EU Commission and EU Parliament: Taxation of the digital economy

International Tax Review is part of Legal Benchmarking Limited, 4 Bouverie Street, London, EC4Y 8AX

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

EU Commission and EU Parliament: Taxation of the digital economy

Blue sky thinking on the digital economy

There is growing evidence that the EU Commission will publish two proposals on the taxation of the digital economy and digital business models on March 21 2018.

These proposals are expected to consist of a short-term/temporary measure, a turnover equalisation tax – i.e. a tax assessed on turnover rather than profits. However, this shall not be levied on all digital services, but rather ‘only’ on online advertising and on services provided by mediation platforms, i.e. platforms that arrange product deliveries or services between two market participants (e.g. Uber, Airbnb, Amazon Marketplace, etc.).

If proprietary products or services are distributed via the internet, then they shall accordingly not be taxed. According to media reports, it is expected that companies will also only be subject to tax if their multinational consolidated turnover exceeds a total of €750 million ($924 million) per annum Furthermore, an additional threshold may be stipulated with regard to annual turnover from digital services within the EU subject to turnover equalisation tax. By all accounts, this will lie somewhere between €10 million and €20 million. The assessment basis for the tax shall be the gross revenue (before costs have been deducted) on all production and distribution levels (B2B/B2C). Both cross-border transactions (within the EU and with third countries) and domestic transactions shall be included. The tax rate is expected to be approximately 2%. The tax paid may be deducted from the assessment basis for foreign corporation tax as an expense.

The EU Commission would reportedly also like to propose the concept of digital/virtual business premises as part of its plans to introduce a common assessment basis for corporation tax. To this end, the European Parliament’s Economic Committee also decided to pursue such an approach on February 20 2018. Consequently, business premises shall be established if turnover exceeds €5 million per annum in a member state and, regarding the company and the relevant member state, if either:

  • more than 1,000 registered users from the state have logged on in a month or visited the site;

  • more than 1,000 customers resident in the state have made electronic agreements each month; or

  • the volume of the data collected in the state amounts to more than ten per cent of the total data stored by the company.

With regard to the distribution of consolidated profit, the EU Parliament is considering adding a fourth ‘data’ factor to the three factors (turnover, payroll/employees and assets).

Furthermore, the OECD is reportedly working on an interim report which is expected to be published on April 18 2018. A wide range of national states – including Israel and Italy – have already implemented similar proposals or are in the process of reviewing them.

This article was prepared by WTS, the main sponsor of International Tax Review's Indirect Tax Forum, which will be held on March 22 - the day after these proposals are due to be released - in Amsterdam. Follow this link for more details.

more across site & shared bottom lb ros

More from across our site

Heads of tax need to push their teams forward as strategic business advisers to add value across the organisation, says Sandy Markwick
Scott Bessent reportedly felt undermined by Musk naming Gary Shapley as acting IRS commissioner; in other news, Baker Tilly will combine with a top 15 US firm
The promise of nine years’ tax certainty and a ‘rational and pragmatic’ government process makes APAs a no-brainer, Indian tax advisers tell ITR
Despite garnering significant revenues from multinationals, Italy’s digital services tax presents pressing double taxation issues, say Stefano Simontacchi and Francesco Saverio Scandone of BonelliErede
ITR’s research shows that in-house tax counsel in Asia also feel underserved by their advisers’ international networks
World Tax global head of research Jon Moore tells ITR how his team spots standout submissions, and gives early statistical insights into this year’s entries
Australia’s conservative opposition will repeal controversial tax agent reporting rules if elected in the country’s May general election
Shapley would be the fourth person to hold the job this year; in other news, UK tax advisory firm MHA raised fewer funds than expected from its London IPO
The US needs to be involved in pillar one for there to be more international acceptance of the project, Michael Masciangelo says
The UK regulator is investigating EY’s auditing of the national postal service as it relates to the high-profile Horizon scandal, which saw hundreds wrongfully convicted
Gift this article