The UK introduces Digital Services Tax

Mar 31, 2020 | Digital Services, VAT Updates

On 19th March 2020, the UK Government published the Finance Bill 2020 which includes the final provisions of the UK’s much-anticipated Digital Services Tax (DST). The 2020 Budget had confirmed that the DST would be effective from 1st April 2020. There will be a 2% VAT introduced to service providers.

The digital services that fall under the DST:

  • Social media services (earlier referred to as social media platforms)
  • Internet search engines
  • Online marketplaces

The Bill provides some further clarifications around scoping, particularly on what may be considered not to fall within the scope of certain definitions, further information will be released in the upcoming months.

The threshold of DST: companies with annual worldwide revenues arising from relevant digital services activity exceed £500 million and more than £25 million of these annual digital services revenues are attributable to UK users.

The Bill confirms that the due date of the tax is the day after nine months following the end of the accounting period. Thus, a company with an accounting period that ends on 31st December 2020 (which falls within the scope and is chargeable to DST in terms of the final law) is to make its first payment of DST on 1st October 2021. (1) (2) (3)

 

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