E-News from KPMG’s EU Tax Centre

Latest CJEU, EFTA, ECHR

CJEU provides guidance on the anti-abuse provision in the Parent-Subsidiary Directive

On April 3, 2025, the Court of Justice of the European Union (CJEU or the Court) delivered its decision in case C-228/24, addressing the interpretation of the anti-abuse provision in the Parent-Subsidiary Directive (PSD). The plaintiff in the case was a Lithuanian company active in the video games industry, which received dividends from its UK subsidiary (UK Sub) in n 2018 and 2019.

​During this period, the UK subsidiary served as an intermediary between the plaintiff and various advertising and game distribution platforms. The UK Sub's activities ceased in 2019, once the plaintiff was able to secure direct agreements with these platforms, leading to its liquidation in 2021. Following a tax inspection, the Lithuanian tax authorities denied the applicability of the dividend participation exemption under the PSD to dividend payments received by the Lithuanian company from its UK subsidiary. The decision was made on the grounds that the UK Sub was a non-genuine arrangement. 

The Court ruled that the anti-abuse provision in the PSD¹ does not prevent a national practice whereby a parent company is denied a corporate income tax exemption on dividends received from a subsidiary classified as a non-genuine arrangement. This is the case even if the subsidiary is not a conduit company and the distributed profits arise from activities conducted in its own name, provided that elements of an abusive practice are present.

The CJEU did hold that the anti-abuse provision prohibits a national practice that considers only the situation on the dividend payment dates when classifying a subsidiary established in another Member State as a non-genuine arrangement. This is particularly the case where the subsidiary was established for valid commercial reasons and its genuine activities prior to those dates are not called into question.

Lastly, the Court provided clarifications regarding non-genuine arrangements. The Court stated that merely classifying a subsidiary as non-genuine does not automatically imply that the parent company has obtained a tax advantage. This is true even when the parent company receives an exemption from corporate income tax on dividends from that subsidiary, as it does not necessarily undermine the object and purpose of the PSD.

For more details, please refer to Euro Tax Flash Issue 560.

State aid

European Commission approves Finnish state aid tax credit scheme to support green transition

On February 18, 2025, the European Commission approved a EUR 2.3 billion Finnish scheme to support investments in strategic sectors and to help industrial companies decarbonize their production processes.

The scheme, designed in form of a tax credit available to all sectors except financial institutions, consists of three components:

• support investments in renewable energy production (excluding electricity) and in storage of clean energy sources and fuels,
• support newly installed or repowered capacities for decarbonization and energy efficiency of industrial production processes, and
• support production of strategic equipment such as batteries, solar panels, wind turbines, and related key components or raw materials.

The Commission’s release does not include details on the tax credits. However, Finland had previously announced plans to allow credits of up to 20 percent of qualifying costs for green transition investments (capped at EUR 150 million per group), provided that the qualifying costs amount to at least EUR 50 million per facility – see E-News Issue 201.

The scheme, approved under the State aid Temporary Crisis and Transition Framework (‘TCTF'), is set to run until December 31, 2025, and includes safeguards to avoid undue distortions of competition within the European Economic Area.

For more information, please refer to a report prepared by KPMG Finland.

European Commission has no objections to modification and extension of Irish film tax relief support scheme

On March 27, 2025, the European Commission published its positive decision on the Irish authorities intention to modify and extend the Irish film tax relief support scheme.

The legal basis of the existing scheme is Section 481 of the Taxes Consolidation Act 1997 as amended by the 2023 Finance Act. The existing scheme aims to support the production of feature films, television dramas, animations and creative documentaries having a cultural content in Ireland. The aid is available to film production companies established in the European Economic Area (EEA) and operating in Ireland. The aid is granted in relation to eligible audiovisual works and is calculated based on the amount spent in Ireland on a given film production. Qualifying audiovisual works must have a minimum production budget of EUR 250,000 and incur at least EUR 125,000 of eligible expenditure.

