Is Cloud Computing a Challenge to the Traditional Concept of a Permanent Establishment?

Abstract

Cloud computing services represent a change in the modern business behavior. There are few rules addressing cloud issues such as data and service location, as well the jurisdiction to tax these services. Considering such an environment, this article discusses the application of traditional international tax rules and concepts, which were constructed for ordinary services, to a virtualized environment, and addresses, in particular, jurisdictional tax issues in relation to cloud services. For this purpose, it was discussed the main features of cloud services and the problem of location of data. In the tax field, the discussion encompassed the principles and concepts that involve cloud services and international taxation until 2013. Lastly, the article discussed proposals that supposedly better addressed the jurisdictional problems with the international taxation caused by digital services, including the hitherto embryonic OECD BEPS.