Concept of Digital Permanent Establishment and the Legal Analysis of Necessity of Its Application in the Tax System of the Republic of Azerbaijan

The rise of the digital economy has become a major concern for the global society since it has drastically altered tax laws worldwide.Existing national tax policy is designed on the basis of the "permanent establishment" concept when determining the tax liability of business.However digitalization allows businesses to function without meeting the permanent establishment requirement in any jurisdiction.In addition, tax authorities finds it difficult to characterize the income of foreign (non-resident) digital companies for tax purposes as they can easily move across jurisdictions, skip registration process and etc.It is without question necessary to adapt existing tax system to the new way of doing business and establish legislative answers at the Azerbaijani level to the difficulties posed by the digital economy.The revenues of foreign digital companies are currently untaxed in the Republic of Azerbaijan.At that point, digital companies generating revenues from Azerbaijani source without having a permanent establishment in the Republic of Azerbaijan should get the same tax treatment as those with a physical permanent establishment.