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What Every Tech Company Should Know About Europe’s Digital Services Tax

The UK and the EU are eyeing big scores by drafting new tax laws aimed at tech companies, but Washington, and some Euro businesses are crying foul.

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The European Commission Plan

The European Commission’s plan would reform corporate tax rules so that profits are registered and taxed where businesses have “significant interaction with users through digital channels,” according to the commission. It would hit those tech companies that reach any of three size benchmarks: annual revenue from supplying digital services in excess of $7.9 million (7 million euros); more than 100,000 website users; or more than 3,000 “online business contracts.” If one of the three criteria are met inside a member state, the company would owe taxes to that member state.

The taxes would come from three areas: profits that a company makes from selling user data, as an example the EU says “placement of advertising;” a tax on services connecting users, online marketplace platforms for the sharing economy; as well as other digital channels, such as subscriptions to streaming services.

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