Digital Services Taxes Explained: 2026 Country Rates, Canada's Repeal and the US Response

Digital services taxes explained in one line: they are taxes some countries charge on the gross revenue large tech groups earn from local users, usually 2% to 5% of in-country revenue from online advertising, marketplaces, social media or user data, once a group passes a global threshold of about €750 million. As of 26 October 2026, France, the UK, Italy, Spain, Austria and Turkey still collect one, Canada has repealed its tax retroactively, and India has switched off its equalisation levy.

This guide gives digital services taxes explained for US businesses: current rates and thresholds, the 2025 and 2026 changes, the status of OECD Pillar One, the US response through Section 301, and Maryland's separate state tax on digital advertising. Most small and mid-sized US companies will never owe a DST directly, though many pay one indirectly through platform fees.

Digital Services Taxes Explained: How the Tax Works

A digital services tax (DST) is charged on revenue, before any deduction for costs. Corporate income tax falls on profit, so a loss-making platform can still owe DST where its users generate revenue.

Scope varies by country. The taxed activities usually include targeted online advertising, digital intermediation (marketplaces and platforms that let users interact or trade), social media, search engines and the sale or transmission of user data. Selling your own goods through your own website is usually outside scope.

Two thresholds decide who pays. A worldwide revenue test, normally €750 million or a local equivalent, limits the tax to large groups. A local test, such as £25 million of UK digital services revenue, sets the in-country floor. Both are normally tested on a consolidated group basis.

Because a DST falls on gross receipts, ask your adviser whether a payment qualifies under the foreign tax credit rules or only as a deductible expense before you file.

Digital Services Tax Rates and Thresholds by Country (October 2026)

The table reflects official sources checked on 26 October 2026. Confirm the rules for the period you are filing.

France

France taxes revenue from digital intermediation and targeted advertising attributed to France, once taxable revenue exceeds €750 million worldwide and €25 million in France. The rate is still 3%. An amendment to the 2027 budget bill tabled on 4 October 2026 states the current 3% rate and both thresholds and notes that the bill forecasts about €981 million of DST revenue. That amendment proposed 6% and was not moved in committee. During the 2026 budget debate, the finance committee adopted an amendment for a 15% rate, yet the rate in force is still 3%. Treat any increase as a proposal until the 2027 finance law is published.

United Kingdom

HMRC sets the thresholds at £500 million of worldwide revenue from digital services activities, with £25 million attributable to UK users. The tax covers social media services, search engines and online marketplaces. The first £25 million of UK revenue is an annual allowance, and 2% applies above it. Groups with low UK margins can elect an alternative basis of charge.

Italy

Italy's revenue agency confirms that its DST applies at 3% to targeted advertising, multi-sided digital interfaces and user data, for groups with at least €750 million of worldwide revenue. The 2025 budget law removed the former €5.5 million Italian revenue test. Returns are due by 30 June, with a 30% advance payment by 30 November and the balance by 16 May of the following year.

Spain and Austria

Spain's Ley 4/2020 charges 3% on online advertising, intermediation and data transmission revenue, for groups with net turnover above €750 million and more than €3 million of Spanish digital revenue. Austria's tax applies only to online advertising, at 5% of the fee received, for groups with €750 million of worldwide revenue and €25 million of Austrian online advertising revenue.

Turkey

Turkey's DST was 7.5%. Presidential Decision No. 10767, published in the Official Gazette on 25 December 2025, cut it to 5% from 1 January 2026 and 2.5% from 1 January 2027. Law 7194's thresholds are unchanged: a group is exempt if its Turkish in-scope revenue is below TRY 20 million or its worldwide revenue is below €750 million.

India's Equalisation Levy

India's equalisation levy worked like a DST. The 2% levy on e-commerce supplies stopped applying from 1 August 2024. The Finance Act, 2025, enacted on 29 March 2025, ended the 6% levy on online advertising for consideration received on or after 1 April 2025.

Canada's Digital Services Tax: Collected, Cancelled, Repealed

Canada's Digital Services Tax Act was enacted on 20 June 2024 at a 3% rate, with the first collection scheduled for 30 June 2025. On 29 June 2025, the Department of Finance announced that Canada would rescind the tax to advance trade talks with the United States and that the 30 June collection would be halted.

The Budget 2025 Implementation Act, No. 1 received royal assent on 26 March 2026. Part 2 of that Act repeals the Digital Services Tax Act and its regulations, deems the repeal effective from 20 June 2024, and requires refunds of amounts already paid, with interest.

The repeal reached customers too. Google says it stopped charging a 2.5% Canadian DST fee from 1 July 2025 and is crediting back fees charged to ads customers, so check your platform statements for that credit.

OECD Pillar One Status in 2026

Pillar One was designed to replace DSTs. Its Amount A would reallocate part of the residual profit of the largest multinationals to market countries, and its multilateral convention would require signatories to withdraw DSTs and not introduce new ones.

That convention has never entered into force. In a January 2025 update, the Inclusive Framework co-chairs reported that the text had been stable since mid-2024 but that one member objected to its adoption, citing the unfinished Amount B framework. A US presidential memorandum of 20 January 2025 then directed the Treasury to notify the OECD that commitments on the Global Tax Deal have no force or effect in the United States without an act of Congress.

Attention moved to Pillar Two, where a side-by-side package released on 5 January 2026 accommodates the US minimum tax regime. The OECD's April 2026 report to G20 finance ministers says this increased interest in resuming dialogue on digital tax challenges, but no revised Pillar One agreement has been published. Groups subject to the global minimum tax can use our Pillar Two compliance guide and readiness checklist for mid-market CFOs.

