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Czech Government Approves Digital Tax

by Ulrika Lomas,, Brussels

25 November 2019

On November 18, 2019, the Government of the Czech Republic announced that it has agreed on a draft law to introduce a tax on digital services, which will now be submitted to parliament.

The digital services tax will apply to revenues from online advertising, the sale of user data, and intermediation services, by companies with a global turnover of EUR750m (USD829m) or more and realizing sales in the Czech Republic of at least CZK100m (USD4.3m). This represents a change from the draft submitted to the Government by the Ministry of Finance on September 5, 2019, which set the domestic sales threshold at CZK50m.

According to the Government, companies will be liable for the tax if they receive at least CZK5m from online advertising and selling user data in the Czech Republic. Similarly, the DST will only apply to revenue from intermediation services if the platform has in excess of 200,000 users.

If less than 10 percent of a company's total taxable sales are realized within Europe, it will be excluded from the scope of the DST, the Government said.

As written, the draft law will be temporary, and is set to expire at the end of the 2024 tax year. The Government underscored that it would prefer to sign up to an internationally agreed solution to the tax challenges of the digitalized economy.

TAGS: Finance | tax | commerce | law | internet | e-commerce | transfer pricing | Czech Republic | services | Europe | BEPS

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