Network tax presence as a new legal category of international taxation

Abstract

The relevance of this study is обусловлена by the transformation of international taxation under the influence of economic digitalization, the expansion of platform-based business models, and the spread of remote forms of work organization, which significantly complicate the application of the classical concept of permanent establishment. Traditional criteria of physical presence increasingly fail to adequately identify the economic activities of non-residents in market jurisdictions, creating a gap between actual value creation processes and the legal mechanisms of their taxation. This problem becomes particularly acute where national law-enforcement practice continues to rely on a formal territorial approach, thereby limiting the exercise of taxing rights by the state and increasing fiscal risks. The purpose of the article is to provide a scholarly examination of the transformation of the permanent establishment concept in the digital economy and to substantiate the appropriateness of using the category of network tax presence to analyze contemporary forms of economic interaction between non-residents and national markets. The study employs formal legal and comparative legal methods, systemic and structural-functional approaches, as well as an analysis of international tax standards and national judicial practice. The results demonstrate that international tax initiatives – particularly the amendments to the OECD and United Nations Model Tax Conventions of 2025–institutionalize a shift from a formal-physical to an economically oriented logic of determining tax presence, in which market engagement, the regularity of digital interaction, and the economic materiality of activities become decisive criteria. At the same time, an analysis of Ukrainian judicial practice reveals the predominance of a traditional interpretation of permanent establishment that insufficiently accounts for the specific features of digital and platform-based business models. It is substantiated that the use of the network tax presence category enables a systematic interpretation of non-residents’ economic activities based on cross-platform interactions of users, data, and algorithms, thereby overcoming the limitations of the classical territorial approach. The scientific and practical significance of the study lies in expanding the analytical toolkit of international tax law, which can be used to adapt national tax policy to the conditions of the digital economy, enhance the economic justification of taxing non-residents, and reduce fiscal losses without a radical revision of existing legal constructs.