Tax Residency in the European Union and the Problems of Implementing Anti-Tax Avoidance Legislation in the Frames of Digital Competition: A View From Non-Residents

Abstract

In recent years, the rapid development of the digital economy has brought issues of taxation and tax residency in the European Union (EU) into sharp focus. Digital competition and globalization have changed traditional approaches to taxation, requiring legislative responses and new policies to be adapted to ensure fair and efficient tax systems. The EU actively addresses aggressive tax planning by developing new regulatory instruments such as the ATAD (Anti-Tax Avoidance Directive), which require the adaptation of national tax systems. However, implementing these directives in the digital economy faces many challenges. This study intends to identify, analyze, and systematize the problems of implementing the EU anti-tax avoidance regulation in the context of expanding digital competition among business entities. The achievement of the research objectives is based on the analysis and synthesis of political and legal initiatives in the field of EU tax regulation. The study suggests that currently the implementation of the anti-tax avoidance initiatives in the context of digital competition faces a number of specific challenges for both residents and non-residents. The main ones are issues related to the legal definition of tax residence and the issue of permanent establishment (presence). One of the most problematic areas of practice was the Directive on Administrative Cooperation (DAC6), aimed at preventing aggressive tax planning. Although it formally serves as an instrument of transparency, the uncertainty of its key categories (including “hallmarks,” “intermediaries”) has created significant difficulties in law enforcement. In general, it can be argued that the problems of indeterminacy of the nexus, blurring of DAC6 criteria, and differences in the implementation of EC directives reflect a general trend—a transition from codified norms to flexible, interpretation-dependent constructions. This creates risks for legal predictability and uniform application of tax legislation. The solution could be the formalization of key concepts (nexus, hallmarks, substance) in the form of supranational criteria.