India and US reach compromise on digital taxes

India and the United States have reached a compromise over the country’s 2% equalization tax or digital tax on the provision of e-commerce services and the retaliatory measures proposed by the United States against it.

According to an official statement issued on Wednesday by the Ministry of Finance, “The two countries agreed on the terms of the unilateral measures decision on October 21, 2021 that the United States agreed with the United Kingdom, Austria, France, Italy and Spain…”

New Delhi has gained time until 1 April 2022 to start the implementation period of the Interim Agreement. “Between India and the United States, the transition period will extend from April 1, 2022 until the implementation of Pillar One or March 31, 2024, whichever comes first,” the statement said.

The US announced in January of this year that India’s equality tax was discriminatory and enforceable and in March proposed retaliatory rates of 25% on nearly 40 products including shrimp, wooden furniture, gold and silver, jewelry and basmati rice. The fee could rise to about $55 million, which is the approximate amount of DST paid by US-based companies such as Google, Amazon, Linkedin and Facebook, according to USPTO calculations.

Cards revenge

However, in June, the US suspended retaliatory tariffs on six countries, including India, for up to 180 days to make time for negotiations in the Organization for Economic Cooperation and Development. and the Group of Twenty on international taxation. .

With the two countries reaching a compromise on the issue, the United States is expected to drop its intention to retaliate.

On October 8, 2021, India and the United States joined 134 other members of the comprehensive OECD/G20 framework (including Austria, France, Italy, Spain, and the United Kingdom) to reach agreement on a declaration on the pillars of a two-way solution. Addressing the financial challenges arising from the digitization of the economy On October 21, 2021, the United States, Austria, France, Italy, Spain and the United Kingdom reached agreement on a transitional approach to existing unilateral measures during the implementation of Pillar I.

“The two countries decide to remain in close contact to ensure a common understanding of their respective obligations and to seek to resolve any further differences of opinion on this issue through constructive dialogue; the final terms of the agreement will be determined by February 1, 2022..