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Frustrated by slow movement in the European Union and the Organisation for Economic Co-operation and Development (OECD) on the enactment of taxes on digital services, on April 30, 2019 the Czech Republic’s Ministry of Finance announced a plan to tax such activities at 7%, a rate higher than that so far proposed by any other country.
The Czech plan would apply, as others, to large companies (those with global turnover exceeding 750 million euros), but so far does not specify how much activity those companies would have to have in the Czech Republic to become subject to the tax. However, the Ministry estimated that the tax would produce about CZK 5 billion (about $219 million) annually. The activities subject to tax would be the placement of advertising on a digital interface, the provision of digital interfaces allowing users to interact with each other or access a supply of goods and services, and the sale of data collected on users and user activity on digital interfaces.
The proposal follows other recent ones. For example, see the articles “France, Austria Move Ahead with Digital Taxes,” (LINK to that blog on April 16), and “Digital Taxes Advance in European Union” (LINK to blog on February 28).
The tax would be intended to go into effect in mid-2020.
However, it as well as other such proposals could be affected by OECD proposals expected to be presented to G-20 finance ministers at their June meeting in Fukuoka, Japan, and to G-20 leaders their June meeting in Osaka, Japan. As noted, the EU continues to seek agreement on a digital tax plan that would be EU-wide.
Worldwide ERC® members with business in the EU should be following these developments, which ultimately are likely to increase costs for both the members and their transferees.
Worldwide ERC® continues to monitor the impact of the Tax Cuts and Jobs Act on talent mobility programs and policies.
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