SPREČAVANJE IZBJEGAVANJA STATUSA STALNE POSLOVNE JEDINICE U DIGITALNOJ EKONOMIJI
TACKLING THE AVOIDANCE OF PERMANENT ESTABLISHMENT STATUS IN DIGITAL ECONOMY

Summary/Abstract: Advances in digital technology have not changed the fundamental nature of the core activities that businesses carry out as part of a business model to generate profits (businesses still need to source and acquire inputs, create or add value, and sell to customers). Digitalization has, however, driven considerable changes in the way these activities are carried out. Nowadays it is possible to be heavily involved in the economic life of another country, e.g. by doing business with customers located in that country via the internet, without having a taxable presence herein (such as substantial physical presence or a dependent agent). The fact that it is possible to generate a large quantity of sales without taxable presence raised a question about whether the current international taxation rules continue to be appropriate in the digital economy. These changes have particularly placed pressure on the concept of permanent establishment (PE) for treaty purposes and the related profit attribution rules. Therefore, the objective of this paper is to put alight on the traditional PE concept, it’s inappropriateness as a taxable nexus in the digital economy and, also to analyze some potential solutions for this issue

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