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| July 19, 2019

Draft law on digital tax

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The Ministry of Finance has sent out a draft law on digital tax for an open consultation. You can find more about the expected draft here. It should serve to implement a uniform digital tax of 7 % on selected internet services provided in the Czech Republic. The persons liable to the digital tax shall be companies with a global turnover higher than 750 million EUR per year which reach a turnover for provided taxable services of at least 50 million CZK per calendar year in the area of the Czech Republic.

Tax liability shall arise in the three specific areas:

  • targeted advertising placed in a digital interface
  • use of a multilateral digital interface
  • sale of user data.

This is the so called DST (i.e. digital services tax) model of digital tax proposed earlier by the European Commission. The tax will also be levied on some platforms of digital economy which allow their users to provide services or goods for payment for each other, for example Facebook, Google, Airbnb, or Uber.

However, this model of digital tax has not yet been successfully pushed through at the level of the European Union. “Talks in the EU and the OECD will keep going on for some time still, but we cannot wait any longer and watch the unfair competition between global giants and our entrepreneurs and businesses. That is why we decided to implement a Czech national legislation for temporary levelling of digital tax until an international compromise can be finally reached,” says the minister of finance about the proposed draft.

Digital tax in the Czech Republic should depend on sales from services provided during the taxable period, specifically the portion of them that applies to Czech consumers. The tax period should correspond to the calendar year. The tax shall be paid in monthly advances and will be due in the 3 months following the end of the tax period.

The new legislation is expected to take effect by mid-2020. We will keep you informed about any further developments.