European Commission Approaches Digital Tax

February 27, 2018 Taxation in EU

digital taxBRUSSELS – Lawmakers in Europe may soon be deciding on a generic new tax on large digital businesses.

The European Commission is understood to be working on a temporary new tax intended to stop large digital companies from diverting their profits to low-tax jurisdictions without facing any tax obligations.

It is hoped that the new tax will target the online businesses based on where they draw their customers, instead of where they register their offices or settle the arising profits.

The tax is aimed squarely at large firms and will apply only to businesses with global revenues exceeding EUR 750 million per year, with at least EUR 10 million being from an EU country.

The exact rate of the tax has not yet been determined but is currently suggested to be set at between 1 percent and 5 percent.

So far the tax is expected to be levied on online advertising, gig-economy platforms, and online shopping platforms, however, online media platforms such as Netflix are currently excluded.

The proposal is expected to be refined and then presented to lawmakers in the second half of March 2018.

The tax may take as long as 2 years to be enacted.