Turkey To Withdraw Digital Services Tax

By Global Tax Weekly

Turkey and the United States have made a joint announcement that the former has agreed a timeline for the withdrawal of its digital services tax.

The newly announced bilateral agreement follows the international agreement on October 8, 2021, among 136 territories party to the BEPS Inclusive Framework on a new, two-pillar international tax framework for large multinational companies, including new rules to share the profits of digital giants with market jurisdictions (“pillar one”) and a minimum 15 percent corporate tax rate (“pillar two”).

The agreement between Turkey and the United States mirrors an earlier “political compromise” struck between the US and five European states – Austria, France, Italy, Spain, and the United Kingdom. Under the agreements, the countries will replace their digital services taxes with the OECD’s new framework when it is introduced – expected from December 31, 2023.

Further, they agreed that the tax burden of these regimes, from January 1, 2022, should not exceed that which would be enforced were the pillar one measures effective immediately. In addition, the countries have agreed to provide a credit against corporate tax liability for any digital services tax paid in excess of what would be due under pillar one, for a period between January 1, 2022, and ending on the earlier of the date the pillar one multilateral convention comes into force or December 31, 2023.

In return, the United States has agreed to terminate proposed trade actions and commit not to imposing further trade actions against the countries.

The expansion of these terms also to Turkey was announced by the US Treasury on November 22.

For more information on this, and other topical international tax matters, please visit: https://www.cchgroup.com/roles/corporations/international-solutions/research/global-tax-weekly-a-closer-look

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