Key countries extend moratorium on DSTs


The United States released a joint statement along with Austria, France, Italy, Spain and the United Kingdom, on Feb. 15 to extend a moratorium on Digital Services Taxes (DSTs).


The moratorium, originally announced on Oct. 21, 2021, was meant to give the Organisation for Economic Co-operation and Development (OECD) more time to negotiate Pillar 1.


Pillar 1 is part of the framework from the OECD for addressing base erosion and profit shifting. It aims to end the patchwork of unilateral DSTs in favor of a unified approach that would allow countries to tax a share of profits from digital goods and services consumed in a jurisdiction, even when the taxpayer has no physical presence there.


The moratorium was originally set to expire on Dec. 23, 2023. Participating countries had agreed to extend it through the end of 2024 if at least 30 jurisdictions, accounting for at least 60% of the parent companies of affected taxpayers, signed a multilateral convention implementing Pillar 1 before the end of 2023. The OECD released a draft of the multilateral tax treaty on Oct. 23, 2024, but not enough countries were willing to sign it to extend the moratorium. The OECD has announced a new goal to finalize text by the end of March for a signing ceremony by the end of June.


The Feb. 15th joint statement announced that the signing countries effectively agreed to respect the moratorium through June 30, 2024, aligning with the OECD’s anticipated signing ceremony to finalize the text of Pillar 1. The agreement does not cover the rest of the countries involved in Pillar 1 and notably does not include Turkey, which has a DST that was suspended under prior agreements, and Canada, which is considering a DST that could be retroactive to 2022.



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