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On October 21, 2021 the United Kingdom, Austria, France, Italy, Spain and the United States issued a joint statement regarding a compromise on a transitional approach to existing unilateral measures IDigital Services Taxes) during the interim period before Pillar 1 is in effect.

The deal struck outlines a DST-credit system which will bridge the gap between the DSTs and the start of the new system – which is due to be implemented in 2023.

 

As part of today’s deal the US will not levy tariffs in response to the DSTs. Under the Unilateral Measures Compromise, the United Kingdom, Austria, France, Italy, Spain and countries which have all enacted Unilateral Measures before October 8, 2021, are not required to withdraw their Unilateral Measures until Pillar 1 takes effect. However, to the extent that taxes that accrue to the United Kingdom, Austria, France, Italy, Spain and with respect to existing Unilateral Measures during a defined period after political agreement is reached, and before Pillar 1 takes effect, exceed an amount equivalent to the tax due under Pillar 1 in the first full year of Pillar 1 implementation (prorated to achieve proportionality with the length of the Interim Period), such excess will be creditable against the portion of the corporate income tax liability associated with Amount A as computed under Pillar 1 in these countries, respectively. As part of the Unilateral Measures Compromise, the United States agrees to terminate proposed trade actions and commit not to impose further trade actions against the United Kingdom, Austria, France, Italy, Spain, and with respect to their existing Digital Services Taxes until the end of the Interim Period. The United Kingdom, Austria, France, Italy, Spain and the United States, will remain in close contact to ensure that there is a common understanding of the respective commitments under this agreement and endeavour to resolve any further differences of views on this matter through constructive dialogue.

 

The text of the joint statement as issued on October 21, 2021 by the United Kingdom, Austria, France, Italy, Spain and the United States can be found here.

 

 

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