Threat of digital services turnover tax on non-resident providers if OECD Pillar 1 talks fail
New Zealand is the latest country to draw-up plans for a Digital Services Tax (DST) which would tax sales by non-resident providers of in-scope services to consumers. The aim is to close the corporate income tax loophole under current global tax rules for foreign providers. This includes Facebook, Google and Apple earning income from social media platforms, search engines, and online marketplaces.
New Zealand’s announcement shows frustrations with slow progress on a new global regime being championed as OECD Pillar 1 reforms by over 140. A moratorium for a further year on new DST was announced in July. Countries such as Canada DST are still going ahead in 2024.
New Zealand will mirror the common thresholds for affected businesses:
- Turnover above €750m per year globally; and
- Turnover above NZ$3.5m in New Zealand
New Zealand GST on digital services was separately introduced in 2016.
Asia Pacific Digital Services Taxes (DST)
|Country||Status||Rate||Annual sales threshold||Scope|
|In-country income||Global income|
|India||Jun 2016||6%||Rs 2cores||n/a||Advertising|
|India||Apr 2020||2%||INR 20m||n/a||Goods and digital services|
|Laos||Feb 2024||TBC||Streaming; ad's; travel & hotel online|
|Nepal||Jul 2022||2%||NPR 2m||Electronic & digital services|
|New Zealand||Jan 2025||3%||NZ$3.5m||NZ$1.1bn||Social media; Content sharing; Search engine; user data; Intermediation;|
|Pakistan||Sep 2021||2%||Nil||Nil||Withholding tax on marketplaces|
|Kyrgystan||Jan 2022||2%||Nil||Nil||Tax on digital services B2B and B2C|
|Sierra Leone||Jan 2021||1.5%||Digital and electronic services|
|Vietnam||2021 TBC||1.5%||Ecommerce tax|