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Council of the EU

ECOFIN Council approves biannual report on tax issues

On June 20, 2025, the Economic and Financial Affairs Council (ECOFIN) approved a report to the European Council in its final meeting under the Polish Presidency of the Council of the European Union. The report details progress made with respect to various tax-related initiatives during the first half of 2025.

Key takeaways from a direct tax perspective include:

• DAC9: the Directive was adopted by the ECOFIN Council on April 14, 2025 and, published in the EU Official Journal on May 6, 2025. The Directive facilitates the information exchange for Pillar Two purposes between EU countries and introduces a standard template for the Top-up tax information return (closely following the GloBE Information Return template developed by the OECD).
• Misuse of shell entities (Unshell Directive proposal): based on discussion in the Council working group, it emerged that the analysis of the Unshell proposal in the Council should be discontinued in light of the current EU tax simplification efforts. Instead, it could be examined whether the aims of the Unshell proposal could be achieved with clarifications or amendments of hallmarks in Council Directive 2018/822 (DAC6). Such examination should start following the Commission’s analysis of the functioning of the Directive on Administrative Cooperation (DAC).
• Transfer Pricing Directive proposal: the report notes that whilst Member States support the general objective of reducing complexity and administrative burdens, achieving a compromise on the proposal in its current form does not seem feasible. In parallel, no agreement has been reached on a new EU Transfer Pricing Platform aimed at determining consensus-based non-legally binding solutions to practical transfer pricing issues.
• BEFIT Directive proposal: the report notes that discussions on the BEFIT proposal did not progress during the first half of 2025 due to prioritization of other tax initiatives.
• Tax decluttering and simplification: The report refers to the ECOFIN Council conclusions on a tax decluttering and simplification agenda that were approved on March 11, 2025. The conclusions call for reviewing existing legislation with the aim of eliminating outdated and overlapping rules as well as for enhancing clarity and consistency of EU tax legislation.
• Pillar Two: The report refers to the ongoing discussions at OECD/G20 level regarding the way forward with respect to the global implementation of Pillar Two. The report stresses the objective to ensure EU competitiveness and fairness for in-scope MNEs.
• United Nations (UN) Tax Cooperation Framework: The report notes the progress made on the UN Framework Convention on International Tax Cooperation. Focus areas of the UN work include the taxation of income from cross-border services, and the prevention and resolution of tax disputes.

Denmark has assumed the Presidency of the Council on July 1, 2025 (for more information, please refer to the below summary). For a detailed overview of the ECOFIN report, please refer to Euro Tax Flash Issue 563.

ECOFIN Council approves Code of Conduct Group Council conclusion

On June 20, 2025, the ECOFIN Council also approved the report on the conclusions on the progress of the Code of Conduct Group (Group) during the term of the Polish Presidency.

Update on the standstill and rollback review process in relation to preferential tax measures

The Group’s report notes that a number of new preferential tax measures were notified, including the Danish refundable Tax Credit for R&D costs, the Irish participation exemption for foreign dividends, the Italian prolongation of tax credit for investments in the Single Economic Zone and the new Italian tax credit for investments in capital goods within innovation projects aimed at reducing energy consumption. On all new notified regimes, the Group agreed that the measures do not need to be assessed.

Update on the EU listing exercise and defensive measures against non-cooperative jurisdictions

The Group’s report further details the work performed with regards to the EU list of non-cooperative jurisdictions, including the most recent update that was approved by the ECOFIN Council on February 18, 2025, and published in the Official Journal on February 28, 2025 (for more details, please refer to E-News Issue 207).

Additional takeaways from the Group’s report in relation to the EU listing exercise include:

• New Criterion 1.4 (beneficial ownership information): The Group’s report notes that the Council conclusions of December 10, 2024, called on the Group to continue the work to incorporate beneficial ownership as a fourth transparency criterion. The June 2025 report echoes the ask but does not provide any further details on the matter.
• Criterion 3.2 (implementation of Country-by-Country (CbyC) Reporting minimum standard): The Group’s report notes that, on November 20, 2024, the Group requested commitments on criterion 3.2 from jurisdictions with one or more outstanding general recommendations in the 2024 Inclusive Framework report and one or more resident Ultimate Parent Entities in 2022 or 2023. According to the Group’s report, jurisdictions in this category, which have not yet activated relationships for CbyC reporting exchanges with all EU Member States, will also be asked to commit to addressing identified issues. The Group’s report notes that commitments will be recorded in Annex II at the update of the EU list in October 2025 and that deficiencies should be addressed in time to be reflected in the 2026 Inclusive Framework peer review report on CbyC reporting.

Update on other workstreams

The Group agreed to start addressing recommendations of the European Court of Auditors special report on Combatting harmful tax regimes and corporate tax avoidance (see E-News Issue 204) by revising guidance on rollback and developing guidance on grandfathering rules. In addition, the Group agreed to examine the application of the nexus requirement to expenditure-based tax incentives in Special Economic Zones, with a view to promoting competitiveness in the EU.

