We understand that the EU Council legal service has issued an opinion that the Commission’s proposal for a digital services tax (DST) is unlawful, as it is not an indirect tax within TFEU art 113.
Under art 113, there are three categories of taxes that can be harmonised among EU member states: turnover taxes, excise duties, and other forms of indirect taxation. The DST does not easily fit any of these categories.
The only other possibility would be to introduce the DST through art 115, which provides the legal basis for direct tax measures necessary for the functioning of the internal market.
The Commission published its proposal in March for an ‘interim’ DST at a rate of 3% on revenues from selling online advertising space, digital intermediary activities, and selling user-generated data and content. The tax would affect companies with annual worldwide revenues above €750 million.
Dan Neidle, partner at Clifford Chance, commented that it would seem ‘brave’ for the Commission to proceed with the DST as it stands, ‘given the high risk of legal challenges from affected businesses. We may see Germany and others now calling for the process to end in its current form’, he said.
We understand that the EU Council legal service has issued an opinion that the Commission’s proposal for a digital services tax (DST) is unlawful, as it is not an indirect tax within TFEU art 113.
Under art 113, there are three categories of taxes that can be harmonised among EU member states: turnover taxes, excise duties, and other forms of indirect taxation. The DST does not easily fit any of these categories.
The only other possibility would be to introduce the DST through art 115, which provides the legal basis for direct tax measures necessary for the functioning of the internal market.
The Commission published its proposal in March for an ‘interim’ DST at a rate of 3% on revenues from selling online advertising space, digital intermediary activities, and selling user-generated data and content. The tax would affect companies with annual worldwide revenues above €750 million.
Dan Neidle, partner at Clifford Chance, commented that it would seem ‘brave’ for the Commission to proceed with the DST as it stands, ‘given the high risk of legal challenges from affected businesses. We may see Germany and others now calling for the process to end in its current form’, he said.
.tmb-editorspic.jpg?sfvrsn=df04ab27_1)
