U.S., India extend digital tax truce to Sunday as deadline approaches

The U.S. and India extended a standstill agreement on U.S. retaliation over India’s digital-services tax until Sunday.

The United States and India have extended a standstill agreement on U.S. retaliation over India's digital-services tax until Sunday, aligning it with a fast-approaching deadline for a global deal to reallocate taxing rights on the world's biggest and most profitable companies, the U.S. Treasury said on Friday.

In a brief announcement, the Treasury said that a November 2021 political compromise that expired March 31 would be extended through the end of the month, as negotiations on the "Pillar 1" tax agreement continue.

The Pillar 1 deal is in danger of collapse, as the U.S., India and China have failed to agree on key elements of the deal related to calculation of transfer pricing to help determine local tax liabilities.

The stakes of the last-minute negotiations are high. The deal's failure could prompt several countries to reinstate their taxes on U.S. tech giants such as Apple, Alphabet's Google, and Amazon.com and risk punitive duties on billions of dollars in exports to the U.S.

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The extension of the U.S.-India agreement also aligns it with the expiration of similar deals with six other countries that had enacted digital-services taxes: Austria, Britain, France, Italy, Spain and Turkey.

These countries suspended their digital-services taxes shortly after a two-pillar tax deal was struck in October 2021 by nearly 140 countries to impose a 15% global minimum corporate income tax and complete negotiation on reallocating some taxing rights on large multinationals to countries where they sell goods and services. This was meant to replace the digital-services taxes.