Bridge in Turkey at night

Agreement between Turkey and the US with respect to Digital Services Tax

Global Publication February 24, 2022


The United States and Turkey have agreed on the terms for the rescission of Turkey's Digital Services Tax ("DST") that largely targeted highly profitable US technology giants.

A total of 136 countries of the Organization for Economic Cooperation and Development ("OECD")/G20 Inclusive Framework—representing nearly 95 percent of the world's GDP—agreed in principle to rescind their digital services taxes as part of a sweeping global tax deal agreed on 8 October 2021.


On 8 October 2021, the United States and Turkey joined 134 other members of the OECD/G20 Inclusive Framework (including Austria, France, Italy, Spain, and the United Kingdom) in reaching political agreement on the "Statement on a Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalization of the Economy".

Pillar One is said to be intended to ensure a fairer distribution of profits and taxing rights among countries with respect to the largest and most profitable multinational enterprises. It will re-allocate some taxing rights over multinational enterprises from their home countries to the markets where they have business activities and earn profits, regardless of whether firms have a physical presence there. Multinational enterprises with global turnover above €20 billion will be subject to tax in proportion to their profits gained from the countries where they operate.

Pillar Two introduces a global minimum corporate tax rate set at 15 percent. The new minimum tax rate will apply to companies with revenue above €750 million and is estimated to generate around US$150 billion in additional global tax revenues annually.

Under the agreement, Turkey will remove its existing DSTs before the entry into force of Pillar One.

What to expect

The goal of these reforms is to provide a tax framework that is fairer, more stable, and better equipped to meet the needs of a 21st century global economy.

The agreement between the two countries will allow for the termination of the US retaliatory trade measures imposed against Turkey and will take on the same terms agreed by Washington in October with Austria, Britain, France, Germany and Italy (namely, Unilateral Measures Compromise).

The US Congress will need to take action to implement Pillar Two and may need to take action to implement Pillar One. The Pillar Two global minimum tax is part of the 2021 tax legislation pending before congress. The path in the US to implement the Pillar One reallocation of taxing rights to market countries is less clear. It might be implemented through US tax treaty amendment, which must be ratified by the US Senate, or through US tax legislation, which must be approved by the US Congress, or some combination of both. The Biden administration is also reportedly exploring the possibility of implementing Pillar One through Executıve Order or some other alternative path that does not require Congressional approval.

This article was co-written by lawyers from Pekin Bayar Mizrahi, a Turkish law firm which is in alliance with Norton Rose Fulbright US LLP.


Senior Partner, Pekin Bayar Mizrahi
Senior Associate, Pekin Bayar Mizrahi

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