[co-authors: Isabella Peek & Sabrina Bey]
The Office of the United States Trade Representative (“USTR”) announced that the Department of the Treasury has reached an agreement with Austria, France, Italy, Spain, and the United Kingdom regarding the treatment of Digital Services Taxes (“DSTs”). The Department of Treasury reached the agreement in conjunction with the Organization for Economic Co-operation and Development (“OECD”) global agreement. In coordination with the Department of Treasury, USTR plans to work together with these governments to ensure implementation of the agreement and rollback of existing DSTs.
Under the Agreement, in defined circumstances, DST liability that U.S. companies accrue during the interim period will be creditable against future income taxes accrued under Pillar 1 of the OECD agreement. In return, the United States will terminate the currently-suspended additional duties on goods of Austria, France, Italy, Spain, and the United Kingdom that had been adopted in the DST Section 301 investigations.
The products affected by the Section 301 tariffs included glassware from Austria; cosmetics and handbags from France; furniture and jewelry from India; footwear and handbags from Italy; shellfish and footwear from Spain; carpets and linens from Turkey; and beauty products and apparel from the UK. To see the full range of products subject to the 25% Section 301 DST tariffs, see the lists under Annex B of the Notice of Action for each country.
Turkey and India, the other two countries covered by the DST investigations, have not joined in the agreement. As such, USTR will also continue to oppose the implementation of those unilateral digital services taxes until an agreement is reached.
USTR initiated the Section 301 DSTs investigation on June 2, 2020 but terminated the investigation with respect Brazil, the Czech Republic, the European Union, and Indonesia on March 26, 2021, because they chose not to adopt DSTs previously under consideration. The investigation continued with respect to Austria, India, Italy, Spain, Turkey, and the UK until June 2, 2021, when the final determination was announced to impose a 25% additional tariff 180 days following the announcement. USTR similarly suspended Section 301 DSTs tariffs on imports from France on January 6, 2021.