Priorities of the Danish Presidency of the Council

On June 19, 2025, Denmark published the program note for the Danish Presidency of the Council of the EU (July 1 – December 31, 2025). Key takeaways from a tax perspective include:

• Countering tax evasion and avoidance: The Danish Presidency aims to prioritize initiatives to counter tax evasion and tax avoidance to promote and ensure fair taxation at an international level, including updating the EU list of non-cooperative tax jurisdictions and enhancing tools used by the Code of Conduct Group to identify harmful tax practices.
• Strengthening administrative cooperation: The Presidency supports revising or expanding the DAC to improve information exchange between tax authorities and encourage good governance within and beyond the EU.
• Competitiveness and simplification: To bolster European competitiveness, the Presidency will advocate for simplifying existing and future tax rules with the aim to reduce burdens on businesses and authorities while ensuring effective governance and member state involvement.
• Energy taxation: The Danish Presidency plans to advance negotiations on revising the Energy Taxation Directive with a view to align energy product taxation with EU energy and climate policies and encourage the use of renewable energy sources.
• Carbon border adjustment mechanism (CBAM): The Presidency will prioritize strengthening the CBAM regulation to prevent carbon leakage, supporting the green transition and enhancing European competitiveness.
• Own resources: The Danish Presidency will continue talks on a possible revision of the Council Decision on own resources.

European Commission

Clean Industrial State Aid Framework published

On June 25, 2025, the European Commission adopted the Clean Industrial State Aid Framework (CISAF). The CISAF provides conditions for certain types of aid measures to be considered compatible with EU State aid rules with the aim of promoting investments in renewable energy, industrial decarbonization, and clean technology manufacturing.

The CISAF generally allows aid to be granted in any form, including direct grants and tax advantages (e.g., tax credits and accelerated depreciation). The Framework also lays down specific conditions for State aid schemes in the form of accelerated depreciation granted to incentivize acquisition or lease of clean technology equipment.

The framework replaces the Temporary Crisis and Transition Framework (TCTF) adopted in March 2023, with the CISAF applying as of the adoption date of June 25, 2025, until December 31, 2030. 

For more information, please refer to Euro Tax Flash Issue 564.

EC publishes tax incentive recommendations

On July 2, 2025, the European Commission issued recommendations on tax incentives to support the Clean Industrial Deal. The recommendations are in line with the recently-published CISAF. 

The recommendations set out common guiding principles for Member States to design cost-effective tax measures that stimulate investment in clean technologies and industrial decarbonization. Key instruments suggested for enhancing clean investment include:

• Accelerated depreciation: Member States are recommended to incentivize the acquisition or lease of clean technology equipment through accelerated depreciation, up to full and immediate expensing.
• Tax credits: Member States are recommended to introduce tax credits supporting the creation of additional manufacturing capacity and tax credits supporting investment in energy efficiency and greenhouse gas emission reduction. From a design perspective, the tax credits should primarily be deducted from the corporate tax liability but could also be offset against other national taxes due (where feasible in national tax systems). The tax credits should also be aligned with the design conditions set out by the EU Minimum Tax Directive with respect to Qualified Refundable Tax Credits.

The recommendations further refer to design restrictions established by the CISAF, where the accelerated depreciation or tax credit measures involve State aid (i.e., favor certain undertakings or the production of certain goods) to ensure that the measures are considered compatible with the internal market.

Member States are invited to inform the European Commission by December 31, 2025, of the measures introduced or announced to implement the recommendations, as well as of any similar measures already in place and changes to them. Member States are further recommended to regularly evaluate the effectiveness of the measures they have taken to implement the recommendations and to exchange good practices using an existing EU forum.

For more information, please refer to the EC press release and Euro Tax Flash Issue 565.

Recommendations for Member States in 2025 European Semester Spring Package

On June 4, 2025, the European Commission issued the European Semester Spring Package 2025, which includes recommendations for each of the 27 Member States.

Key takeaways from the package include:

• Public finances efficiency: The package highlights the significance of improving the efficiency and quality of public finances, advocating for a balanced tax mix to enable EU Member States to fund their policy priorities effectively.
• Tax gap reduction: It calls for narrowing tax gaps by curbing the least cost-effective tax expenditures and enhancing taxpayer compliance, aiming to establish stable revenue streams fairly.
• Tax administration modernization: The package stresses the importance of modernizing and digitalizing tax administrations, utilizing effective tools to combat aggressive tax planning and bolster information exchange.
• Tax reform benefits: Improved efficiency and quality of public finances, including tax reform, are noted as contributors to other policy goals, such as reducing the tax burden on labor to boost employment.
• Decarbonization incentives: Tax incentives are deemed crucial for decarbonization, with country-specific recommendations urging several EU Member States to refine their tax mix to foster sustainable competitiveness, lower investment barriers, and accelerate investments in clean energy infrastructure.