The aid takes the form of a reduction of the tax due that may be claimed against the producer company’s corporation tax liabilities and amounts to 32 percent of whichever is the lowest of: (i) the eligible expenditure amount; (ii) 80 percent of the total cost of production of the film; or (iii) EUR 125 million.

The notified amendment consists in the introduction of an additional aid category for small to medium sized feature film productions (the ‘Scéal Uplift’). The Scéal Uplift will take the form of an enhanced tax credit rate of 40 percent, i.e., an uplift of 8 percent compared to the existing 32 percent tax relief. To qualify for the Scéal Uplift, a producer company will first be subject to an assessment under the standard tax relief qualifying criteria (mentioned above). To qualify for the enhanced support, productions must then meet additional criteria, such as:

(i) the project is a feature film (including animated film),

(ii) the producer company has incurred qualifying expenditure of less than EUR 20 million on the production of the film, and

(iii) an individual who is national of, or ordinarily resident in, Ireland or another EEA State is engaged in a key creative role on the production.

The European Commission has accordingly decided not to raise objections to the notified amendment on the ground that it is compatible with the internal market pursuant to Article 107(3)(d) of the Treaty on the Functioning of the European Union. The application of the modified tax relief support scheme has been authorized from January 1, 2025, until December 31, 2028

EU Institutions

Postponement of EU sustainability due diligence and reporting requirements

On April 3, 2025, the European Parliament voted to delay the implementation of EU legislation concerning corporate sustainability due diligence and reporting requirements in accordance with the Commission’s Omnibus simplification proposals.

Key takeaways include:

• Corporate Sustainability Due Diligence Directive (CSDDD): The rules should be transposed in national legislation by July 26, 2027, in each Member State, which represents a postponement of the deadline by one year. For first-time application there is also a delay of one year from July 26, 2027 to July 26, 2028.

• Corporate Sustainability Reporting Directive (CSRD): The CSRD's implementation is postponed by two years for the second and third waves of companies². Second wave companies were originally required to report on the financial year 2025 with publication in 2026. This has been postponed to reporting in respect of financial year 2027, with publication in 2028. Listed small and medium-sized enterprises (considered as third wave companies) will begin reporting one year later in respect of financial year 2028, with publication in 2029.

Following the approval by the European Parliament, the ‘stop the clock’ proposal, must now receive formal approval from the Council of the European Union, which had already endorsed the text on March 26, 2025.

Meanwhile, the substantive proposals still need to be discussed and approved by the European Parliament and the Council.

For more information, please refer to E News Issue 208, Euro Tax Flash Issue 558 and a report prepared by KPMG International.

OECD and other International 

Updated outcomes of the transitional peer review process (Pillar Two)

On March 28, 2025, the Inclusive Framework on BEPS released an updated version of the central registry providing the outcome of the Pillar Two transitional peer review process current as of March 31, 2025.

The registry was initially published on January 15, 2025, identifying jurisdictions that have been granted Transitional Qualified Status concerning the local implementation of the Domestic Minimum Top-up Tax (DMTT) and Income Inclusion Rule (IIR).

According to the update, Guernsey’s and Spain’s IIRs have been awarded Transitional Qualified Status. In addition, the DMTT of both Guernsey and Spain have been awarded Transitional Qualified Status and are also considered eligible for the QDMTT Safe Harbors.

The list of qualifying jurisdictions is continually updated as more legislation completes transitional qualification process.

For previous coverage, please refer to E-News Issue 205.

Local Law and Regulations

Draft DMTT information return updated

On April 10, 2025, the Belgian tax authorities published an updated draft tax form (in Dutch / French). In the related press release (in Dutch / French) the Federal Public Service Finance highlights that the draft tax form has been provided for information purposes only. It will be considered final after publication in the Belgian Official Gazette. Additionally, an XML schema of the declaration and information on how to complete the form will be provided as soon as possible. Once finalized, it will be utilized by companies submitting their annual DMTT returns for the first time in 2025. Note that the submission deadline for the DMTT return in Belgium is 11 months after the fiscal year ends, which means that the deadline is November 30, 2025, for taxpayers whose fiscal year ended on December 31, 2024.

