Digital services tax freeze extended through 2024 by consensus among countries

PARIS – The OECD announced on Wednesday that all countries, except Canada, with digital services taxes have agreed to delay their implementation for at least one more year as a global multinationals tax deal is postponed. This deal aims to replace outdated rules on how governments tax multinational companies, such as Apple and Amazon, that can currently book profits in low-tax countries.

Over 140 countries were expected to begin implementing the 2021 deal next year, which would reallocate taxing rights on around $200 billion in profits from major multinational companies to the countries where their sales occur. However, the more than 30 governments with national digital services taxes have agreed to suspend them until the first part of the deal is in place or drop them altogether.

The second part of the deal seeks to eliminate tax competition between governments by establishing a global minimum corporate tax rate of 15% starting next year. While progress is being made on the second part, concerns have been raised by some countries about the multilateral treaty supporting the first part. As a result, the plan now is to finalize the details for governments to sign off by the end of this year, with the treaty expected to come into force in 2025 instead of 2024.

The OECD stated that if at least 30 countries sign the treaty, the freeze on national digital taxing rights will be extended through 2024, with the option to further extend through 2025 if necessary. Only five countries – Belarus, Canada, Pakistan, Russia, and Sri Lanka – were unable to offer their support at the meeting.

Ratification of the treaty will pose challenges, particularly in the United States where a two-thirds majority in the Senate is required. However, once governments sign the treaty, it will pave the way for significant changes in international taxation and the regulation of digital giants.