The cross-border relief applies when the revenues from the transaction are (or would be) subject to a foreign tax which is similar to the UK DST. HMRC interprets whether a foreign tax is similar to the UK DST by looking at the essential nature and character of the foreign tax in question. Importantly, the statutory test is not that the foreign DST is identical to the UK DST.

It is a test of the objectives of the tax, rather than the detailed mechanics involved in achieving those objectives. The following provides an indication of the level at which HMRC will make that judgement:

• whether the tax is levied on gross revenues;
• whether the tax is calculated on the revenues that are derived from users in that territory; and
• whether the tax applies to broadly similar services based on a similar policy rationale.

The following countries, which now includes Spain, have taxes that are considered to be similar to the UK DST for the purposes of cross-border relief:

• France;
• Italy;
• Malaysia;
• Spain; and
• Turkey.

HMRC keeps this list under review and will consider the case from customers for the taxes from other countries to be included. To access HMRC’s Digital Services Tax Manual, click here.