The phenomenon of digitalization is considered the most important development of the economy since the industrial revolution and one of the major drivers of growth and innovation. At the same time, the digital economy is associated with major challenges for the international tax system. Traditional tax laws are governing new ways of conducting business, but current international tax law and its underlying principles may not have kept pace with changes in global business practices. With regards to digital business models, the main tax challenges in the digital economy are the decrease in physical presence in customers market, the increase in the importance and mobility of intangibles and the high degree of integration of the value chain. Although these developments are not entirely new, they have triggered a political and academic discussion about how international taxation can be reformed to provide a reasonable and stable system for taxing the profits of multinational companies in the 21st century.