DST19100 - Associated Online Advertising Service - Overview
Digital Services Tax (DST) is charged on the revenues received in connection with specified digital services activities. The following are digital services activities for the purposes of DST:
- a social media service
- an internet search engine
- an online marketplace
A group will be within the scope of DST if it provides one or more of the three digital services activities.
Social media services, internet search engines and online marketplaces often monetise their services through displaying advertising to users. As these services have matured, some groups have gone on to provide various services that facilitate the placement of online advertising on other online services offered by the group or other third-party content publishers.
In some cases, these online advertising services derive a significant advantage from their association with the group’s digital services activities in scope of the DST. In these circumstances, the DST legislation requires the group to include the revenues from the online advertising services in the digital services revenues of the group’s underlying digital services activities.
This is because there is typically a lot of integration between the wider online advertising services and the in-scope digital services activities and the ability to provide and monetise these wider services is greatly enhanced by the provision of a social media platform, search engine or online marketplace.
This manifests itself in various ways; for instance, these groups often hold large scale advertising inventories, have extensive proprietary data about user behaviour which allows them to target and monitor ad performance very effectively and have developed highly advanced advertising platforms in the course of providing the digital service activity. It is therefore reasonable to view the online advertising service as an extension of the digital service activity and another way in which the social media service, search engine or online marketplace is monetised.
It is important to note these revenues should only be included when the online advertising service derives a significant benefit from its association with the digital services activity. DST is not a general tax on online advertising.
There are two stages to the legislation.
Stage 1
The first stage is to identify the group’s online advertising services
Stage 2
The next stage is to determine if these online advertising services are associated with any of the group’s digital services activities. Any services which are associated are associated online advertising services.
The revenues arising in connection with associated online advertising services are then included within the revenues of the digital services activities.
These concepts are explained in greater detail in the following sections.