Digital Tax Moves Ahead Despite Trade Threat

Digital tax czech republic

US Tech companies face 7% digital tax in the Czech Republic

The Czech Republic is seeking a 7 percent tax on companies that provide digital services to Czech users.

The tax bill went before the Chamber of Deputies today, who gave it tacit approval in the opening round. Next, it will go before the Budget Committee for review. The tax could add nearly CZK 5 billion annually to the state budget.

Companies targeted

The Ministry of Finance has proposed the so-called DST model of digital tax on select internet services. Such as targeted advertising on websites, paid social media services, or selling user data.

The bill applies to tech firms that meet certain revenue thresholds in the last calendar year.

  • Worldwide revenues over 750 million euros (CZK 19 billion).
  • Czech revenue over 3.9 million euros (CZK 100 million).

Companies must also have at least two hundred thousand user accounts. As a result companies such as Apple, Amazon, Facebook and Google will be subject to the tax. Internet based marketplaces are also eligible for taxation, Airbnb and Uber for example. The fee will not apply to e-commerce stores or video game services.

Digital tax calculation

The proposed tax will be collected on revenues. It will not be a tax on profits. Thus, the tax base will be revenues for services provided during the tax period, but only the amount relating to Czech users.

US threatens trade war

The United States warned of retaliatory measures on Czech imports over the digital tax. Because, Washington says the tax discriminates against US-based firms.

Finance Minister Schiller defiant

Finance Minister Alena Schiller (ANO) said she is not afraid of US retaliation. Schiiler told deputies today “We don’t have official information that anything is going to happen to us.”

French-US digital tax dispute

The introduction of a 3 percent digital tax triggered a dispute between France and the US. Washington threatened France with retaliatory duties on French goods. France responded by postponing the rollout of the tax from April to the end of the year.

Opposition to tax

KDU-CSL chairman Jan Bartosek proposes reducing the rate from seven to three percent. Mr. Bartosek believes seven percent is excessive. The Pirates and SPD both want the tax lowered to five percent.