Specific tax-related recommendations for Member States include:

• Reducing reliance on labor taxes: Countries such as Austria and Italy are asked to reduce reliance on labor taxes to alleviate the burden on workers and stimulate employment.
• Diversifying tax revenue sources: To ensure long-term stability, countries such as Cyprus are encouraged to diversify their tax revenue sources.
• Reforming tax system to reduce distortions: Advice is given to reform tax systems to reduce distortions and improve neutrality, aiming to harmonize taxation of different assets and review tax expenditures for Belgium and the Netherlands.
• Strengthening environmental taxes: Countries such as Slovakia and Italy are urged to strengthen environmental taxes and align energy taxation with green transition goals.
• Prioritizing research and development (R&D): Recommendations emphasize prioritizing tax incentives to boost private R&D investments and streamline existing incentives for Finland and Lithuania.
• Improving compliance trough digitalization: To combat tax evasion, countries such as Greece and Latvia are advised to focus on digitalization and centralization of tax controls to enhance compliance and reduce informal economic activities.
• Ensuring fairness in corporate taxation: Recommendations for Luxembourg and Malta aim to address aggressive tax planning and ensure fairness in corporate taxation to prevent competitive distortions and safeguard government finances.

The Eurogroup and Council are invited to discuss and endorse the package's policy guidance. Member States are urged to implement recommendations effectively, in collaboration with social partners and civil society.

European Commission approves Irish State Aid measure

On June 5, 2025, the European Commission approved a EUR 211 million Irish State aid measure aimed at supporting the production of unscripted audiovisual programs with Irish and European cultural content.

Key takeaways include:

• Duration and form: The measure will be effective for four years, ending on December 31, 2028. It will be implemented as a tax credit covering up to 20 percent of production expenditures within Ireland.
• Eligibility criteria: Productions must have a minimum total cost of EUR 250,000 and at least EUR 125,000 in eligible expenditures within Ireland. A cultural test ensures productions have a strong cultural character, promoting Irish or European culture.
• Compliance with EU rules: The Commission assessed the measure under Article 107(3)(d) of the TFEU and the Cinema Communication. In the Commission’s view, the measure aligns with the relevant State aid provisions, by ensuring aid is granted exclusively to cultural products, capping the aid intensity at 16 percent of total production costs, and applying cumulation rules to prevent distortions of competition.

Commissioner Hoekstra answers to parliamentary question on the introduction of a European digital tax

On April 30, 2025, a member of the European Parliament (MEP) asked what steps the Commission plans to take to introduce a European digital tax and to ensure that it is included in the upcoming proposals for new own resources in the light of growing calls from Member States and EU leaders to secure new own resources.

On June 17, 2025, the Commissioner responsible for climate, net zero and clean growth, Wopke Hoekstra answered, with respect to a potential European digital tax, that the EC prefers a global solution. The Commissioner noted that a proliferation of national or regional measures would generate fragmentation of the international tax landscape and may create double taxation issues. Mr. Hoekstra’s answer referred in this context to the April 2025 plenary meeting of the OECD/G20 Inclusive Framework (IF) on BEPS, where IF members reiterated their commitment to the Two-Pillar solution and pursue the discussions on both Pillar One and Pillar Two. Mr. Hoekstra further noted that the EC will continue to engage with the United States in this respect and will liaise with Member States on the best way forward in case a global solution cannot be agreed.

For previous comments made by Commissioner Hoekstra in this context, please refer to E-News Issue 207.

Public hearing of the FISC subcommittee on the taxation of the EU's financial sector

On June 3, 2025, the European Parliament's Subcommittee on Tax Matters (FISC) held a workshop to discuss the findings of a study on the "Taxation of the EU's financial sector – Options and experiences".

The study maps existing financial sector taxes applied in EU Member States, summarizes empirical evidence on their effects, and calls for addressing costs of fragmentation due to inconsistent regulatory or tax treatment across borders.

Key recommendations of the study are as follows:

• Regulatory measures: The study states that given the overall limited ability of financial sector taxes to correct financial market imperfections, such financial market imperfections should mainly be addressed through adequate regulatory measures.
• Reform of financial sector taxes: Specific financial sector taxation provisions should be reformed and coordinated to eliminate existing incoherences and contradictory effects.
• Financial transaction taxes (FTT): The study notes that empirical evidence indicates that FTTs are unlikely to help stabilize financial markets or cause significant market distortions. Nonetheless, they can provide a stable, though rather limited, contribution to overall tax revenue.
• Temporary windfall taxes: Several Member States have recently implemented some form of windfall tax on (above-normal or excess) profits, which, in most cases, are not permanent. Although windfall taxes could theoretically discourage incentives and investment, their temporary nature suggests they won't lead to long-term divergence in tax treatment within the finance sector.
• Harmonizing financial sector taxes: The study suggests that, whilst financial sector taxes can effectively generate revenue, they should be coordinated and potentially harmonized across Member States.
• Principles for financial sector tax design: To ensure effective coordination across Member States, several general principles should be followed when designing national financial sector taxes. These principles include maintaining transparency in the design of specific financial sector taxes, conducting regular assessments and evaluations of their impacts, and implementing sunset legislation for newly introduced financial sector taxes.
• Distortionary effects: Tax provisions with distortionary effects need to be tackled.
• Cross-border aspects: Cross-border aspects, especially regarding tax avoidance through profit shifting and aggressive tax planning, as well as the double taxation of financial institutions, should be addressed.
• Completion of financial unions: Relevant tax provisions impeding the completion of the Capital Markets Union (CMU) and the Savings and Investments Union (SIU) should also be addressed. This includes, for instance, the fragmentation of withholding taxes on cross-border dividend and interest income.

