Last week the UK, Austria, France, Italy, Spain and the US announced the terms of an agreement, referred to as the “Unilateral Measures Compromise” on the transition from existing Digital Services Taxes (DSTs) to the new multilateral solution on Pillar One agreed by the OECD/G20 Inclusive Framework on 8 October 2021.
The joint statement notes under the Unilateral Measures Compromise, the UK, Austria, France, Italy, Spain and countries which have all enacted Unilateral Measures before 8 October 2021, are not required to withdraw their Unilateral Measures until Pillar One takes effect.
The statement continues to explain that to the extent that taxes that accrue to Austria, France, Italy, Spain, and the United Kingdom with respect to existing unilateral measures during a defined period after political agreement is reached, and before Pillar One takes effect, exceed an amount equivalent to the tax due under Pillar One in the first full year of Pillar One implementation (as prorated), such excess amount of tax collected will be creditable against the portion of the corporate income tax liability.
As part of this compromise, the United States has agreed to terminate certain proposed trade actions and commits to not impose further trade actions against Austria, France, Italy, Spain, and the United Kingdom with respect to their existing digital services taxes until the end of an interim period.