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United States:
US and India reach agreement on taxes on digital services
November 30, 2021
Thompson Hine LLP
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On November 24, 2021, the Office of the US Trade Representative (USTR) announced that the United States and India had reached an agreement on the treatment of taxes on digital services (DSTs). Under the agreement, India will repeal its existing DST prior to the entry into force of Pillar 1 of the Organization for Economic Co-operation and Development (OECD) global taxation agreement. The United States and India agreed that the same conditions would apply as under the Unilateral Action Compromise concluded in a previous agreement between the United States and Austria, France, Italy, Spain, Turkey and the United Kingdom. See updates from October 22, 2021 and November 23, 2021.
Under the circumstances defined in the agreement, liability for DSTs that US companies will be liable for during this transition period (from April 1, 2022 until either Pillar 1 implementation or 31st Pillar 1 of the OECD World Tax Convention. In return, the United States are lifting their currently suspended additional tariffs on certain imports from India that have been included in the Section 301 USTR investigation of Indian DSTs. The Treasury Department’s announcement of this Agreement with India is available here. During the Section 301 investigation into India’s DSTs Soon to be discontinued, the USTR will oversee the implementation of the agreement with India. For more information on this investigation, see updates June 4, 2020, June 2, 2021 and January 7, 2021.
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