The news comes on the same day that the US government threatened to impose tariffs on France over a similar tax levy.
The 2% tax, which will be aimed at companies with digital revenues greater than £500m when over £25m of that is earned from the UK, will be implemented from April 2020.
Paymaster general and financial secretary to the Treasury, Jesse Norman, said: “The UK has always sought to lead in finding an international solution to taxing the digital economy. This targeted and proportionate digital services tax is designed to keep our tax system in this area both fair and competitive, pending a longer term international settlement.”
The government predicts that digital services tax will raise £400m per year by 2021.