The release of the revised draft form follows a public consultation conducted by the tax authority in the fall of 2024 regarding a proposed domestic top-up tax return (see E-News Issue 202 for previous coverage). Key information to be provided in the return includes:

• Group information: The return would require the identification of certain group entities, including the taxpayer(s) subject to the Belgian DMTT, the Belgium-based group entity or designated filing entity, the UPE of the group, as well as Excluded Entities.
• Safe Harbours and elections: The return would allow groups to indicate whether they benefit from a Safe Harbor relief (including the permanent Safe Harbor for Non-Material Constituent Entities (NMCE) and the temporary Country-by-Country (CbyC) Reporting Safe Harbor) by mentioning the test met for Safe Harbor purposes. In addition, the return would require groups to indicate the GloBE elections being made.
• DMTT calculation: The return would require certain disclosures regarding the calculation and allocation of the Belgian DMTT liability.
• Advance payments: the Belgian system of advance current income tax payments applies also for top-up tax purposes. Any advance payments made during the year will be credited against the DMTT liability.

Note that the January 2025 Administrative Guidance on the GloBE Information Return states that the DMTT information should be incorporated directly into the GloBE Information Return. However, according to the adopted version of DAC9, EU countries may require a routine domestic tax return or to collect information for the purposes of the preparation of the DMTT tax return whilst generally refraining from requiring the reporting of additional data points beyond the GIR.

For more information, please refer to a report prepared by KPMG in Belgium.

German coalition agreement unveils plans for comprehensive tax reforms

On April 9, 2025, the German coalition agreement was published, outlining several key tax and financial policies aimed at enhancing economic growth, competitiveness, and social security.

Key takeaways include:

• Investment incentives: The coalition intends to introduce a new investment booster in the form of declining balance tax depreciation for equipment investments. Businesses will benefit from a 30 percent depreciation rate for the years 2025, 2026, and 2027.
• Reduction of corporate income tax rate: Starting on January 1, 2028, the corporate tax rate of 15 percent will be reduced incrementally by one percentage point annually over five years. Note that Germany levies trade tax alongside the corporate income tax. The trade tax rate is set at municipal level and amounts on average to 14 percent, calculated on the taxable trade income (trade income adjusted for trade tax purposes). The coalition agreement intends to increase the minimum trade tax multiplier from 200 percent to 280 percent, raising the minimum trade tax rate from 7 percent to 9.8 percent.
• Solidarity surcharge³: The solidarity surcharge of 5.5 percent will remain unchanged (see E News Issue 209 for more information regarding the recent Constitutional Court decision confirming the constitutionality of the solidarity surcharge).
• Pillar Two: The coalition reaffirms its commitment to the minimum tax for large corporations. It supports international efforts to permanently simplify the minimum tax framework and will monitor global developments to prevent competitive disadvantages for German companies.
• Financial transaction tax: The government backs the implementation of a financial transaction tax at EU level.
• Combatting tax havens: Germany will advocate for the strict inclusion of non-cooperative tax jurisdictions on the EU's list of non-cooperative jurisdictions.
• Neutral taxation across legal forms: The German government intends to refine the existing option for partnerships to be taxed like corporations under section 1a of the German Corporate Income Tax Act. This adjustment aims to reduce legal barriers that have previously hindered its widespread adoption. Additionally, enhancements will be made to the deferral of taxation on retained earnings, promoting equitable treatment across different business entities.
• Tax harmonization: The coalition intends to act against unfair tax competition and supports the introduction of a common corporate tax base within the EU.

It should be noted that these measures are proposals within the coalition agreement and will require government action for implementation during the legislative term.

