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Budget 2020: Digital Services tax.

From 1 April 2020, the government will introduce a 2% Digital Services Tax (DST) on the revenues of search engines, social media services and online marketplaces which derive value from UK users.

Businesses will be liable to the DST when a group’s worldwide revenues from these digital activities are more than £500 million and more than £25 million of these revenues are derived from UK users.

If a group’s revenues exceed these thresholds, revenues derived from UK users will be taxed at a rate of 2% however there is an allowance of £25 million, which means a group’s first £25 million of revenues derived from UK users will not be subject to the DST. 

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Shriya Dheir

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DheirS@buzzacott.co.uk

Businesses will be liable to the DST when a group’s worldwide revenues from these digital activities are more than £500 million and more than £25 million of these revenues are derived from UK users.

If a group’s revenues exceed these thresholds, revenues derived from UK users will be taxed at a rate of 2% however there is an allowance of £25 million, which means a group’s first £25 million of revenues derived from UK users will not be subject to the DST. 

If caught by the new regime, the DST will be reportable and payable under the UK Corporation Tax framework.

The government still believes the most sustainable long-term solution to the tax challenges arising from digitalisation is reform of the international corporate tax rules. The DST will be dis-applied once an appropriate international solution is in place.

Read more on the Budget here.

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