Issue: № 8, 2025
Doi: https://doi.org/10.37634/efp.2025.8.1
This paper provides a comprehensive analysis of the attribution of profit to a non-resident's permanent establishment (PE) in the context of the digital transformation of the global economy. It identifies the evolution of the PE concept in international tax law, where physical presence is no longer a sufficient or necessary condition for taxation due to the rapid expansion of digital business models. The study examines the key elements of the OECD’s BEPS Action Plan, particularly Action 7, which broadens the definition of a PE through agency criteria, anti-fragmentation rules, and reconsideration of auxiliary activities. Special attention is paid to the concept of Significant Economic Presence (SEP), which allows jurisdictions to impose taxes on digital companies without physical presence, based on user engagement, digital interaction volume, and the collection of personal data. The implementation of SEP by countries such as India, Kenya, and Colombia is reviewed, along with the correlation between SEP and global initiatives under the OECD’s Pillar One and Pillar Two (GloBE). The paper justifies the necessity of incorporating SEP criteria into Ukrainian tax legislation, improving profit attribution through the FAR approach (functions, assets, risks), and introducing a transitional Digital Services Tax (DST) prior to full participation in international multilateral frameworks. A detailed roadmap for Ukraine is proposed, addressing fiscal, legal, and administrative aspects of digital tax reform in alignment with modern global standards.
Keywords : permanent establishment, digital economy, significant economic presence, BEPS, GloBE, Pillar One, Pillar Two, transfer pricing, digital services tax, economic presence, non-resident taxation, tax sovereignty
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