Digital services tax in the Czech Republic

Daně | PwC Česká republika

On 5 September 2019 the Czech Ministry of Finance presented the draft proposal of selected digital services tax law to the Czech government. The planned effective date is proposed to be in the middle of 2020.

Based on the Explanatory memorandum to the draft of the law, the Czech digital services tax is planned to be implemented as temporary solution and should be effective until a solution on the global level is agreed and implemented, at the level of so called Inclusive OECD framework.

The Czech Ministry of Finance explains that the new taxation aims at large global companies (and their groups) amongst others (i) providing global digital services and (ii) having also significant digital presence in the Czech Republic.

The digital services tax would be imposed on companies which meet the following criteria:

  • Test of the global importance: Total revenue of a company or a company’s group exceeding EUR 750m; and
  • Test of the significant digital presence in the Czech Republic: The revenue generated a company or a company’s group from the selected digital services in the territory of Czech Republic exceeds CZK 50m (approx. EUR 2m).
  • De minimis rule: An annual turnover generated by a company or a company’s group from targeted advertisement campaigns and sales of user data exceeds CZK 5m (approx. EUR 200k) and more than 200k users of the multi-sided digital interfaces in the territory of the Czech Republic in the respective period.

The following digital services will be subject to the digital services tax:

  • Targeted advertisement campaigns;
  • Use of multi-sided digital interfaces;
  • Sale of user data.

The selected digital services would be subject to tax if a Czech user (determined based on the IP address) will participate in a transaction.

The tax rate is determined at a rate of 7%; tax base equals to part of the turnover from defined digital services attributable to the Czech Republic. The taxable period would be the calendar year.

The taxpayer meeting all the above-mentioned criteria is obliged to register to the digital services tax in the Czech Republic, pay monthly tax advances and file the tax return in the Czech Republic. In case the taxpayer will not comply with any of the obligations tax authority may decide that the taxpayer will be considered as unreliable.***

Lucia Čechová, Matěj Čaňo
PwC, Tax and Legal Services