Digital Taxes and International Investment Law

The rapid digitalization of the economy has led to the proliferation of companies with primarily digital presences and global operations. This transformation has prompted governments worldwide to impose digital taxes on technology companies, sparking debates about the compatibility of such measures with international investment law. The introduction of digital taxes represents a significant departure from traditional territorial based tax principles, creating legal uncertainty and potentially discriminatory effects. And while the OECD/G20 Inclusive Framework aims to establish a multilateral solution to digital taxation, its implementation poses challenges, including potential investor claims. Against this backdrop, this chapter explores the implications of digital taxation on foreign investors’ rights under international investment agreements, by examining four key questions: whether digital assets can qualify as protected “investments” under investment treaties; whether digital taxes violate national treatment obligations by disproportionately burdening foreign investors; whether such measures breach the right to fair and equitable treatment, including legal stability; and whether they amount to unlawful indirect expropriation by neutralizing digital assets as investments. By addressing these issues, this chapter highlights the evolving interplay between digital taxation and international investment law, emphasizing the need for balanced solutions that mitigate conflicts while fostering legal certainty in the digital economy.