Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

June 4, 2020

USTR initiates investigations into digital services taxes either adopted, or under consideration, by certain jurisdictions

Executive summary

On 2 June 2020, the United States (US) Trade Representative (USTR) announced investigations will be conducted into certain jurisdictions relating to the adoption or contemplated adoption of a digital services tax (DST).1 As outlined in a corresponding Federal Register Notice (FRN), jurisdictions included within the scope of this announcement include: Austria, Brazil, the Czech Republic, the European Union2 (EU), India, Indonesia, Italy, Spain, Turkey, and the United Kingdom.3

Investigations will be conducted pursuant to Section 301 of the Trade Act of 1974 (Section 301), with the goal of determining whether the adopted or contemplated DST of the relevant jurisdiction is unreasonable or discriminatory as well as whether it burdens or restricts US commerce.

In the event the USTR concludes that a particular DST policy falls within the scope of Section 301, the USTR will then decide how the DST policy is to be addressed. For example, the USTR could choose to impose punitive tariffs on goods from these jurisdictions, as seen with other Section 301 investigations. Companies with transactions involving the investigated jurisdictions, and therefore, potentially subject to actions on DST, should closely monitor the investigation process, consider submitting comments per the FRN (due 15 July 2020), and assess impacts if action is taken.

Detailed discussion


Certain jurisdictions have recently imposed or contemplated imposing a tax on the revenue of specific companies offering digital services to users within the jurisdiction. This tax, or DST, stands to impact certain US companies operating abroad.

The table below outlines DST metrics for the jurisdictions included within the scope of the USTR’s recent announcement.4


In effect

Percentage of taxation

Revenue threshold


1 January 2020

5% tax on revenue from online advertising services.

Companies with at least €750 million in annual global revenue for all services and €25 million in in-country revenue for covered digital services.


Under consideration

Applicable to the gross revenue derived from digital services provided by large technology companies.


Czech Republic

Under consideration

7% tax on revenue from targeted advertising and digital interface services.

Companies generating €750 million in annual global revenues for all services and CZK50 million in in-country revenue for covered digital services.

European Union

Under consideration

3% tax on revenue from targeted advertising and digital interface services.

Companies generating at least €750 million in global revenue from covered digital services and at least €50 million in EU-wide revenue for covered digital services.


1 April 2020

2% DST.

The tax applies to nonresident companies, and covers online sales of goods and services to, or aimed at, persons in India.

The tax applies only to companies with annual revenue in excess of approximately Rs. 20 million (approximately US $267,000).


Further measures required

An electronic transaction tax that targets cross-border, digital transactions was adopted.



1 January 2020

3% tax on revenue from targeted advertising and digital interface services.

Companies generating at least €750 million in global revenue for all services and €5.5 million in country revenue for covered digital services.


Under consideration

3% tax on revenue from targeted advertising and digital interface services.

Companies generating at least €750 million in global revenue for all services and €3 million in in-country revenue for covered digital services.


1 March 2020

The measure applies a 7.5% tax on revenue from targeted advertising, social media and digital interface services.

The Turkish President has the authority to increase the tax rate up to 15%.

Companies generating €750 million in global revenue from covered digital services and TL20 million in in-country revenue from covered digital services.

United Kingdom

Under consideration

The measure would apply a 2% tax on revenue above £25 million to internet search engines, social media, and online marketplaces.

Companies generating at least £500 million in global revenue from covered digital services and £25 million in in-country revenue from covered digital services.

This USTR investigatory announcement aligns with the USTR’s previous findings relating to France’s DST.5 The French DST imposed a 3% tax on global revenue generated by “digital interface” services provided to French users. The tax was to be retroactive to 1 January 2019 and applied to companies that have global, annual revenues in excess of €750 million, or US$845 million at the current exchange rate, and that have €25 million, or US$28.15 million, of digital sales that are generated in France.6 The USTR found that France’s DST created an unreasonable or discriminatory burden to US commerce.

As a result of the USTR’s finding, the US threatened to impose tariffs on approximately US$2.4 billion of goods of French-origin. France decided to suspend the DST, and the US did not impose the proposed tariffs, pending the Organisation for Economic Co-operation and Development (OECD) negotiations of a DST agreement incorporating multiple jurisdictions.7 As of now, a final resolution has not been achieved by the OECD.

In response to the adoption or contemplated adoption of a DST within the identified jurisdictions, and pursuant to Section 301, the USTR announced it will begin investigations with the goal of determining whether the adopted or contemplated DST are unreasonable or discriminatory and whether they burden or restrict US commerce. Initially, the DST investigations will aim to assess if there is discrimination against US companies, retroactivity, and potentially unreasonable tax policy. Specifically relating to tax policy, the USTR will seek to determine whether the tax policy differs from the standards embodied within the US and international tax systems.8 As in the investigation into France’s DST, if these DST are found to be discriminatory, the USTR will then determine actions to address the policies.

The USTR is currently accepting comments relating to these investigations and those comments must be submitted by 15 July 2020.

Actions for businesses

US companies that import goods from any of the aforementioned jurisdictions subject to USTR investigations should closely monitor the USTR investigations, results, and subsequent actions. Companies should also consider submitting comments by the 15 July deadline.

Past USTR actions have included targeting specific categories of goods in certain industry subsectors. If the respective DST are found to be discriminatory, similar actions may be taken with respect to each implicated jurisdiction. Consequently, as the investigations progress, companies should be sure to fully understand the extent of products, particularly, the Harmonized Tariff Schedule of the US (HTSUS) classifications and country of origin for trade flows between the impacted jurisdictions and the US.



2. EU member countries are Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, and Sweden.


4. Ibid.

5. See EY Global Tax Alert, US issues findings of Section 301 investigation regarding France’s Digital Services Tax; proposes imposition of tariffs, dated 4 December 2019.

6. Ibid.




For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (United States), Global Trade



The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


Copyright © 2024, Ernst & Young LLP.


All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.


Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.


"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.


Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or Please refer to the privacy notice/policy on these sites for more information.

Yes, I accept         Find out more