US Response: Section 301 and Executive Action, 2025 to 2026

The White House describes DSTs as taxes designed to target American companies. The main US tool is Section 301 of the Trade Act of 1974, which lets the US Trade Representative (USTR) investigate and retaliate against foreign practices that burden US commerce. USTR investigated France and later Austria, India, Italy, Spain, Turkey, the UK and others in 2019 and 2020, then terminated those actions in November 2021 while continuing to monitor them.

A presidential memorandum of 21 February 2025 directed USTR to decide whether to renew the Section 301 investigations into the DSTs of France, Austria, Italy, Spain, Turkey and the UK. As of 26 October 2026, USTR's DST investigation page still lists the November 2021 terminations as its latest entries, and no DST-specific Section 301 initiation appears in the Federal Register.

Other developments shaped the pressure:

• On 29 June 2025, the day before first collection, Canada announced it would rescind its DST to advance trade negotiations with the United States.
• On 20 February 2026, the Supreme Court held in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act does not authorize tariffs, which leaves other statutes, such as Section 301, as routes for tariff action.

Any renewed Section 301 case would run through notice, comment and hearings before tariffs apply, which gives importers some warning.

Worked Example: One Group, Six Tax Rules (Illustrative)

Take an illustrative US marketplace and advertising group whose worldwide in-scope revenue is above every global threshold. Its 2026 local in-scope revenue is £60 million in the UK, €40 million in France, €10 million in Italy, €2.5 million in Spain, €18 million of Austrian online advertising and TRY 150 million in Turkey.

The euro liability is €1.5 million across France and Italy, plus £700,000 and TRY 7.5 million. At the same Turkish revenue in 2027, the 2.5% rate halves that line to TRY 3.75 million.

The UK deducts its £25 million as an allowance, while France and Spain tax the whole local amount once the threshold is crossed. The harder part is data. Each country attributes revenue using its own user-location rules, so billing systems need to tag revenue by user country. The same data supports SaaS sales tax decisions and economic nexus tracking for SaaS and marketplaces.

Maryland's Digital Advertising Tax: A Separate US State Issue

One US state built its own version. Maryland's Digital Advertising Gross Revenues Tax applies to businesses with at least $100 million of global annual gross revenue and at least $1 million of annual gross revenue from digital advertising services in Maryland. The Comptroller's Technical Bulletin No. 59 sets four rates by global revenue: 2.5% from $100 million to $1 billion, 5% above $1 billion to $5 billion, 7.5% above $5 billion to $15 billion, and 10% above $15 billion. Form 600 is due by 15 April, with quarterly estimates. A company with $1.2 billion of global revenue and an $8 million Maryland assessable base would owe $400,000 at 5% (illustrative).

The courts have narrowed it:

• On 15 August 2025, the Fourth Circuit held that the ban on passing the tax to customers as a separate fee, surcharge or line item violates the First Amendment, and the District Court barred its enforcement on 15 October 2025. Maryland's Department of Legislative Services notes that ruling left the tax itself in place.
• On 14 August 2026, the Maryland Tax Court ruled for Apple, Google and Peacock, reversing the Comptroller's refund denials and ordering refunds with interest. Apple and Google won on all counts and Peacock in part. Each order notes a 30-day window to seek judicial review in circuit court.

Those orders bind the parties. The statute remains on the books, so businesses near the thresholds should take advice on filing protectively and claiming refunds. Maryland's separate 3% sales tax on certain technology services is covered in our Maryland sales tax guide.

What US Businesses Should Do Now

Most US companies sit far below €750 million, so their exposure is indirect. Ad platforms, app stores and marketplaces often add country-specific DST surcharges. Review vendor statements for those lines and watch for credits where a tax has been repealed, as in Canada.

Larger groups and fast-growing platforms should:

• map in-scope revenue (advertising, marketplace commissions, data) by user country each quarter;
• test global and local thresholds on a consolidated basis;
• calendar registration and payment dates, such as the UK's 90-day registration window and Italy's 30 November advance;
• keep DST revenue attribution consistent with transfer pricing documentation;
• review permanent establishment risk separately, since a DST does not replace corporate tax.

VAT on digital services often applies from the first sale, long before any DST threshold; our US sales tax and VAT comparison explains the mechanics. See also our guides to international taxation for CPA firms and global expansion and tax compliance.

Frequently Asked Questions

Do digital services taxes apply to small US businesses? Rarely as a direct liability. Every DST in force in October 2026 uses a worldwide threshold of €750 million or £500 million, so small businesses are far below it. They can still bear DST costs through platform surcharges.

Is Canada's digital services tax still in effect? No. The Budget 2025 Implementation Act, No. 1, given royal assent on 26 March 2026, repealed it with effect from 20 June 2024 and requires refunds with interest.

Has the US imposed tariffs over digital services taxes in 2025 or 2026? Not as of 26 October 2026. A February 2025 memorandum told USTR to consider renewing the Section 301 cases, but no DST-specific Section 301 action has been published.

What happens to DSTs if Pillar One is adopted? The Amount A convention would require signatories to withdraw DSTs. It has not entered into force, and the US has said the OECD deal has no domestic effect without legislation, so current DSTs remain.

Is Maryland's digital advertising tax still collected? The statute remains in force, but the Maryland Tax Court ruled on 14 August 2026 for Apple, Google and Peacock and ordered refunds. Take advice on protective filing while further review plays out.

Next Step

Madras Accountancy supports US businesses and CPA firms with bookkeeping, tax preparation, CFO and advisory work, and audit support, including the revenue-by-country tracking and vendor reconciliations that cross-border tax rules depend on. If you sell digital services abroad or buy heavily from global ad platforms, contact our team to review your reporting setup.