Mu-hyup "Korean Global Companies Must Prepare for EU Digital Tax Introduction"

EU Likely to Implement Even If OECD Agreement Fails
Need to Revise Internal Accounting and Financial Systems

[Asia Economy Reporter Hwang Yoon-joo] As advanced countries such as the European Union (EU) show strong intentions to introduce a digital services tax, there are claims that our global companies must also prepare accordingly.

According to the "Introduction and Response to the EU Digital Services Tax" report released on the 12th by the Korea International Trade Association's Brussels office, after the EU-wide digital services tax introduction failed in December 2018, the Organisation for Economic Co-operation and Development (OECD) decided to prepare an international agreement on the digital tax by the end of this year.

Some EU member states plan to introduce their own digital services tax before the agreement is finalized. Italy and Austria have implemented it since January this year, the UK plans to implement it in April, and the Czech Republic in June. France was the first among EU member states to pass a digital services tax bill last July but has temporarily suspended taxation until the end of this year.

According to the report, the EU imposes the digital services tax on information and communication technology (ICT) companies whose main business is operating online and mobile platforms, so no Korean companies have been subject to taxation yet. However, the OECD's digital tax expands the scope of taxation to consumer-targeted businesses such as home appliances and automobiles using ICT technology, franchises, and luxury brands, so many of our companies are expected to be included. Once an agreement is reached at the OECD, EU member states that have individually implemented digital services taxes will also follow suit.

The report stated, "If the OECD digital tax is introduced, administrative costs such as building systems for allocating corporate sales by country and tax settlement, as well as legal and accounting consulting, will occur," and added, "Our companies need to organize internal accounting and financial systems according to global standards and prioritize factors such as marketability and infrastructure over tax benefits when selecting overseas bases."

Kang No-kyung, deputy manager of the Brussels office, said, "There is a growing consensus worldwide on the need to strengthen the taxation rights of countries where digital services are provided," and added, "Attention should be paid to the OECD-level digital tax discussions, and even if no agreement is reached, preparation is necessary as the EU shows strong intentions to implement a digital services tax at the EU level."

This content was produced with the assistance of AI translation services.