President Biden and his administration recently secured a compromise with some European countries about removing their digital tax services on certain large US companies by 2023 in transition to a new global tax deal. The countries that agreed to this were: the U.S., U.K., France, Italy, Spain and Austria.
The idea behind this is to move to a global minimum tax rate as well as coming up with a new method of taxing. This would be a system of sharing taxes that are put onto large, multinational companies mostly in order of where their operations are located instead of where profits are.
Currently, many countries – particularly European countries – have taxes that target large US tech companies that have gained revenue in their countries even if they do not have physical operations located there. This has created some hostility between these countries and the U.S. particularly. Though these six countries have come to an accord, it is important to mention that it does not include India or Turkey which are among the countries imposing these digital taxes.
Considering that some of these major companies such as Facebook and Google are based in the United States, President Biden’s administration found this to be unfair. In June, his administration fought back by implementing tariffs for Austria, India, Italy, Spain, the U.K. and Turkey. However, while they began to put these into place, they did allow time for negotiating this new deal.
This deal is encouraging countries to begin to dial back their digital service taxes over the next year and not implement new ones.
Since these countries came to an agreement about dropping their digital service taxes, the plan is for the U.S. to drop their tariff threats against these same countries. While asking them to completely eliminate these by 2023 is a lofty goal, the impending threats helped speed the decision along.
If you are curious about this new deal and how it could affect the tax you must collect and pay for your company, we are here to help! Contact us to learn all of the services available to help you and your small business. We can be reached at 310-534-5577 or [email protected].
Find more information from the source of this article here: https://www.accountingtoday.com/articles/u-s-nears-deals-with-countries-on-eliminating-digital-taxes?position=editorial_2&campaignname=ACT%20Tax%20Practice-10122021&utm_source=newsletter&utm_medium=email&utm_campaign=V2_ACT_TaxProToday_20210503%2B%27-%27%2B10122021&bt_ee=GnHNapQq%2F3dfLGqZTT0XimlLD2P%2FAsLtpMSeC1tocYfLwH9eXnYK2FG7RY%2FhGA7d&bt_ts=1634054726101
