United States: U.S. And India Reach Agreement On Digital Services Taxes

On November 24, 2021, the Office of the U.S. Trade Representative (USTR) announced that the United States and India reached an agreement regarding the treatment of Digital Services Taxes (DSTs).  Under the agreement, India will remove its existing DSTs before the entry into force of Pillar 1 of the agreement on global taxation of the Organization for Economic Cooperation and Development (OECD). The United States and India agreed that the same terms that apply under the Unilateral Measures Compromise reached in an earlier agreement between the United States and Austria, France, Italy, Spain, Turkey and the United Kingdom will apply under this agreement.  See Updates of October 22, 2021 and November 23, 2021.

In circumstances defined in the agreement, liability for DSTs that U.S. companies accrue during this interim period (from April 1, 2022 until either the implementation of Pillar 1 or March 31, 2024 (whichever is earlier)) will be creditable against future income taxes accrued under Pillar 1 of the OECD global taxation agreement. In return, the United States will terminate its currently suspended additional duties on certain imports from India that had been adopted in the USTR's Section 301 investigation of India's DSTs. The Department of the Treasury's announcement of this agreement with India is available here. While the Section 301 investigation into India's DSTs will soon be terminated, the USTR will monitor implementation of the agreement with India. For more information on this investigation, see Updates of June 4, 2020, June 2, 2021, and January 7, 2021.