Guidance on the treatment of tax transparent entities for Country-by-Country Reporting and Pillar Two purposes

On April 3, 2025, the German Federal Ministry of Finance issued guidance on the treatment of tax transparent entities for CbyC Reporting to tax administrations and for the purposes of applying the transitional CbyC Reporting Safe Harbour under Pillar Two.

In particular, the guidance clarifies how certain types of entities would be treated from a (private) CbyC reporting and Pillar Two perspective, including:

• domestic tax transparent entity engaging in asset management activity;
• domestic tax transparent entity engaging in business activity (considered as a permanent establishment for German tax purposes) and German-based owners;
• domestic tax transparent entity engaging in business activity (considered as a permanent establishment for German tax purposes) and foreign-based owners;
• foreign tax transparent entities.

The guidance clarifies that a permanent establishment for German tax purposes does not automatically trigger a permanent establishment for Pillar Two purposes. For example, a domestic tax transparent entity that has only German-based owners would generally not trigger a permanent establishment for Pillar Two purposes.

Public Consultation on the R&D tax credit and on options to support innovation

On April 2, 2025, Ireland's Department of Finance launched a public consultation on the research and development (R&D) tax credit and on options to support innovation. Key takeaways include:

• The R&D tax credit: The R&D tax credit is aimed at boosting business R&D activities in Ireland. The credit is available to all companies within the charge to Irish tax that carry out qualifying R&D activities. For more information on the Irish R&D tax credit, please refer to a report prepared by KPMG in Ireland.
• Public consultation process: According to the consultation document, there is a commitment to examine options to enhance the R&D tax credit, reward innovation and digitalization and to encourage innovation by domestic and international companies. The government aims to define “innovation” clearly and considers targeted measures to support it, in line with the EU State aid framework.

Interested parties are invited to submit their responses to specific questions related to the R&D tax credit and on innovation. The consultation period runs from April 2 to May 19, 2025.

Namibia proposes 2025/2026 Tax Budget

On March 27, 2025, Namibia's Finance Minister unveiled the 2025/2026 budget, introducing several tax reforms aimed at enhancing economic growth and tax competitiveness.

Key takeaways from a direct tax perspective include:

• Corporate tax adjustments: The corporate tax rate for non-mining companies will decrease from 31 percent to 30 percent from January 1, 2025, with a further reduction to 28 percent planned for 2026/2027. Additional measures involve replacing the 3:1 thin capitalization ratio with a 30 percent cap on interest deductions, limiting the carryforward of assessed losses, and implementing a 10 percent dividend tax starting January 1, 2026. An anti-avoidance rule is also proposed to curb revenue loss from loans disguised as preference shares.
• Special Economic Zones (SEZ) regime: The SEZ regime, which will be introduced as a replacement for the current Export Processing Zone regime, is being finalized. The new regime offers a 20 percent corporate tax rate for SMEs that meet specific criteria, such as an annual turnover below a set threshold.
• Tax Amnesty Program: The tax arrears relief program, forgiving all interest and penalties if the principal is paid by October 31, 2026, will be extended.

For more information please refer to a March 2025 report prepared by KPMG in Namibia.

Decision on Pillar One Amount B implementation

On March 31, 2025, the Norwegian Tax Administration released a statement regarding the implementation of Amount B under Pillar One. Amount B generally aims to simplify and streamline the application of the arm’s length principle to baseline marketing and distribution activities and can be elected for application for accounting periods starting on or after January 1, 2025.

Key takeaways include:

• Norway has opted to currently not apply Amount B. Consequently, related parties in Norway must adhere to the OECD Transfer Pricing Guidelines (TPG) as per section 13-1 of the Taxation Act when pricing intracompany transactions.
• In mutual agreement procedures under tax treaties, Norway will base its position on transaction pricing according to the TPG.
• However, if the conditions to apply Amount B are met and the pricing matrix was correctly used, Norway will accept the results of a jurisdiction's Amount B application. The Norwegian Tax Administration reserves the right to assess whether these conditions are fulfilled. In the case that the outlined conditions are not met, transactions will be evaluated according to the TPG.
• Until further notices, this decision is initially applicable for the period from January 1, 2025, to December 31, 2029.

