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European Union delays Digital Services Tax levy

OECD agreement by almost 140 countries on reforms puts EU DST on pause

The EU’s European Commission has announced that it will pause its Digital Levy, a proposed Digital Services Tax, until at least October 2021. It will wait on the details of the OECD’s Inclusive Framework, which has developed two ‘pillar’ to implement the right to tax non-residents on local income and set a global minimum tax rate.

The EU Digital Levy would replace the initial Digital Services Taxes being introduced in Europe and beyond. VAT Calc’s global VAT and GST on digital services blog keeps a live update on how countries are imposing indirect taxes on non-resident providers and electronic marketplaces.

Inclusive Framework gains G7 and G20 approval

This follow the G7 and G20 (July 10) countries both approving the overall plan, requesting technical details by October. The two pillars aim to target digital services income earned by non-established companies that legitimately avoid the normal corporate income tax, and stop the damaging race to the bottom of national corporate tax rates.

  • Pillar 1: opens the right to tax profits of foreign companies selling digital services to local consumers without a permanent establishment (offices; staff; warehouses etc) and so avoiding local income tax. The Inclusive Framework allows countries to tax profits above 10% at their tax rate
  • Pillar 2: sets a global minimum corporate tax rate at 15%. If a country does not tax the income of a local subsidiary of a global multinational, then the home country of the group company can opt to top-up the effective tax rate to 15%.

EU Digital Levy

The digital levy is one of the proposals from the Commission in response to a request in July 2020 from the European Council for proposals for generating additional resources to support the EU’s borrowing and repayment capacity. The EU Commission had proposed an EU wide digital tax back in 2018 but this was opposed by countries such as Ireland, Luxembourg and the Nordic countries, who feared it would lead to a reduction in their revenues. EU finance ministers agreed in March 2019 to concentrate on the OECD’s project and to leave the EU proposal in reserve should the OECD not manage to secure timely international agreement.

Europe Digital Services Taxes (DST)

Country Status Rate Annual sales threshold Scope
In-country income Global income
EU Digital Levy Paused 3% EU €50m €750m Marketplaces; advertising
Austria Jan 2020 5% €25m €750m Advertising
Belgium Paused 3% €5m €750m Advertising; Intermediation; Data Transmission
Czech Proposed 5% CZK 100m €750m Advertising; digital services
Denmark Jan 2024 6% Streaming video
France Jan 2019 3% €25m €750m Digital interface; advertising; user data
Greece Jul 2019 Nil n/a Tourist accomodation
Hungary Jul 2019 0% to Dec 2022; then 7.5% HUF 100m n/a Media content; Advertising
Italy Jan 2020 3% €5.5m €750m Advertising; digital interfaces; user data
Latvia Paused 3% €750m Digital interface; advertising; user data
Norway Paused Subject to progress on OECD plans
Poland Jul 2020 1.5% Streaming media and Audiovisual media service and audiovisual commercial communication
Poland 2 Proposed 7% Digital services
Portugal Feb 2021 1.5% Video-sharing platforms and subscription TV streaming (1%)
Portugal 2 Proposed 7% Streaming video services
Slovenia Proposed Advertising; user data
Spain Jan 2021 3% €3m €750m Advertising; user data
Turkey Mar 2020 7.5% TRY 20m €750m Advertising; Content; social media
UK Apr 2020 2% UK £25m £500m Marketplaces; Social media; search engines

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