TAXATION OF DIGITAL SERVICES

Abstract

Digital services are changing our society and economy, bringing new challenges and problems for tax policy through development of digital economy. Digital companies have new business models, often without a physical presence in different countries, and at the same time they provide services to users whose contribution creates value for these companies that states cannot tax under current rules as traditional services. Also, it is often hard to determine the location of a customer which is important for taxation. There are some important factors influencing taxation of digital service such as significant economic presence from companies and creation of big data by users of different countries. Some countries have introduced their taxes on digital services independently, which means that there is no consensus on the taxation of digital services at the international level. The aim of this paper is to highlight the tax treatment of digital services in the European Union and, consequently, in Croatia. Also, authors will analyze the legal solutions for the taxation of digital services in France, the United Kingdom and the Republic of India, and make proposals for the introduction of taxes on digital services in Croatia.