On 21 March 2018, the European Commission published two draft Directives relevant to the taxation of the digital economy.

• The first will impose a “temporary” digital services tax (DST). Levied by each member state, DST will apply at the rate of 3% on revenue from certain digital activities and only to entities with (i) worldwide revenues exceeding EUR 750m, and (ii) taxable EU revenue exceeding EUR 50m. The stated intention is that DST will no longer be charged once more permanent measures are put in place (see below).

• The second draft Directive would allow any member state to extend the definition of a “permanent establishment” to include the existence of a “significant digital presence” in the member state. This threshold would be met if certain digital services are supplied to users in the member state through a digital interface and either:

– total annual revenue exceeds EUR 7m, or

– number of users exceeds 100,000, or

– business contracts for supply of such services exceeds 3,000.

The draft Directives can be viewed here.