The transformation of the economy due to information and communication technologies enables multinational enterprises to do business online all over the world. Usually the source state does not have any right to tax the amount of profit, that was generated within the country through digital businesses. This is because of tax regulations currently valid, which declare that the source state only has a taxation right, if there is a permanent establishment. The problem is, that the concept of a permanent establishment is built on a physical presence of the company. However, in the digital age this is not necessary anymore. Therefore, the concept of a digital permanent establishment is being proposed by the OECD as one way to also tax digital businesses in the source state. In the course of this thesis analysis of the technological innovations of the digital world shows the challenges for their appropriate taxation and evaluates, if the concept of a digital permanent establishment could help to find a way of an adequate taxation. The results show that although there is a possibility to tax profits generated through digital businesses, the application of the digital permanent establishment will lead to several problems. Before the implementation can start, it would be necessary to have clear definitions of the criteria that result in the presence of a digital permanent establishment. Furthermore, to avoid legal uncertainty and cases of double taxation, there is the need for a global solution. The main challenge will be to find a suitable way of profit distribution among the business units of a corporate group. In consideration of these challenges, it is not possible to recommend the introduction of the digital permanent establishment. Furthermore, tax authorities should not implement any unilateral measures for taxing the digital economy, as this would make a global solution even more difficult.