For more information on Amount B, please refer to a report by KPMG International.

Regulations to the Global Minimum Tax Act published in Spain

On April 2, 2025, a Royal Decree was published in the Spanish Official Gazette clarifying the application of the Global Minimum Tax Law that previously entered into effect on December 22, 2024 - please refer to E-News Issue 205 for previous coverage.

The Royal Decree implements various items from the OECD Administrative Guidance and clarifies the administrative requirements, including:

• February 2023 Administrative Guidance: e.g., election to exclude income attributable to debt releases under certain conditions, the election to include portfolio shareholding income, application of an Excess Negative Tax Expense carry forward.
• July 2023 Administrative Guidance: e.g., treatment of (non-) marketable transferable tax credits, clarifications on Substance-Based Income Exclusion.
• December 2023 Administrative Guidance: e.g., mismatches between fiscal years of the UPE and other Constituent Entities of the MNE Group or large domestic group.
• Administration: the decree outlines the information to be included in the GloBE Information Return, in line with the OECD GloBE Information Return template. In addition, the decree provides for the requirement to notify tax authorities of the identity and location of the entity that submits the GloBE Information Return (UPE or Designated Filing Entity). Based on the decree, such notification must be submitted to the tax authorities within three months prior to 15 months after the end of the Reporting Fiscal Year (respectively two months prior to 18 months for the transitional year).

For more information, please refer to a report prepared by KPMG in Spain.

Tunisia introduces corporate tax reforms under the 2025 Finance Law

On March 18, 2025, the Tunisian tax authorities issued a General Memorandum, clarifying changes resulting from the 2025 Finance Law, which was introduced in December 2024. The law entailed amendments to its Corporate Income Tax (CIT) rates, focusing on progressive taxation to enhance fairness.

Key changes include:

• CIT rate adjustments: The standard rate increased from 15 percent to 20 percent, while banks and financial institutions are now taxed at 40 percent (previously 35 percent).
• Capital gains tax: Non-resident companies face a 20 percent rate on capital gains from real estate and securities.
• Minimum tax rates: The minimum tax rates were raised from 20 percent to 25 percent for companies which are subject to the adjusted CIT rate of 40 percent and benefit from certain tax exemptions. The rate remains at 10 percent for all other companies. Please note that the minimum tax rate is a domestic tax policy measure unrelated to Pillar Two.
• Advance tax for partnerships: The rate increased from 15 percent to 20 percent, subject to certain exceptions.
• Withholding tax for non-residents: The withholding tax rates increased from 10 percent to 15 percent in respect of capital gains relating to real estate (or related rights), and from 15 percent to 20 percent in respect of gains from securities transactions.

The provisions regarding the CIT rates and the minimum tax apply to profits earned from January 1, 2024. Withholding tax on capital gains applies to transactions carried out from January 1, 2025.

List of qualified status for Pillar Two (IIR and DMTT) purposes published

On March 31, 2025, HMRC published a document listing the jurisdictions that have been awarded the Transitional Qualified Status in relation to the local implementation of the DMTT and IIR. The list also indicates those DMTTs that are eligible for the QDMTT Safe Harbors and the date from which these taxes are deemed to have qualifying or accredited status under the UK rules.

The list follows the outcome of the transitional peer review process in form of a central record, which was published by the Inclusive Framework (IF) on BEPS on January 15, 2025, and subsequently updated on March 28, 2025. The latter update has not been reflected in the UK list yet.

For more information, please refer to a report prepared by KPMG in the UK. For previous coverage of the IF release, please refer to E-News Issue 205. For more information on the UK Pillar Two rules and recent updates, please refer to E-News Issue 209.