 Recording of the meeting is available in the European Parliament’s media centre.

Study on “Tax barriers and cross-border workers: Tackling the fragmentation of the EU Tax Framework”

In June 2025, the European Parliament's FISC Subcommittee on Tax Matters published a study on “Tax barriers and cross-border workers: tackling the fragmentation of the EU Tax Framework”. The study provides an analysis of the tax barriers impacting cross-border worker mobility within the European Union.

Key takeaways include:

• Tax fragmentation and mobility: Tax fragmentation is highlighted as a significant barrier to worker mobility within the EU. This fragmentation can distort employees' choices of host countries, impacting their free movement.
• Compliance costs: The study emphasizes the significant variation in tax compliance costs across different sizes of enterprises, industries, and countries. The study notes that these costs can be particularly burdensome for small and medium-sized enterprises, impacting their ability to operate efficiently across borders.
• Policy recommendations: The study proposes specific measures for tax harmonization and coordination to reduce these barriers. Key recommendations include:
  • Split-year rules: Implementing split-year rules (rules determining the liability to tax by reference to the actual days of the year in which tax nexus exists) to ensure tax neutrality for mobile workers and to mitigate tax disparities.
  • Coordination of tax residence definitions: Better coordination of tax residence definitions to avoid double taxation and legal uncertainty.
  • Addressing exit taxes: Suggestions to address exit taxes, which can deter workers from moving across borders.
  • Simplified compliance requirements: Harmonizing compliance requirements to reduce administrative burdens and costs for mobile workers and their employers.
• Focus on remote work: The study stresses the importance of a coordinated approach to tax treaties concerning remote work. This includes addressing legal uncertainty and facilitating the free movement of remote workers, digital nomads, and other highly mobile employees.
• Case studies: The study includes case studies focused on different types of workers, such as frontier workers and highly mobile workers. The aim of the case studies is to illustrate the practical implications of current tax policies and the potential benefits of proposed changes.

Opinion on assessing tax reporting obligations in the EU

On June 18, 2025, the European Economic and Social Committee (EESC) adopted an opinion on assessing tax reporting obligations in the EU, focusing on simplification, reducing administrative burdens, and enhancing competitiveness.

Key takeaways from a corporate tax perspective include:

• Simplification and competitiveness: The EESC endorses the European Commission's plans to simplify tax systems, reduce administrative burdens, and boost competitiveness. Simplification should streamline outdated rules and enhance coherence. The report notes that tax simplification should facilitate efficient information exchange between tax authorities without leading to unintended tax liability changes or enabling tax evasion.
• Certainty and clarity of EU legislation: The EESC encourages the Commission to provide and publish interpretative guidance on the most relevant definitions and concepts referred to in any proposal. In addition, the report proposes the introduction of an advance rulings system at EU level to provide clarity on complex tax rules, with the Court of Justice of the European Union as the body tasked with giving the final verdict.
• Impact assessment and competitiveness checks: The EESC advocates for impact assessments and competitiveness checks for new legislative initiatives to ensure they align with the Commission's objectives of simplification and reduced administrative burdens, especially for small and medium-sized enterprises (SMEs).
• Taxation of cross-border work: The report calls on the EC to clarify the taxation of cross-border work and telework, with a proposed initial step of establishing a portal for employees to report their workdays across different countries and employers.
• Public CbyC Reporting: The EESC calls for a single harmonized standard for Public CbyC Reporting to avoid the application of different standards and definitions of concepts that generate additional compliance burdens and multiple layers of reporting.
• Review of anti-avoidance rules: The report notes that effectiveness and consistency of anti-avoidance rules should be reviewed by both the European Commission and the Member States. According to the report, this should include an assessment of the Anti-Tax Avoidance Directive’s (ATAD) proportionality (in particular the CFC rules) in light of the Pillar Two framework. The report further notes that the interpretation of law anti-avoidance rules in case law, as well as general anti-avoidance rules in EU Directives create uncertainty (also in combination with national rules).
• Pillar Two: The report calls on the EU and Member States to ensure that no retaliatory measures are introduced in response to the application of the Pillar Two framework, and the Undertaxed Profits Rule (UTPR) in particular. The EESC takes the view that any revision must ensure competitiveness and a level playing field for European businesses and should be aligned between the EU and the OECD.
• Utilization of information: The report puts emphasis on the need for tax authorities to effectively use information provided by taxpayers and obtained from other jurisdictions. According to the report, there is currently not enough reliable data on the use of reporting obligations by tax authorities.
• Digitalization and IT solutions: The EESC considers modern IT solutions as being crucial for managing data volumes and reducing workloads, aligning with the Commission's goals of simplification and enhanced competitiveness.

