On 18 November 2019, Government approved a draft bill regarding digital service tax (DST), which responds to the dynamic development of digital economy services and straightens the conditions in the Czech tax environment. The Ministry of Finance proposes a single digital tax of 7% on selected digital services provided in the Czech Republic including targeted advertising campaigns, a versatile digital interface. Companies with global revenues more than € 750 million per year, and which will generate sales in the Czech Republic exceeding CZK 100 million will be subject to digital service tax.
On the contrary, companies for whom the provision of digital services is a marginal activity will not be subject to digital tax. The key factor will be the share of collection from taxable services in total revenues within Europe. Companies with a maximum share of 10% will be excluded from the scope of the Act. At the same time, these companies will be obliged to notify. The person to whom this exception applies will be obliged to notify the tax administrator in advance. This measure is intended to reduce the possibility of circumventing the proposed law.
The law enactment will depend on the legislative process, the expected start of the digital tax in the Czech Republic is in mid-2020. The applicability of the law will be limited in time. The last tax period in which the DST will apply will be the year 2024.
