Czech tax on digital services

On 7 July 2021, the parliamentary meeting schedule included the third reading of the bill on tax on digital services - including almost twenty amendments. However, Parliament did not manage to debate the bill; there will be another chance to debate the matter in September 2021.

If the digital tax bill is approved in its current wording, it would include taxation of:

• the provision of a targeted marketing campaign;
• using a multilateral digital interface;
• providing information on users.

The digital tax would apply to companies that are part of a multinational group with a total annual turnover of at least EUR 750 million whose total income from taxable services provided in the Czech Republic amounts to over CZK 100 million in the decisive period and whose profit from the digital services provided by the companies represents more than 10% of total profit. Such companies would be considered taxable persons. They would be obliged to register as a digital taxpayer if they fulfilled some of the following conditions within the decisive period:

• Total payment for the provision of a targeted marketing campaign amounts to over CZK 5 million;
• Total payment for providing information on users amounts to over CZK 5 million;
• The number of user accounts using a multilateral digital interface is over 200,000.

Partial tax rates from digital services were originally suggested in the amount of 7%, but the amendments suggested a decreased rate of 5% or even 3%. Another discussed change will surely be the date of the bill coming into effect.

With respect to the growing tendency to deal with the taxation of digital giants world-wide on the OECD level, it is not clear whether the digital tax act will be approved in its current wording, since the effectiveness of the act is currently envisaged only until the end of 2024.