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Digital services tax update

20 October 2020 / David Klass
Issue: 4765 / Categories: Comment & Analysis
29555
It’s a digital world

Key points

  • Current international corporate tax rules are not fit for purpose for the digital economy.
  • Several countries have introduced a digital services tax to ensure multinationals pay tax where they generate profits.
  • The UK digital services tax came into force in April 2020 at a rate of 2%.
  • It is a turnover tax and applies to digital service revenues rather than profits.
  • Some businesses have passed on the cost further down the chain.

After many months in the planning the UK digital services tax (DST) came into force on 1 April 2020. It is a new 2% tax on specified revenues of search engines social media services and online marketplaces which derive value from UK users.

 

Background

The context of the genesis of the DST was the attempt to agree  at an international level how to tax multinationals operating in the ‘digital’ economy more effectively than the existing –...

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