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Czechia joins the digital tax club

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The government has passed a digital tax on the worlds digital giants. The law still needs to be passed in parliament and signed by the president. World governments have turned to global mega-companies as a target to tax, due to their high profitability and flexible entity arrangements, making taxing them an arguable process – who can lay claim to the revenue, let alone the profit?

Estimates of the potential revenue from the 7% tax run as high as five billion Czech Crowns a year. It also has an expiration date: 2024 is the last year it would be in effect. The Minister of Finance Alena Schillerova (ANO) said that the government sending a clear signal to the OECD, or at least the EU, which failed this year to find a solution to the issue of taxation of corporations which have domicile in the country, but revenues are registered elsewhere.

The 7% tax would be applied to revenue of the internet giants, for services which are consumed in Czechia, for example online advertising such as pop up commercials on streaming services, or internet sites etc. Tax would be estimated annually, then the companies would need to pay deposit amounts monthly, with a final annual tax return completing the billing cycle.

Schillerova added that companies which have digital services as a side income, for example the automakers selling adverts on their digital screens in cars, would be exempt from taxation. The deciding threshold would be 10% of total revenues.

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