The government published a draft bill proposing a 7% digital services tax in December 2019. The tax will apply to companies or groups generating with a turnover higher than€750 million and with a tax base relating to local in scope taxable digital services in excess for around €4 million equivalent.
In scope taxable services provided through a digital interface:
- Performance of targeted advertising campaigns,
- Utilization of multilateral digital interfaces,
- Provision of user data.
Users can be companies or individual consumers.
Like in the EU directive draft the location of the technical equipment used to access the digital interface is the determining triggering point for the tax liability, using the equipment’s IP address as a key indicator.
For the digital advertising case the campaign must be targeted and can include the provision of accessory services.
The draft establishes a minimum threshold for the taxation of specific individual digital service types:
- Around €200k for targeted digital advertising campaigns and the
provision of user data for a given service.
- Around 200k of local user accounts in the multilateral digital interface
Registration will be required, and monthly tax payment instalments will be due, as long as records of the digital services on a transaction by transaction basis.
It is foreseen that when passed the law will come into force around June-July 2020, but the draft also comes with an expected law expiration date at the end of 2024.
The Czech DST draft law is mostly aligned to the EU Directive draft, with the following key differences:
- The higher tax rate
- Includes an anticipated expiration date, likely to be subject to effective OECD level agreement.
- Companies where digital services are not the core will be exempt from taxation if the in-scope services delivered in the EU and other closer territories are below 10% of total company / Group revenues.
This is a relevant nuance; in the public comments to EU Directives and Spain digital tax DET3 remarked the necessity to set up the Non-Core Digital Services exemption to avoid economic distortions and undesired overall effects of the DST regulations.