Google has announced that starting from 1 November 2020, advertisers in the United Kingdom, Turkey and Austria will be taking the hit for the Digital Service Tax.

Google has announced to its tens of thousands of clients that from November it will charge an addition fee for adverts showcasing on Google and YouTube.  The announcement comes after Amazon declared that they would be passing the Digital Service Tax (DST) cost onto their sellers.

“Digital service taxes increase the cost of digital advertising,” a Google spokeswoman told The Guardian regarding the news

Amazon announced their increase in August with the commencement date of 1 September 2020. Facebook is projected to follow suit.

Advertisers in the UK will be required to pay 2% and advertisers running adverts in Austria and Turkey will have a 5% tax.

“Any taxes, such as sales tax, VAT, GST, or QST that apply in your country will be charged in addition to the new fees,” – Google help page

DTS will affect the large digital media companies, namely Facebook, Amazon and Google. A threshold has been set for digital companies that have at least £500m in revenue and more specifically £25m in the UK.

How is DTS going to impact advertisers?

From November, these new taxes will be added to the advertiser’s monthly invoice. They will not be deducted from the budget already spent by Google. When advertises review their monthly bill there will be an additional line item for tax and any other applicable fees.

Google has also advised that an advertiser utilising manual or prepayments may result in an additional charge.  However, it will not apply the taxes to prepaid funds.

Therefore, things such as cost per click (CPC) and cost per acquisition (CPA) will reflect only the spend and not the additional taxes. This means that all calculations done within the account itself will not reflect the taxes. Advertisers are advised to revise historic data to get a sense of what adjustments are required and factor this into their calculated ROI from advertising.

How to work out your Digital Service Tax?

Find out how much you will need to pay if DST applies to your business.

“You need to register within 90 days of the end of your first Digital Services Tax accounting period.

You need to pay a 2% tax on revenues over £25 million derived from UK users.

If you have a low UK operating margin in the accounting period, you can choose to calculate how much tax you need to pay using the alternative charge.” – GOV.UK

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