Proposals for the introduction of a Digital Services Tax (DST) are well underway in many countries including the EU, USA & many other countries.
A DST is a tax on revenues generated online from consumers (B2C) rather than businesses (B2B).
It is an attempt to tax revenues in markets where the provider does not have a physical presence and therefore levy tax from where the economic activity has been produced.
This has been a contentious issue for a several years with multinationals structuring and locating in low tax jurisdictions and recent developments to introduce a DST does not come as a surprise.
The key issue facing online services businesses appear to be the lack of a coherent multilateral approach to this issue due to the inability of jurisdictions to agree on a unified approach.
Recent EU proposals are based on companies with Revenues with a very high value (€ 750m or more worldwide and € 50m in the EU) with an administrative system similar to MOSS (Mini One Stop Shop) proposed to facilitate collection.
At the moment whilst Ireland does not agree to the proposals, there is EU wide consensus that there is a need for a DST to be implemented by 2023.
If you compare the EU proposal above to the USA for example, in New York there are proposals for a DST on advertising services for non-resident providers where there New York sales are $ 500,000 or more.
Clearly, changes are afoot and companies need to be aware of what these will entail.
The impact on Ireland's technology sector for larger employers should not be underestimated given the potential for additional taxes on their activities. It would be expected that double tax treaties will be updated to assist companies to avoid exposure to double taxation on both direct and indirect taxes on these Revenues.
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