An amendment has been proposed to the UK's Finance Bill 2019-21 that would require businesses liable to the UK's digital services tax to release a group tax strategy, which would generally be required to include a country-by-country report.
Under current rules in force in the UK, multinational groups located in the EU or with operations in the EU with total consolidated revenue of EUR750m (USD843m) or more are required to file country-by-country (CbC) reports. The report must include information for every tax jurisdiction in which the group does business, covering the amount of revenue, profit before tax, income tax paid and accrued, number of employees, stated capital, related earnings, and tangible assets.
The requirement to publish a tax strategy has been in place for certain UK groups for financial years starting after September 15, 2016.
A tax strategy must be prepared and published if a taxpayer is a UK group, sub-group, company or partnership, which in the previous financial year had either or both:
1) turnover above GBP200m (USD249m)
2) a balance sheet over GBP2bn
In addition, the requirement applies to those groups that must prepare CbC reports.
A company or sub-group only has to publish its own tax strategy if it's not covered by a published strategy at a higher level.
The amendment to the Finance Bill 2019-21 would broaden this requirement to companies captured by the UK's digital services tax. The DST has applied since April 2020, at a rate of two percent on the revenues of search engines, social media platforms, and online marketplaces that derive value from UK users.
Businesses are liable to DST when the group's worldwide revenues from the covered digital activities are more than GBP500m and more than GBP25m of these revenues are derived from UK users.
The business tax strategy would need to include a CbC report if the group is required to prepare a CbC report under the UK's CbC reporting rules, or would have been so required if the head of the group were resident in the United Kingdom for tax purposes (if such CbC report has not been included in a tax strategy published by the group).
If adopted, the requirement would apply from April 1, 2021.
The Finance Bill 2019-2021 has been approved at second reading by the House of Commons and by the House of Lords at first reading. It will next be subject to a second reading before the House of Lords, where the proposed amendments will be considered.
（Resource: Wolters Kluwer Global Daily Tax News Date: 2020-07-06）
