Thursday, 2 December, 2021
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Digital tax for US cos to stay until OECD pact comes into force

Digital tax for US cos to stay until OECD pact comes into force

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NEW YORK: The 2 per cent equalisation levy imposed by India on digital players will continue for US companies until a global agreement on taxing multinational enterprises (MNEs) comes into effect or March 31, 2024, whichever is earlier. The United States, on the other hand, has committed to withdrawing its threat of retaliatory trade action against India, according to an agreement reached between the two countries on Wednesday.

New Delhi and Washington have agreed to count the benefits of a global agreement on taxation from the next financial year. However, the benefits would actually accrue once the global pact comes into effect or March 31, 2024, whichever is earlier, in the form of credit, according to the reading of the pact by experts, report agencies.

According to the bilateral agreement, India’s equalisation levy will not go away in the interim period, which starts from April 1, 2022. However, once the global agreement (Pillar-1) comes into effect, it would be calculated whether MNEs have paid higher tax in the form of equalisation levy than what is liable under the agreement. The excess amount will be calculated on the basis of the first year of Pillar 1 implementation.

In case they have paid higher tax, the excess amount would be given as credit to the companies. It is expected that global taxation would be less than the equalisation levy.