The EESC is an advisory body that is consulted and provides opinions on EU initiatives. However, it is important to note that the EESC’s opinion is not binding on the Council of the European Union (i.e. it would remain up to the 27 EU Member States to agree on potential legislative measures).

For more information on the EU tax decluttering and simplification agenda, please refer to Euro Tax Flash Issue 558.

Additional FAQ on the application of minimum taxation (under Pillar Two)

On June 27, 2025, additional non-binding Pillar Two guidance in the form of an FAQ document was issued by the tax authorities in Austria.

The FAQs provide clarifications on different aspects of the GloBE rules in Austria, including:

• Prior-year income adjustments: Treatment of income that relates to a fiscal year prior to the application of the GloBE rules but that is recognized for accounting purposes in a fiscal year to which the GloBE rules apply.
• Hybrid bonds: Treatment of bonds that are recognized as equity for accounting purposes (treated as profit neutral) but as debt instrument for tax purposes (which reduces the tax base).
• Joint Ventures: Treatment of situations where the financial accounts of a Joint Venture Group are based on a fiscal year that is different to the UPE fiscal year.
• Merger and de-merger rules: Clarifications on the relevant fiscal years to be considered for testing the revenue threshold following a merger or de-merger. Clarifications on the interaction between the special revenue threshold rules under Article 6.1 and the regular revenue threshold rules under Article 1.1 Model Rules.
• Deemed consolidation test: Clarifications on the operation of the deemed consolidation test (i.e., in certain situations where a parent entity does not consolidate its subsidiaries).
• Compliance requirements: Clarifications on compliance obligations where a group disposes/liquidates during the fiscal year the only Austrian Constituent Entity within the group, with the effect that the group no longer has a Constituent Entity in Austria.

For previous coverage on Austrian Pillar FAQ, please refer to E-News Issue 207.

Estonian Parliament approves increase of income tax rates

On June 18, 2025, the Estonian Parliament approved a draft bill which proposed several tax amendments.

From a direct tax perspective, a key takeaway is the removal of the so-called “security tax”. The initial plans foresaw a temporary additional security tax of two percent on corporate income, which would have taken effect from January 1, 2026. Instead, starting from January 1, 2026, the standard personal income tax rate and corporate income tax rate (i.e., corporate tax in relation to distributed profits) will be increased from 22 percent to 24 percent.

For our previous coverage of the defense tax act, please refer to E-News Issue 213.

Bill on various tax measures approved (including amendments to Pillar Two registration deadline)

On June 11, 2025, the Hungarian Parliament approved both Bill T/11864 and Bill T/11920 providing for several tax amendments. From a direct tax perspective, key measures include:

• Corporate taxation: the legislation increases the upper limit for tax base reduction for R&D activities from HUF 50 to HUF 150 million (EUR 125 to EUR 375 thousand) for collaborations with universities. The legislation further outlines the determination of the Hungarian corporate income tax base based on IFRS accounts in case of derecognition of own shares or participations. In this case, the pre-tax profit must be adjusted for related profits or losses from the current and the previous tax years.
• Pillar Two: the legislation amends the Pillar Two registration deadline to the last day of the second month following the last day of the tax year. Previously, groups were required to provide information on Constituent Entities based in Hungary and on the Ultimate Parent Entity (UPE) within twelve months from the start of the tax year concerned. Note that the amendments do not have a retrospective effect. As such, for calendar year taxpayers in-scope for fiscal year 2024, the deadline remains on December 31, 2024. For groups with a June 30, 2025 year-end, the deadline for registration is now August 31, 2025. For previous coverage on Pillar Two registration requirements in Hungary, please refer to E-News Issue 204.
• Extra profit taxes: several windfall taxes, previously introduced as a temporary measure, would be made permanent as of 2026. Furthermore, the legislation provides for changes to the different extra profit tax rates, including:
  • The special tax rates applicable to credit institutions and financial enterprises will increase, for the portion of the tax base not exceeding HUF 20 billion (approximately EUR 47 million), the tax rate will rise from 7 to 8 percent, and for the portion exceeding that amount, it will increase from 18 to 20 percent.
  • The insurance tax will remain for the tax year 2026 but will benefit from a higher deduction up to 60 percent of the increase in the nominal value of the government bonds portfolio, as compared to 30 percent in 2025.
  • The income tax rate for energy suppliers has been set at 41 percent in 2025 and 31 percent in 2026.
  • For more information on Hungarian extra profit taxes, please refer to a dedicated report by KPMG in Hungary.

The bills were published in the Hungarian Official Journal on June 19, 2025.

