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  • Service: Tax, Global Transfer Pricing Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 5/28/2014

EU - Report, recommendations on taxation of digital economy 

May 28: The European Commission today received a final report from an independent group that was assigned the task of examining key issues related to the taxation of the digital economy in the EU, and to present ideas as to how best to approach the various challenges and opportunities.

As explained in today’s EC release, the report addresses tax issues related to the digital economy in the broadest sense—both indirect (VAT) and direct (corporate) tax issues, as well as broader issues on how tax policy can consider opportunities that the digital economy offers.


The report specifically addresses certain transfer pricing items. Priority areas for the EU within the Base Erosion and Profit Shifting (BEPS) project, according to the report, are countering harmful tax competition, revising transfer pricing rules, and reviewing the concepts for defining and applying taxable presence.


Also, the Common Consolidated Corporate Tax Base (CCCTB) proposals provide an opportunity for the EU to expand on new international standards (such as transfer pricing profit split methods) and to achieve additional simplification within the EU.


Read text [PDF 2.15 MB] of the 82-page report and executive summary.


The European Commission will now consider the report and policy changes stemming from the recommendations.

Conclusions, recommendations of the report

  • The digital economy does not require a separate tax regime. Current rules may need to be adapted to respond to the digitisation of the economy.
  • Digitisation greatly facilitates cross-border business. Removing barriers to the single market, including tax barriers, and creating a more favourable business environment through neutral, simplified, and coordinated tax rules is therefore more important than ever.
  • The upcoming move to a destination-based VAT system for digital services is commended, along with the simplification that the “mini-One Stop Shop” will bring for businesses. The report recommends that this could be further expanded to all goods and services (in business-to-consumer transactions) in the future.
  • To provide neutrality and “a level playing field” for EU business, the report recommends the removal of the VAT exemption for small consignments from non-EU countries. This would be supported by a “One Stop Shop” and a fast-track customs procedure.
  • In the area of corporate taxation, the G20/OECD Base Erosion and Profit Shifting (BEPS) project will be fundamental to address tax avoidance and aggressive tax planning globally. The report strongly recommends that EU Member States take a common position.
  • Priority areas for the EU within the BEPS project, according to the report, are countering harmful tax competition, revising transfer pricing rules, and reviewing the concepts for defining and applying taxable presence.
  • The Common Consolidated Corporate Tax Base (CCCTB) provides an opportunity for the EU to expand on new international standards (such as transfer pricing profit split methods) and to achieve additional simplification within the EU.
  • More radical reforms of the tax system could also be looked at in the longer term, including a destination-based corporation tax.


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