The DST tax rate of 2% will apply to revenues from a “digital services activity” derived from UK users by taxable persons.

Companies that carry on a “digital services activity” and provide those services to UK users where:

• Worldwide “digital services revenues” exceeds £500 million; and
• More than £25 million of those revenues are derived from UK users;

are taxable persons for the purposes of DST.

Digital services revenues are those revenues that arise in connection with a digital services activity.

In order to determine the figures above and, therefore, the liability to the UK DST, the thresholds must be calculated at a group level. The group consists of all entities that are included in the group consolidated accounts. Therefore, digital services revenue of all group entities counts towards the DST thresholds even where they do not have a UK taxable presence for corporation tax purposes.

The scope of UK DST is limited to revenues from the following “digital services activities”:

1. Providing a social media platform – this is an online platform where the main purpose, or one of the main purposes of which is to promote interaction between users and enables content to be shared with other groups of users;
2. Providing an internet search engine; and
3. Providing an online marketplace – this is an online platform where the main purpose, or one of the main purposes of which is to facilitate the sale of goods or services by users, or to advertise or otherwise offer to other users particular goods or services for sale.

Digital services revenues will include all revenues earned by the group and connected with the above digital service activities regardless of how the business or group monetises the service.

Regulated financial and payments service providers are exempt from DST and DST is not accountable on the underlying value of the goods and services provided between users selling though an online marketplace.

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