UK: House of Commons passes digital services tax legislation

UK: House of Commons passes digital services tax

The House of Commons on 2 July 2020 passed Finance Bill 2020 that includes the proposal for a digital services tax (scheduled to be effective retroactively from 1 April 2020)—thus, moving the UK a step closer to enacting its digital services tax legislation.


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Having passed through the House of Commons, the next steps for Finance Bill 2020 are the second reading and remaining stages in the House of Lords—scheduled for 17 July 2020.

UK digital services tax—overview

The digital services tax would be a tax at a rate of 2% imposed on revenue on certain digital income streams connected to UK users (effective from 1 April 2020). The tax would be calculated based on relevant revenue as recognised in the financial statements and would apply only to a global group that exceeds the following thresholds in a 12-month period:

  • £500 million of worldwide revenue from digital services activities; and
  • £25 million of these revenues attributable to UK users (UK digital services revenues).

The legislation contains a requirement for the government to review the digital services tax in 2025 and provide a revenue assessment of its impact. However, proposals that would have required the government to report annually on the tax and include in the annual report an assessment of its revenue effect were ultimately voted down in the House of Commons.

The UK’s digital services tax is still expected to be a temporary measure, pending an international consensus on the OECD’s work into the taxation of the digitalised economy (or BEPS 2.0).

Read a July 2020 report prepared by the KPMG member firm in the UK

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