On November 22, 2021, the Office of the U.S. Trade Representative (USTR) announced that the United States and Turkey reached an agreement regarding the treatment of Digital Services Taxes (DSTs).

Under the agreement, Turkey will remove its existing DSTs before the entry into force of Pillar 1 of the agreement on global taxation of the Organization for Economic Cooperation and Development (OECD). The United States and Turkey have agreed that the same terms that apply under the Unilateral Measures Compromise reached in an earlier agreement between the United States and Austria, France, Italy, Spain and the United Kingdom will apply under this agreement. See Update of October 22, 2021.

In circumstances defined in the agreement, liability for DSTs that U.S. companies accrue during this interim period (Pillar 1 of the OECD agreement is to be fully implemented in 2023) will be creditable against future income taxes accrued under Pillar 1 of the OECD global taxation agreement. In return, the United States will terminate its currently suspended additional duties on certain imports from Turkey that had been adopted in the USTR’s Section 301 investigation of Turkey’s DSTs. The “Joint Statement from the United States and Turkey Regarding a Compromise on a Transitional Approach to Existing Unilateral Measures During the Interim Period Before Pillar 1 Is in Effect” is available here. While the Section 301 investigation into Turkey’s DSTs will soon be terminated, the USTR will monitor implementation of the agreement with Turkey. For more information on this investigation, see Updates of June 4, 2020, June 2, 2021, and January 7, 2021.