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

Amended regulation implementing minimum taxation rules (under Pillar Two)

On June 19, 2025, the Isle of Man income tax division published the updated Global Minimum Tax (Pillar Two) Order, to incorporate the January 2025 Administrative Guidance.

Key takeaways include:

• Amendments to the Global Minimum (Pillar Two) Order: mandating that the application of the Income Inclusion Rule (IIR) and Qualifying Domestic Minimum Top-up Tax (QDMTT) incorporate the most recent GloBE Commentary, Administrative Guidance, and Safe Harbors published prior to the relevant Fiscal Year. The previous law encompassed Administrative Guidance up to June 2024. The updated law expands the definition of Administrative Guidance to include the January 2025 releases. Consequently, the January 2025 Administrative Guidance clarifications to Articles 8.1.4, 8.1.5 and 9.1 of the OECD Model Rules apply to fiscal years beginning on or after June 17, 2025.
• List of qualified status for Pillar Two (IIR and DMTT) purposes: incorporating the list of jurisdictions that have been awarded the Transitional Qualified Status in relation to the local implementation of the QDMTT, IIR and QDMTT Safe Harbors, applying to fiscal years beginning on or after June 17, 2025. The list follows the outcome of the transitional peer review process in form of a central record, which was published by the IF on BEPS on January 15, 2025, and subsequently updated on March 28, 2025.

For more information on the OECD January 2025 Administrative Guidance, please refer to a report prepared by KPMG International.

For previous coverage on the implementation of Pillar Two in the Isle of Man, please refer to E-News Issue 204. 

Bill on various tax amendments published

On June 17, 2025, Italy published Law Decree No. 84/2025 in the Official Gazette. Key takeaways include:

• Tax loss carry-forward: The previously introduced tax loss carry-forward restrictions regarding companies undergoing both a change in control and primary business activity were modified. Previous exemptions from carry-forward restrictions were only granted in certain exceptional cases such as passing an equity test. According to the new decree, tax losses can be carried forward up to the certified economic value of net assets (subject to certain reductions). For previous coverage, please refer to E-News Issue 206.
• Controlled Foreign Company (CFC) Rule: Italy’s CFC rules were recently updated to include a minimum 15 percent effective tax rate (ETR) test for foreign subsidiaries, calculated as the ratio of the foreign tax burden (including current and deferred taxes, and the portion of QDMTT attributable to the CFC) to the CFC’s accounting pre-tax earnings. The new Decree clarifies how to attribute QDMTT to CFCs for the CFC effective tax rate test. The QDMTT should be taken into account based on allocation methods prescribed by the QDMTT/CFC jurisdiction. If no method exists, the QDMTT should be apportioned with reference to the proportion of the CFCs income to the aggregated income of all group entities in the QDMTT/CFC jurisdiction that are part of the same blending group for Pillar Two purposes.
• Hybrid mismatch penalty protection deadline: The deadline for completing and signing the required documentation for penalty protection related to hybrid mismatch assessments has been extended to October 31, 2025, covering fiscal years from 2020 to 2024. Initially, taxpayers had until June 30, 2025, to prepare documentation for fiscal years 2020-2022, and October 31, 2025, for fiscal years 2023-2024. For previous coverage, please refer to E-News Issue 205.

The Italian Parliament has 60 days to convert the decree into law, potentially with amendments.

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

Latvian government approves draft amendments to partially implement DAC8 and CARF

On June 3, 2025, the Latvian Cabinet of Ministers approved a draft bill which partially transposes the Council Directive (EU) 2023/2226 (DAC8) and the international crypto asset reporting framework (CARF) into domestic law.

Key takeaways include:

• In accordance with DAC8, the bill introduces rules on due diligence procedures and reporting requirements for crypto-asset service providers and platforms. In-scope crypto-asset service providers will be required to collect and verify information from EU clients, in line with specific due diligence procedures. Subsequently, certain information will be reported to the relevant competent authorities in Latvia. This information is then exchanged by the tax authorities of Latvia with the tax authorities of the Member State where the reportable user is tax resident.
• Based on the draft bill, the Cabinet of Ministers would be empowered to issue detailed regulations regarding triggers of the reporting obligation, the scope and procedures for reportable information, as well as measures regarding the automatic exchange of information.
• The draft bill further proposes penalties to be imposed of up to EUR 14,000 for non-compliance.

The measures are proposed to take effect on January 1, 2026.

Note that DAC8 requires EU countries to also expand the scope of the automatic exchange of advanced cross-border rulings to also include rulings issued to individuals (DAC3) and provides for amendments to the reporting obligations in respect of cross-border arrangements (DAC6). Neither of these aspects have yet been included in the draft bill.

For more information on DAC8, please refer to Euro Tax Flash Issue 553.

Update on Pillar Two registration requirements

On April 17, 2025, Liechtenstein updated its Pillar Two-related registration requirement for Liechtenstein-based entities, mandating all local Constituent Entities and local Excluded Entities to register within twelve months from the end of the fiscal year during which the group is subject to the GloBE Model Rules, instead of the previously applicable six-month deadline. This means that for financial years ending on December 31, 2024, the updated deadline is December 31, 2025, instead of June 30, 2025.

