English to German Bus/Financial Law: Taxation & Customs

The current rules of the international tax system rely on the source taxation of profits and are largely producer-oriented. They attribute the **taxable nexus** and therefore the right to collect corporate income tax to value creation, i.e. to tax jurisdictions where the physical development and production of a product or service takes place. These rules were established for the industrial age and further developed to account for global supply chains.

If the patents, marketing, software development and main operational activities of a company are all located in one country the US, for example – the bulk of the value creation (and the main ***taxable nexus***) are located there under current rules. As a result, non-EU companies with digital business models often do not have a considerable ***taxable nexus*** in the EU because their local activities are considered routine and negligible under current rules.


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