Interim digital services tax on revenues from certain digital services [EU Legislation in Progress]

Written by Marcin Szczepański (2nd edition, updated on 7.12.2018),

According to the European Commission the digital economy is relatively under-taxed when compared with traditional businesses. Certain inherent characteristics such as reliance on cross-border provision of services without physical presence, easy transfers of intangible assets, and novel ways to create value make it particularly easy for enterprises to limit their tax liabilities.

In order to provide a solution to this problem, in March 2018 the Commission adopted the ‘fair taxation of the digital economy’ package, comprised of two proposals. One concerns a permanent reform of corporate tax regime while the second is a proposal for a directive on the common system of a digital services tax on revenues resulting from the provision of certain digital services, which would apply as an interim measure until the permanent reform has been implemented. The tax is to cover businesses above two thresholds: total annual worldwide revenues exceeding €750 million and annual revenues in the EU exceeding €50 million. The proposed single rate is at 3 %, levied on gross revenues resulting from the provision of certain digital services where user value creation is essential.

Parliament’s Committee on Economic and Monetary Affairs (ECON) adopted a report proposing to widen the scope and reach of the tax. The plenary vote is expected during the December session.

Versions

• December 2018: ‘Interim digital services tax on revenues from certain digital services‘ (2nd edition)