,in the current context,there are significant shortcomings in responding to cross-border royalty taxation issues based on traditional international tax rules.From the perspective of China’s current taxation rules for cross-border royalties,China takes the principle of tax sharing and the principle of permanent establishment as the main priority principles,advocating that income is only taxed in the resident country,and that it only enjoys the right to tax when recognized as a permanent establishment.Under this principle,it is easy to confuse income from cross-border royalties with business profits and labor income.However,the development of the digital economy has weakened the boundaries between fixed entities and their income,resulting in changes in the economic correlation factors of the source of income.In this context,in order to protect China’s tax rights and interests from infringement,this article will draw on the shortcomings of the current traditional international tax rules in dealing with cross-border royalty taxation through case analysis,and draw on international experience to provide strategies for ensuring the integrity of China’s tax rights and interests in the context of a digital economy.Firstly,from a theoretical perspective,this article makes clear provisions on the definition and related theories of the digital economy and royalties.Secondly,through case analysis,the disputes caused by the determination of cross-border royalties by G multinational companies in India,the results of case handling,and relevant implications are displayed.It is summarized that the current issues of cross-border royalty taxation in the digital economy are mainly manifested in three aspects: the unclear nature of cross-border royalty,the dilemma of tax jurisdiction,and the dilemma of tax collection and management.Thirdly,from an international perspective,by drawing on the "dual pillar" scheme proposed by the international organization OECD under the digital economy and the experiences of the United States,Israel,Brazil,and other countries,systematically comb relevant tax management practices,and summarize experience and inspiration for solving the tax difficulties of cross-border royalties in China.Finally,based on the exploration of international experience,specific measures are proposed to address this problem in China.First,improve the relevant tax legal system in China;Secondly,improve the division rules of tax jurisdiction;Third,strengthen the tax collection and management of cross-border royalties.