As French lawmakers consider raising their Digital Services Tax (DST) rate from 3% to 6%,the House Ways and Means Committee has issued a statement warning that the U.S. may take aggressive retaliatory actions if the increase is enacted. France’s DST primarily targets large digital service companies, which are predominantly U.S. companies. While the committee’s statement did not explicitly reference Section 899, it strongly suggests that similar measures could be revived should France proceed with the DST hike.
What Was Included in Proposed Section 899
Section 899 was included in the House version of the One Big Beautiful Bill Act (OBBBA), and later dropped in the Senate Version before the final version of the OBBBA was signed into law. As proposed, Section 899 would have imposed higher tax rates on foreign-parented U.S. companies and foreign persons in certain “discriminatory foreign countries.” Discriminatory foreign countries would include any country that has implemented an “unfair tax,” such as a DST. In addition, Section 899 would have imposed the Base Erosion & Anti-Abuse Tax (BEAT) on foreign parented U.S. corporations.
Ultimately, Section 899 was removed from the final bill due to negotiations between the U.S. Treasury and G7 countries and an understanding that the OECD Pillar Two rules would not apply to U.S.-parented groups.
Congressional Response to French DST Rate Changes
The House Ways and Means Committee calls the proposed increase by France “an unwarranted attack on America’s digital companies.” Based on the statement, the retaliatory measures outlined in Section 899 could be imposed on French-parented U.S. companies and on certain payments to French residents if those changes are passed The committee says it would respond to the increase in a manner consistent with the president’s America First trade policy.
French lawmakers are scheduled to vote on the DST rate increase in the coming weeks.
Author: Calvin Yung | [email protected]
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