UK Summarizes Digital Services Tax
The UK Government has released a summary of the feedback that it had received on its consultation on the new Digital Services Tax and set out amendments to its proposals to ensure the regime functions effectively and as intended.
Plans to introduce the levy were confirmed in the 2019 Budget, and are broadly in line with moves in other countries in this area. The Government has proposed that the tax will apply to revenue generated by search engines, social media platforms, and online marketplaces, to revenues from those activities that are linked to the participation of UK users. It will apply only to groups that generate global revenues from in-scope business activities in excess of GBP500m per year. Businesses will not have to pay tax on their first GBP25 million of UK taxable revenues.
According to the Government, with regard to the rationale for the digital services tax, most responses acknowledged the challenges facing the international tax system, and there was broad support for the ongoing OECD process to seek a consensus-based international solution to the tax challenges arising from digitalization by 2020. On tax design matters, meanwhile, respondents raised a number of issues focusing on the approach to drawing the scope of the DST, the method of defining a UK user, and the design of the safe harbor.
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