Digital Services Taxes
Toon Hasselman
by Toon Hasselman
Digital Services Taxes (DST) are taxes on things like social media, search engines, or online marketplace services. They apply when these services come from outside the country and aren’t subject to the usual local business taxes. In other words, they’re like an import tariff on digital services. The rules are set up with high thresholds, so only the biggest companies, for example, Google, Meta, Apple, and Amazon, are really affected.
DST rates are usually around 3%, and they’re applied to the revenue from specific types of digital services, like:
Online Ads: Money made from ads placed on digital platforms based on user data.
Multisided Platforms: Revenue from platforms that connect users, which could lead to sales or services.
User Data: Money made from selling or transferring user data collected from digital platforms.
On 21 February 2025, President Trump signed an order[1] to investigate potential retaliatory tariffs against countries that have a DST. The memo[2] targets 6 countries - Canada, the UK, Turkey, France, Italy, and Spain, - even though a lot of other countries have similar taxes.
Here's a summary of what the targeted countries have done with their DSTs:
Country
Status
Rate
Annual sales threshold
Scope
In-country income
Global income
Canada
Jan 2024
3%
CAD 20m
EUR 750m
Advertising, online marketplaces, social media, and the sale/licensing of user data
UK
April 2020
2%
GBP 25m
GBP 500m
Marketplaces, social media, search engines
Turkey
March 2020
7.5%
TRY 20m
Advertising, content, social media
France
Jan 2019
EUR 25m
Digital interfaces, advertising, user data
Italy
Jan 2020
N/A
Spain
Jan 2021
EUR 3m
EUR 750
Advertising, user data
From 2016 to 2020, the first Trump administration investigated DST and decided that they were a violation of trade agreements with the US. Both the Trump and Biden administrations slapped retaliatory tariffs on those countries but put them on hold while the Pillar 1 negotiations were still ongoing.
Dec 2023: OECD extends DST talks deadline as Pillar 1 progress stalls.
In December 2023, the OECD extended the DST talks deadline as Pillar 1 progress stalled. The OECD has pushed back the deadline for agreeing on DST, moving it from March 2024 to June 2024. There are still plenty of issues to iron out, particularly around ‘Amount A’ of Pillar 1, which is a complicated formula for figuring out how taxes are divided on sales by large multinational companies.
A lot of countries have paused their own DST, hoping that these talks will eventually reach a deal. But if they don’t, and countries go ahead with their DSTs, it could lead to a full-blown trade war.
On 20 January 2025, President Trump decided to withdraw the US from the global digital tax reform talks—specifically the OECD Pillar 1 reform. This reform aimed to figure out how to split taxing rights for cross-border digital services.
Future
Now that Trump has withdrawn from Pillar 1, the tariffs on goods are permanently under attack, we wonder what will be the next steps on the development and introduction on DSTs and how the countries under review will respond.
[1] https://www.whitehouse.gov/presidential-actions/ for all presidential Actions
[2] https://www.whitehouse.gov/presidential-actions/2025/02/defending-american-companies-and-innovators-from-overseas-extortion-and-unfair-fines-and-penalties/
GGI member firm EJP Financial Astronauts ‘s-Hertogenbosch, The NetherlandsT: +31 73 850 72 80
Auditing & Accounting, Corporate Finance, Tax
EJP Financial Astronauts are auditors, advisers, and challengers. Their team of 55 consists of auditors, accountants and international tax lawyers who have a wide range of expertise. Their main fields of expertise are Dutch corporate and personal income tax, international taxation, Dutch royalties, interest and dividend withholding tax, estate planning, and wage tax. They have an AFM licence to perform audits for larger mid-sized companies.
Toon Hasselman is an experienced (30 years) high level VAT and customs specialist to both national and international companies. He provides simple and practical solutions, quick “outside the box” alternatives if necessary, and promotes a no-nonsense approach with conclusive solutions at a fair cost. Toon is also the Global Vice Chair of the GGI Indirect Taxes Practice Group. Contact Toon.
