Czech Finance Ministry To Introduce 7% DST To Tax Global Internet Giant

; posted on
May 2nd, 2019

The Czech Ministry of Finance announced it was planning to introduce a Digital Services Tax (DST). The Ministry is expected to present the proposed DST Bill (the Bill) by the end of May.

Background

On October 2018, the Czech Republic joined opposition by Ireland, Finland and Sweden to the European Union’s proposed tax on big internet companies in a joint paper warning that the measures may breach international treaty obligations. Furthermore, those countries argued that DST could necessitate the renegotiation and potentially eventual termination of bilateral tax treaties with third countries and need to make sure all future treaties allow for the imposition of the digital tax.

The Nordic countries including the Czech Republic agreed to wait for international consensus instead of implementing the 3% DST introduced by EU Commission. However, this move seems shifted as the Czech Republic plans to introduce a higher rate of DST.

The Proposal

The proposal would introduce a new tax on selected internet services provided in the Czech Republic by companies with worldwide revenues exceeding EUR 750 million. To ensure that the DST affects companies that are active on the Czech market, the tax would only apply to companies whose revenues from the Czech Republic exceed a certain threshold (to be specified in the Bill).

The proposed 7% DST would apply to revenues from targeted advertising on a digital interface, transmission of data about users and generated from users' activities on digital interfaces, and the making available to users of a multi-sided digital interface which may facilitate the provision of supplies of goods and services between the users.

The Date of Enforcement

If adopted, the tax could become effective around mid-2020 and conservative estimates showed the digital tax will be adding 5 billion crowns ($218.72 million) annually to state budget revenue.

Source: The New York Times, Reuters

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