DST23000 - Digital Services Revenues

The legislation defines Digital Services revenues as the total amount of revenues arising to members of the group in a period in connection with any digital services activity of any member of the group.

It follows that revenues that arise in connection with a digital services activity will be Digital Services revenues. This is a very broad concept. Revenues will be included whenever there is a connection or link between the earning of the revenue and the underlying Digital Services activity.

This means it does not matter how the group generates revenues from its digital service activities. Any type of revenue will be included if it was earned in connection with the activity. Equally, the nature of that connection is unimportant. It does not matter where the revenues were recognised in the group or how the revenues were described.

It is a question of fact whether a revenue stream is connected to a digital services activity or not. This needs to be assessed in light of the particular facts and circumstances of the business. However, relevant factors to consider are whether:

  • the revenue is earned in the course of providing the digital services activity to users.
  • the revenues would have been earned without the performance of the DST activity,
  • the revenue is derived from the user base of the digital services activity or from enabling other businesses to provide/advertise their services to that user base
  • the revenue was otherwise directly or indirectly linked to DST relevant activities provided to users.

Sometimes revenues may arise in connection with multiple services, only some of which are digital services activities. Where the revenue is wholly connected to the digital services activity, then all the revenues will be digital services revenues. However, where part of the revenue has no connection to the digital services activity, the revenues should be attributed to the digital services activity on a just and reasonable basis.

Example A

Group A provides an online marketplace. User A sells pet food to User B via the online marketplace. Group A applies various charges to sellers on the marketplace. User A pays a fee to list items on the marketplace, a commission for successful transactions and an annual membership fee. User B pays a membership fee, transaction fees and other fees for delivery.

These revenues are all received in connection with the online marketplace and are all digital services revenues. The membership fees are fees to access or use the digital services activity. It is clear they would not have been earned but for the online marketplace activity. Similarly, any fees earned in respect of transactions concluded on the marketplace are connected to the marketplace activity. Without the marketplace, they would not have been earned.

Example B

Group A also provides a fulfilment service for sellers. It charges user C a variety of fees relating to the storage and delivery of pet food ordered via the marketplace. Again, these revenues are connected to the marketplace activity because they are earned in connection with transactions that have taken place on the marketplace.

However, Group A also provides these fulfilment services to local online businesses. It has a similar fee structure for these businesses where they pay a mixture of fees to the Group for the fulfilment of orders they have received through other channels, for instance their own website and telephone orders. These revenues are not connected to the online marketplace because they would have been earned without the use of the online marketplace.

Example C

Group C provides a social media service. It generates revenue by providing advertising displayed to users of its service. Easy access to the social media service is considered a selling point by some manufacturers of digital goods. The manufacturers pay fees to the group to allow their products to have access to the service pre-loaded. Both sources of revenue are generated in connection with the provision of the social media service so are digital services revenues.