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Austria Looking to Tax Online Services Including those Provided Free of Charge — Orbitax Tax News & Alerts

According to recent reports, Andreas Schieder of the Social Democratic Party of Austria has put forward a plan to deal with aggressive tax practices of MNEs operating in the digital economy. The plan includes proposals to extend Austrian tax on advertising revenue to digital formats, to tax purely digital services that are acquired by Austrian customers from companies with no physical presence in the country, and most interestingly, to subject free online services to VAT, such as those provided by Facebook, Google, Twitter, etc. The rational for subjecting free services to VAT is that the use of the free services is essentially a bartering arrangement between the providers and the users, whereby providers allow users to use the services for free in exchange for the users allowing the providers to provide usage data to advertisers. According to Schieder, users are essentially paying with their personal data and such transactions can be subject to tax.

The proposal must still be approved by the Finance Minister before moving forward and it is uncertain if the VAT on free services would even be in accordance with EU Law. Additional details will be published once available.