In addition, note that draft legislative amendments published in March 2025, yet to be adopted, propose to introduce an additional registration requirement for Liechtenstein- based Constituent Entities that will submit the GloBE Information Return (GIR). The deadline for this additional registration requirement would be 15 months after the end of the fiscal year.

Note that Liechtenstein applies the IIR and DMTT for fiscal years starting on or after January 1, 2024. The start date for the UTPR has not yet been determined.

For previous coverage on the Pillar Two registration requirements in Liechtenstein, please refer to E-News Issue 209.

Lithuania enacts corporate income tax reform

On June 17, 2025, Lithuania approved a law on corporate income tax which implements several previously proposed amendments.

Key takeaways include:

• Corporate tax increase: Corporate income tax rates are increased by one percentage point, affecting rates currently at 16 percent (standard corporate income tax rate and dividend income tax rate) and six percent (reduced corporate income tax rate). The reduced rates are applicable for small businesses with a maximum of ten employees and an annual income of up to EUR 300,000.
• Tax incentives for asset depreciation and support for small enterprises: Immediate expensing is introduced for fixed assets, such as equipment, machinery, or computer hard-and soft-ware in the tax period in which the assets were put into use.
• Support for small enterprises: The exemption period during which the profits earned by newly registered companies would be subject to a nil corporate income tax rate is increased from one to two years.

The measures are part of a comprehensive tax reform package which will become effective on January 1, 2026.

For our previous coverage of proposal, please refer to E-News Issue 211.

Public consultation launched on proposed amendments to minimum taxation rules (under Pillar Two)

On June 16, 2025, the Norway Ministry of Finance launched a consultation on a revised draft bill proposing further amendments to the Norwegian Minimum Tax Act, in order to incorporate both the June 2024 and January 2025 Administrative Guidance as well as technical amendments and clarifications.

Key takeaways include:

• Safe Harbors and transitional rules: the draft proposes changes to the local implementation of the transitional CbyC Reporting and QDMTT Safe Harbors, together with deferred tax transitional rules to incorporate the OECD January 2025 Administrative Guidance, focusing on Article 9.1 amendments.
• Divergences between GloBE and accounting carrying values: the draft includes the OECD June 2024 Administrative Guidance clarifications for determining the deferred tax expense for GloBE purposes when the rules result in divergences between GloBE and accounting carrying value of assets and liabilities.
• Recapture of deferred tax liabilities (DTLs): the draft also includes the OECD June 2024 Administrative Guidance provisions on the possibility to aggregate DTL categories, and methodologies for determining whether a DTL reversed within five years.
• Tax allocation: the draft introduces the latest OECD June 2024 Administrative Guidance on the allocation of cross-border current and deferred taxes, as well as on the allocation of profits and taxes in structures such as flow-through entities, hybrid entities, and reverse hybrid entities.

Comments are due by August 4, 2025. The amendments would apply retroactively to fiscal years starting on or after December 31, 2023.

For more information on the OECD June 2024 and January 2025 Administrative Guidance, please refer to a report prepared by KPMG International.

For previous coverage on the updates on the Norwegian Minimum Tax Act, please refer to E-News Issue 202. 

Planned Polish CIT Act amendments focused on aligning with CJEU rulings on investment funds

On June 23, 2025, the Polish Ministry of Finance announced that it is working on a draft bill to amend the Polish Corporate Income Tax (CIT) Act, with the aim of clarifying the conditions for a tax exemption available to non-resident investment funds in response to the following CJEU judgments:

• April 10, 2014, judgement in case C-190/12: the CJEU ruled that excluding non-EU/EEA funds comparable to domestic funds from the domestic tax exemption was incompatible with EU law. The judgement lead to numerous withholding tax refund claims in Poland in the past years.
• February 27, 2025, judgement in case C-18/23: the CJEU found that the requirement for EU/EEA-based funds to be managed by external entities in order to benefit from the tax exemption (so called “ManCo condition”) is contrary to the free movement of capital – for more details please refer to Euro Tax Flash Issue 557 and a tax alert prepared by KPMG in Poland.

Key proposals include:

• Amending Article 6(1)(10a) and Article 17(1)(58) of the Polish CIT Act to remove the requirement for investment funds to be based in an EU Member State or EEA jurisdiction other than Poland.
• Revising the condition in Article 6(1)(10a)(f) of the Polish CIT Act to include internally managed funds, managed by a board established according to the laws of the fund's country of registered seat.

The Council of Ministers plans to adopt the bill in the third quarter of 2025.

Autonomous region of Madeira enacts budget for 2025

On June 25, 2025, the President of the Legislative Assembly of Portugal's Autonomous Region of Madeira signed and published the proposed budget for 2025, which includes tax measures aimed at fostering economic growth and supporting small and medium-sized enterprises (SMEs).