Local courts

Supreme Administrative Court decision: central bank of third country exempt from withholding tax

On March 24, 2025, the Finnish Supreme Administrative Court ruled on whether the central bank of a third country (“Country A”) could be exempt from withholding tax on dividends received from Finnish publicly listed companies.

Under Finnish tax law, the standard withholding tax rate on dividends paid to foreign corporate entities is 20 percent. However, certain domestic entities – such as the Bank of Finland, are exempt from this tax due to their tax-exempt status under Finnish legislation.

Initially, the Finnish Tax Administration held that a nil withholding tax rate also applied to the central bank of Country A. This decision was appealed by the Tax Recipients’ Legal Services Unit to the Adjustment Board, which argued that the foreign central bank should not be exempt. The Adjustment Board agreed and overturned the initial decision, prompting the central bank of Country A to appeal to the Supreme Administrative Court.

The Supreme Administrative Court upheld the appeal and held that a third-country central bank does not need to be identical to a domestic tax-exempt entity to qualify for equivalent treatment. Rather, the key consideration is whether the foreign entity is objectively comparable to a domestic one. The Court found that the central bank of Country A was functionally and legally comparable to the Bank of Finland, and as such, applying withholding tax would unjustifiably restrict capital movements under EU law.

For more information, please refer to a report prepared by KPMG Finland.

EU public county-by-country reporting (CbyC) reporting – a new era for tax transparency webcast – April 22, 2025

The EU has made tax transparency mandatory for multinational groups with a qualifying European presence. Australia has gone a step further, requiring multinationals to disclose not only their CbyC reports to the public but also a description of the group’s approach to tax. This is a game changer in the tax transparency landscape.

To explore these findings further, we would like to invite you to a global webcast where KPMG tax specialists will delve into the details of the new regulations. The team zoom in on the EU disclosure rules, including differences between EU-headquartered companies and non-EU headquartered companies, as well as the particularities of the Australian regime. This webcast aims to provide:

• An overview of the existing EU public CbyC reporting regulations
• Practical examples of implementation strategies and steps towards meeting the various local requirements
• Insights on lessons learnt from early adopter Romania: what did corporates do?
• An update on Australian public CbyC reporting and the overlap and differences with EU public CbyC reporting
• Insights into the state of play of tax transparency beyond the rules in force and future perspectives
• A solution to data challenges – KPMG’s Tax Footprint Analyzer.

Please access the event page to register.

EU Tax Perspectives webcast – May 6, 2025

On May 6, 2025, a panel of KPMG professionals will explore the implications of today’s geopolitical climate on EU tax policy, including the future of BEPS 2.0, EU simplification efforts, and recent developments in public CbCR and other direct tax initiatives.

The session will focus on:

• Tax Policy: The potential impact on EU tax policy of the current geopolitical climate, including considerations on the position of the US administration on international tax cooperation, the rise of tariffs, and the future of BEPS 2.0.
• Simplification efforts: The EU Competitiveness Compass, the European Commission work program and the EU tax decluttering and simplification agenda.
• Tax transparency: An update on EU Public Country-by-Country Reporting, including insights from the experience with reporting in Romania, where the first reports were due by December 31, 2024 and a discussion on key steps that in-scope MNEs should be taking now.
• State of play of other EU direct tax files: The Unshell Directive proposal, BEFIT Directive proposal, the Transfer Pricing Directive proposal, DEBRA Directive proposal.

Please access the event page to register.

Talking tax series

With tax-related issues rising up board level agendas and developing at pace, it’s more crucial than ever to stay informed of the developments and how they may impact your business.

With each new episode, KPMG Talking Tax delves into a specific topic of interest for tax leaders, breaking down complex concepts into insights you can use, all in under five minutes. Featuring Grant Wardell-Johnson, KPMG’s Global Head of Tax Policy, the bi-weekly releases are designed to keep you ahead of the curve, empowering you with the knowledge you need to make informed decisions in the ever-changing tax landscape.

Please access the dedicated KPMG webpage to explore a wide range of subjects to help you navigate the ever-evolving world of tax.