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ECON committee report on ‘significant digital presence’

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The EU Parliament’s economic and monetary affairs (ECON) committee has presented its report with recommendations for a number of amendments to the Commission’s proposal for taxing businesses on the basis of a ‘significant digital presence’.

On 5 December, at the plenary session of the European Parliament, the ECON committee presented its report on the proposal, which would tax businesses on the basis of a ‘significant digital presence’, even where they have no physical permanent establishment in the EU.

This proposal, closely related to the Commission’s plans for the CCCTB, was introduced in March 2018 as part of an overall approach to taxing digital business activities in the EU, together with a proposal for the ‘interim’ digital services tax (DST).

In the original proposal, a digital platform would be deemed to have a ‘significant digital presence’ in an EU member state if it fulfilled one or more of the following criteria:

  • €7m in annual revenues in a member state;
  • more than 100,000 users in a member state in a taxable year; or
  • over 3,000 business contracts for digital services created between the company and business users in a taxable year.

Four EU member states: Denmark, Ireland, Malta and the Netherlands, have submitted reasoned opinions objecting to the proposal on the grounds it does not comply with the EU principle of subsidiarity.

The ECON report puts forward a number of amendments, which include:

  • an additional criterion that the volume of data collected by the taxpayer in a taxable year exceeds 10% of the group’s overall stored digital content;
  • ensuring that online sales of goods or services are included within the definition of taxable activities;
  • emphasising that member states should retain the right to fix corporate tax rates applicable to such revenues on their own territory;
  • encouraging member states to adapt their double tax treaties to accommodate provisions for significant digital presence (for which the Commission may draw up a model tax treaty amendment);
  • recommending the use of TFEU art 115 (measures necessary for the functioning of the internal market) as the legal basis for implementing the proposal; and
  • ensuring the DST is withdrawn once the significant digital presence rules come into effect.

The report also requires the Commission to evaluate the functioning of the directive after three years, including the types of services covered, relevant definitions and the effect on SMEs.

The directive is intended to apply from 1 January 2020. See

The ECON committee also presented its report on the DST at the Parliament’s 5 December plenary session, recommending a broadening of some aspects of the Commission’s original proposal. This followed the joint declaration by France and Germany at the ECOFIN Council meeting on 4 December calling for a scaled-back version of the tax.

Largely following its draft report published in September, the ECON committee’s main amendments would:

  • set the rate of the DST at 3%, increasing to 5% on revenues above €100,000, with all companies in scope receiving an annual tax allowance of €750,000;
  • broaden the scope of ‘taxable revenue’ by including supplies of digital content such as video, audio or text through digital interfaces, and online sales of goods or services via e-commerce platforms;
  • provide for the DST to lapse with the adoption of proposals for a ‘digital significant presence’ or the CCCTB;
  • ask the Commission to review the directive after three years; and
  • introduce a mechanism for DST returns filed with the member state of identification to be audited every three years.


French finance minister, Bruno Le Maire, has pledged to work with Germany until March 2019 to implement their joint proposal for a DST, but also confirmed that France would go ahead with a unilateral tax if those efforts fail.

The OECD’s task force on the digital economy is due to present an update to the inclusive framework in January. OECD director for tax policy, Pascal Saint-Amans, has indicated that the OECD will release an update on its work on taxation of the digital economy by the end of January.