International news

US House passes budget bill, including changes to GILTI

On November 19, the US House passed the budget reconciliation bill, which is now in the Senate. The bill includes changes to GILTI intended to align the law to OECD Pillar 2. Notably, the bill reforms GILTI to a country-by-country determination. Under the bill, GILTI is defined as “the sum of the amounts of GILTI determined separately with respect to each country in which any CFC taxable unit of the United States shareholder is a tax resident.”

OECD to release draft legislation for Pillar 2

According to reports, the OECD will release model legislation for implementing Pillar 2’s global minimum tax at a 15% rate in the coming days. Several countries, including the U.S. and Ireland, have already made plans for adoption of the 15% corporate tax rate, while others, such as Estonia, remain undecided. Further details on Pillar 1, which will likely be implemented through a multilateral instruction, are expected in 2022.

EU holds tight to plan for digital levy

According to Irish Finance Minister Paschal Donohoe, while the EU has formally committed to funding its long-term budget with a proposed digital levy, it will move forward in alignment with the OECD global accord. Details of the digital levy are slim, but the EU has assured that it intends to comply with the OECD two-pillar approach, which includes the repeal of all unilateral Pillar 1.

Repeal of digital services taxes limited in scope, says Saint-Amans

Speaking at a virtual conference, OECD tax chief Pascal Saint-Amans clarified that unilateral measures which do not target digital activity would not be subject to Pillar 1’s repeal of unilateral digital services taxes (DSTs). In particular, Saint-Amans noted that “what you have to expect is a description of what a digital service tax, or something equivalent, is,” and that withholding taxes are not meant to come under the purview of Pillar 1.

US reaches agreement with India, Turkey over digital taxes

Following a deal that the US reached with Austria, France, Italy, Spain and the UK, the US has now reached a deal with India and Turkey to transition out the countries’ unilateral digital services taxes. Under the agreements, which end on March 31, 2024 (or earlier if Pillar 1 comes into effect prior to March 31, 2024), companies who pay the digital taxes will receive credits under the proposed Pillar 1 profit-shifting rules. The agreements mirror the ones reached with Austria, France, Italy, Spain, and the UK, which require participation under the OECD’s Pillar 1 agreement.

United States news

New York issues advisory opinion that creation and maintenance of mobile apps are nontaxable

The New York State Department of Taxation and Finance recently released advisory opinion TSB-A-20(70)S, concluding that a taxpayer’s service of creating and hosting websites and applications (apps) for mobile devices is nontaxable. The taxpayer’s customers are retailers of consumer goods, and the customer’s users access the website or app to purchase items from the retailer. The taxpayer does not charge for website/app creation, and instead recovers its costs through the fixed monthly service fee it charges for website maintenance and hosting. The taxpayer embeds code in the websites/apps so that it can provide analytics services to each customer. The Department concluded that website development services, including consulting, designing, creation, and updating or hosting are not enumerated services subject to tax and do not involve the transfer of any prewritten computer software. The analytics the taxpayer provides are also not a taxable information service in New York, because the information is unique to each individual, and is not incorporated in reports provided to other clients.