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Abstract: 

While the OECD has published a report on the taxation of the digital economyin which it notes that there is no consensus on what changes, if any, should be made, the European Commission has published two draft Directives. The first sets out a “digital services tax” levied on businesses of sufficient size at a rate of 3 percent on gross revenues from on-line advertising, sales of user data, or provision of digital platforms enabling user interaction. This is intended as a temporary measure until wide agreement can be reached on a comprehensive proposal for digital tax reform. The second, the commission’s comprehensive proposal for reform, introduces the concept of “significant digital presence” for corporate income tax purposes. An E.U. member state would be able to tax a company on profits treated as made through a significant digital presence, even if the company had no physical presence in the member state.

Keywords: digital services tax, OECD Base Erosion and Profit Shifting (BEPS) Project, significant economic presence, double taxation

Affiliations:  1: Sullivan & Cromwell LLP; 2: Sullivan & Cromwell LLP.

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