Georgia Stamatelou Partner, Head of Tax 19 April 2018

Transcription

1 Taxation and Challenges of the Digital Economy Georgia Stamatelou Partner, Head of Tax 19 April 2018

2 Agenda Digital Economy in the EU: Commission s proposals Important Milestones The Various Initiatives The Digital Services Tax Important Note 2

3 Glossary BEPS DTT DST EU G20 IP MDR MS OECD PE Base Erosion and Profit Shifting Double Tax Treaty Digital Services Tax European Union International forum for the governments and central bank governors from certain countries Internet Protocol Mandatory Disclosure Rules Member State Organization for Economic Co-operation and Development Permanent Establishment 3

4 Important Milestones The challenges of the digitalization of the economy were identified as one of the main focuses of BEPS leading to BEPS Action 1 Report G20 mandated the OECD to deliver an interim report on the implications of digitalization for taxation 2018 On 16 March the OECD released the Interim Report On 21 March the European Commission proposed new rules to ensure that digital business activities are taxed in a fair and growth-friendly way in the EU 4

5 The Various Initiatives European Commission OECD work Interim report on 16 March 2018: consensus based & to be reported to G20 Description of business model & value creation (diverging views) Disparate views on long-term measures Guidance on introducing interim measures but not recommended No agreement: monitoring of developments with next report in 2020 Proposal of 21 March 2018: unanimity required Comprehensive solution: stand-alone directive on digital PE and non-binding recommendation for DTT situations Targeted (interim) solution: Directive on DST Local Initiatives Hungary: tax on advertising revenue Italy: equalization tax levied on digital services supplied electronically Slovakia: digital PE UK: Diverted Profit Tax and Other initiatives e.g. WHT on royalties, taxing revenues, rather than income Australia: Netflix tax India: potential tax based on economic presence 5

6 Digital Economy in the EU: Commission s proposals 1 1 Today s international corporate tax rules are not fit for the realities of the modern global economy and do not capture business models that can make profit from digital services in a country without being physically present 2 Directive on Digital PE The first initiative aims to reform corporate tax 3 2 rules so that profits are registered and taxed where businesses have significant interaction with users through digital channels. This forms the Commission s preferred long-term solution 3 Directive on DST The second proposal responds to calls from several Member States for an interim tax which covers the main digital activities that currently escape tax altogether in the EU 6

7 The Digital Services Tax: Scope Transmission of data Websites publishers Apps developers Advertisers Airbnb Uber Eats Lyft Booking.com Intermediation Services DST Scope Outside of scope? Supply of digital content: Netflix, Spotify E-commerce: ebay, Amazon Multi-player online games, payment services Traditional newspapers, e.g. The Guardian, advertising on their website Facebook Google AdWords Twitter, Instagram LinkedIn Games apps Supply of Advertising 7

8 The Digital Services Tax: in Brief Proposal of Directive on a digital services tax on revenues Address mismatches between taxation of profits and value creation (high involvement of users) Tax on gross revenues from user value creation (i.e. processing user participation): valorization of user data via ad space or sale making available digital platforms to users 3% single tax rate Businesses that have annual worldwide (group) revenues > EUR 750M & digital (group) revenues in the EU > EUR 50M Tax due where users are located Allocation key depending on the digital services One-Stop-Shop simplification system No difference between purely domestically operating companies of international operating companies. So not only the US tech companies are hit. For example Takeaway.com, marktplaats.com What happens is you frustrate where you are as user? Article 5 par. 5 of the Proposal: For the purposes of this Article, the MS where a user s device is used shall be determined by reference to the IP address of the device or, if more accurate, any other method of geolocation. Does the taxpayer have to pay the tax also when it is making a loss? Yes, the DST is a tax taxing revenues. It does not tax net income 8

9 The Digital Services Tax: Challenges Direct or Indirect Tax? A direct tax Imposed on revenues From certain targeted activities Double Tax Treaties? No, this is not an income tax Nor profits tax Taxation of the Digital Economy Is it EU State aid? Yes in principle selective Justification? end a distortion and unfair competition Approved state aid? Mandatory Disclosure Rules? Does the DST fall under MDR? Yes. It is imposed by a MS, and not mentioned under the exemptions. 9

10 Important Note DST will apply only as an interim measure, until the comprehensive reform has been implemented and has inbuilt mechanisms to alleviate the possibility of double taxation 10

11 QUESTIONS 11

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