Date : 30th May
Timing : 4PM to 5 PM
Digitisation has expanded the scope of business by making the entire world an integrated market. The traditional understanding of permanent establishment required an enterprise to have a physical presence in the source state to grant that state a right to tax the business income of the enterprise. But owing to the digitisation, the enterprise can conclude contracts virtually and move goods and services without having any physical presence in the source state.
Further, various other aspects like data monetisation, artificial intelligence and other emerging concepts pose challenges in determining taxing rights based on conventional tax treaties.
Income from of digital transactions is often sought to be taxed in the jurisdiction where the physical IT infrastructure is located. In the last decade, businesses have minimized the tax effect by moving the physical infrastructure to a low tax jurisdiction, thereby, depriving other countries, where the IP is created or where the demand is generated.
Owing to the increasing complexity surrounding digital business, the tax issues have taken the centre stage on the political agenda and countries are taking host of measures to prevent tax leakage.
India too has introduced equalisation levy and concept of significant economic presence in the search for taxing income from digital transactions. Further, in Draft Report of the Committee constituted by CBDT disregards the OECD approach of profit attribution (based on Functions, Assets and Risk (FAR) analysis) in favour of profit attribution with emphasis on demand functions.