Sarah Arnold, tax writer at Croner-i, explains the key objections to the draft legislation on the government's proposed digital services tax, due to come into force in April 2020, reflecting industry concerns about the complexity of the rules and lack of clarity in the draft legislation
At Budget 2018, the government announced that from April 2020, it would be introducing a digital services tax (DST) as an interim measure to address failings of the international corporate tax framework to achieve the principle that profits of a multinational group should be taxed in the country where the value is created – that countries should have the right to tax profits derived from activities undertaken and value generated in their jurisdictions.
The government’s stated intention is to replace the DST ‘once an appropriate international solution is in place’ but the initial plan is to start the charge at 2%, depending on sales revenue in the UK.
The announcement at Budget 2018 was followed by a consultation, which ran until 28 February 2019. On 11 July 2019, draft legislation was published for inclusion in Finance Bill 2019–20 along with draft guidance for consultation which closed for comment on 5 September 2019.
