Digital Services Tax, how will businesses be impacted between now and 2023 when the new DST regime is introduced?

November 16, 2021
Alastair Wilson


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The UK has agreed to scrap the DST (Digital Services Tax. This currently imposes a 2% levy on tech giants’ revenue. Replacing it will be the new Pillar system which is more complex and has a much broader reach.

It taxes the gross revenues of large multinationals operating search engines, social media platforms, and online marketplaces. This is to the extent that their revenues are linked to the participation of UK users.

How will businesses be impacted between now and 2023 when the new regime is introduced?

gunnercooke Tax Partner Alastair Wilson takes a closer look at the Digital Services Tax:

“As online operations transcend international borders, taxation of digital services has always posed challenging and complex questions for governments.

“In the UK, the Chancellor has agreed to transition away from the DST over the next two years after agreeing a new system with around 140 other countries.

“There are two ‘Pillars’ to the new tax regime. The first will see large multinationals with at least a 10% profit margin pay tax in all countries they operate. This is a significant departure from the current system, as taxes are currently paid to the country where they are headquartered.

“25 percent of any profit above that 10% margin will be reallocated. This is then subject to tax in the countries the business generates revenues in.

“The second Pillar sees the introduction of a 15% minimum corporation tax operated on a country-by-country basis across the G7 nations. The Government feels this will create a more level playing field for digital firms in the UK.

“There is still a huge amount of detail on the new Pillar system yet to enter the public domain. The speed of the transition is likely to create uncertainty and adds an additional layer of complexity to compliance systems.

“Over the coming years, governments will increasingly focus on taxation in the digital realm, meaning businesses with lower revenues are likely to face similar change and have to adapt their approach to  governance too.”

Alastair and his team are on hand should you have any specific concerns relating to your tech organisations tax or Digital Services Tax.