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Digital Services Tax Coming soon to the UK

Digital Services Tax Coming soon to the UK

New digital service tax announced as part of the UK's 2018 Autumn Budget


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KPMG UK reports that the United Kingdom's new digital services tax will be effective April 2020. Announced as part of the UK's Autumn Budget 2018 on October 29, 2018, the tax will be levied on 'tech giants' with global revenues of at least £500 million and is modelled in part on European proposals that began circulating in March this year.

For more details on this and other measures included in the budget, see KPMG UK's budget site.

Digital Services Tax details
This new tax will be:

  • Levied at a fixed percentage of two percent of revenue
  • Applicable only to specific digital businesses that perform intermediation activities (search engines, social media platforms and online marketplaces)
  • Deductible as an allowable expense for UK corporation tax purposes (but not creditable)
  • Regarded by the UK's tax authority as outside the scope of the UK's double tax treaties.

The UK says the tax will be subject to various safeguards, including a £25 million de minimis (the first £25 million of relevant UK revenues are not taxable), an exemption for entities that generate losses, and a reduced rate for low margin businesses.

This tax will not automatically apply to online sales of goods. It will only apply to revenues earned from intermediating such sales. The same general position is expected to apply in relation to supplies of online content, and specific exemptions will also apply to financial and payment services, sales of software/hardware, and to television/broadcasting services.

The details of this tax will be subject to a consultation, which will also explore the possibility of legislating further exemptions.

The new tax will be repealed once a coordinated international digital tax solution is agreed upon, and will otherwise be subject to formal review in 2025.

For more information, see KPMG UK's TaxNewsFlash, "Autumn Budget 2018: Government confirms introduction of UK Digital Services Tax" or contact your KPMG adviser.

Information is current to November 06, 2018. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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