22 Sep 2026
Virtual Permanent Establishment — A New Nexus to Tax?
15 Jul 2024
15 Jul 2024
This article was originally published on Tax Notes International on June 24, 2024.
With the digitalization of businesses and the increased use of technology, entities across the globe have adopted digital tools to provide services in jurisdictions despite not having a physical presence there. Countries are increasingly focusing on taxation of services provided by businesses having only a virtual presence. In the recent Clifford Chance ruling, Indian income tax authorities sought to tax the gross receipts of a law firm based in Singapore from clients in India on the basis that the firm had created a permanent establishment in the form of a “virtual service PE” in India. According to tax authorities, a virtual service PE exists when a nonresident entity provides services in another contracting state, without its personnel being physically present in the jurisdiction.
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