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Taxing The Zeroes And Ones

Kitty Miv, Editor
09 December, 2020

In this week's column (side-stepping the vexed question of the post-Brexit trade talks, which at the time of writing remain unresolved), we will be concentrating on digital taxation, beginning with the news that France is putting into effect its proposal to impose a 3 percent DST on the revenue of revenue of digital companies providing advertising services, businesses selling user data for advertising purposes, and/or providers of intermediation services.

According to reports, France is now collecting its digital services tax from tech firms, with companies having been given notice that their 2020 DST is due.

Under the new French rules, companies with global revenues of EUR750m (USD811m) or more and French sales of at least EUR25m are required to pay the tax, which was approved by the French parliament on July 11, 2019, and applies to turnover realized in France since January 1, 2019.

The collection of DST instalments originally due in April and October 2020 was postponed until December 2020, in a bid to stop the United States from applying retaliatory tariffs on a range of French goods, but given the delay to an international agreement on new digital tax rules, all DST payments due in April and October must be paid in a single lump sum this month.

Meanwhile, a document recently published by the OECD, the annual Consumption Tax Trends report, has highlighted that with VAT rates at an all-time high, governments should ensure they have effective VAT frameworks in place to tax e-commerce.

The report urged countries to adopt the reforms proposed by the OECD in its International VAT/GST Guidelines, covering the digital economy, highlighting that "the surge in e-commerce following the COVID-19 outbreak has emphasized the importance of reform to ensure that VAT is properly applied to digital trade."

Perhaps following the OECD's lead, the EU has put forward proposals for a new transatlantic agenda of cooperation between the EU and the US on ensuring fair taxation of the digital economy.

In response to the election win of US President-elect Joe Biden, the European Commission and the EU High Representative have set out their proposals for future EU-US relations.

In a statement, the Commission and High Representative suggested the EU and US should work "together to find global solutions for fair taxation and [address] market distortions in the digital economy." They argued that "fair taxation in the digital economy requires innovative solutions on both sides of the Atlantic."

Under pillar one of the OECD's current digital tax work, the Organisation is formulating new rules that would allocate some taxing rights to market jurisdictions, regardless of whether a taxpayer has a physical presence there. The US, under the Trump administration, had decided to withdraw from these negotiations.

Pillar two involves the development of a coordinated set of rules, including on a minimum effective tax burden for multinationals, to address ongoing BEPS risks from structures that allow MNEs to shift profit to jurisdictions where they are subject to no or very low taxation.

The Commission and High Representative called on the EU and US to "strongly commit to the timely conclusion of discussions on a global solution within the context of [the] OECD and G20."

Last but by no means least, the Vietnamese authorities have recently provided detail on their VAT collection plans in relation to online transactions, introducing new obligations on payment processing firms to withhold VAT on such transactions, with effect from December 5, 2020.

The obligations are set out in Decree 126/2020/ND-CP. Among other things, the Decree requires payment services providers, as well as banks, to withhold VAT on business-to-consumer supplies where a foreign supplier lacks a permanent establishment in Vietnam and has failed to register for VAT. The tax agency is to provide details to these firms regarding non-compliant suppliers.

Payment processing firms must newly file a monthly declaration to the tax agency, including details of supplies where withholding was impossible.

VAT is due where an individual or business generates turnover from such digital transactions of VND100m (USD4,300) or more each year.

Until next week!


About the Author

Kitty Miv, Editor

Kitty was born in Argentina in 1960 to a Scottish cattle rancher and his Argentine wife. Educated in Edinburgh and at Princeton, Kitty worked for the World Bank as an economist, where she met and married an emigre Iranian banker. During her time with the Bank, Kitty worked in a number of emerging markets, including a spell in the ex-USSR as a Transition Economies Team Leader. Kitty is now a consultant in Brussels and has free-lance writing relationships with a number of prominent economic publications. kitty@lowtax.net


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