Key takeaways from a corporate tax perspective include:

• The standard corporate tax rate is proposed to be set at 14 percent instead of the current 14.7 percent.
• SMEs will benefit from a reduced tax rate of 11.2 percent on the first EUR 50,000 of taxable income (currently 12.5 percent).
• Companies based in Porto Santo, Santana, São Vicente, and Porto Moniz will remain subject to a lower rate of 8.75 percent on the first EUR 50,000 of taxable income.

The decree takes effect from January 1, 2025.

Draft template for Pillar Two notifications published

On June 20, 2025, the Romanian Tax Authorities published a draft order outlining the template and content of the form “Notification concerning the obligation to declare and pay the domestic top-up tax”.

Based on the Romanian Minimum Taxation Law, the form must be used where taxpayers exercise the option to appoint a designated entity to handle DMTT filing and payment responsibilities for all Romanian constituent entities belonging to the same Pillar Two group. The option must be exercised within six months of the last day of the reporting year, i.e., June 30, 2025, for calendar year taxpayers.

The designated filing entity is required to electronically submit certain information to the Romanian Tax Authorities, including:

• relevant reporting fiscal year, including whether this is the first reporting year covered by the notification;
• information on the filing entity (e.g., name, address, e-mail address, tax identification number, contact person), including the type of entity for Pillar Two purposes (e.g., UPE, Constituent Entity, Locally Designated Entity);
• information about the MNE group; and
• information about all the Romanian constituent entities (e.g., name, address, e-mail address, tax number), including whether the entity is a designated entity or not.

The order will enter into force once published in the Official Journal of Romania.

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

Ministry of Finance consults on proposed amendments to minimum taxation rules (under Pillar Two)

On June 16, 2025, the Ministry of Finance in Slovakia published a public consultation on a draft bill to transpose the Council Directive (EU) 2025/872 (DAC9) into domestic law as well as incorporate both the June 2024 and January 2025 OECD Administrative Guidance, by amending the Act 507/2023 which was previously published on December 8, 2024. 

Key takeaways include:

• Incorporation of the OECD January 2025 Administrative Guidance: The draft bill incorporates additional guidance on the application of article 9.1 for transitional CbyC Reporting Safe Harbour purposes, as provided in the OECD January 2025 Administrative Guidance.
• Incorporation of the OECD June 2024 Administrative Guidance: The bill also incorporates elements from the OECD June 2024 Administrative Guidance, including the updated guidance on DTL recapture rules.
• GIR filing: The bill clarifies that an information return template shall be issued by the Slovak administration in accordance with the Top-up Tax Information Return template included in the annex to DAC9. This return needs to be filed within 15 months after the end of the Reporting Fiscal Year (18 months for the transitional year).
• Notification requirements: For Slovak Pillar Two purposes, in-scope groups are required to submit, by electronic means, a notification to inform the Slovak tax authorities about the identity and location of the entity submitting the Top-up Tax Information Return. The notification can be filed by the taxpayer or a local designated entity on behalf of all local group members and must be submitted within 15 months after the end of the Reporting Fiscal Year (respectively 18 months for the transitional year). The draft bill requires the following information to be provided:
  • identification of the entity submitting the notification: name, tax identification number, contact details;
  • identification of the Ultimate Parent Entity (UPE) or Designated Filing Entity for GIR purposes: group name, entity name, tax identification number, registered office address;
  •  identification of the group members covered by the notification: name, tax identification number, registered office address.

If a local designated entity submits the notification on behalf of other local group members, the latter are exempt from submitting separate notifications for the same period.

The deadline for submitting feedback to the public consultation is July 4, 2025. The rules regarding the incorporation of the OECD June 2024 and January 2025 Administrative Guidance should be applied for reporting periods starting from December 31, 2025. The provisions for implementing DAC9 are proposed to take effect from January 1, 2026, or January 1, 2028, respectively. 

For more information on the OECD Administrative Guidance please refer to the relevant reports prepared by KPMG International: June 2024 and January 2025.

Consultation launched on GloBE reporting regulations

On April 30, 2025, the Spanish Government issued for consultation a draft order including the forms to be used to comply with the three main obligations under the Spanish Global Minimum Tax Law.

Form 240: Notification of the constituent entity that is to file the GIR

For Spanish Pillar Two purposes, in-scope groups are required to submit a notification to inform the Spanish tax authorities about the identity and location of the entity submitting the GIR. The draft order provides for a notification template requiring the following information:

• identification of the entity submitting the notification: name, tax identification number, contact person;
• identification of the group members covered by the notification: name and tax identification number;
• identification of the group: group name, group type (large-domestic group or MNE group);
• identification of the UPE: country of residence, company name, tax identification number;
• identification of the Designated Filing Entity for GIR purposes: name, tax identification number;
• GIR information: date of submission, reference number;
• identification of designated local paying entity: name and tax identification number.

The notification can be filed by the Designated Filing on behalf of all local group members and must be submitted 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, i.e., by end of April 2026 for tax year 2024).

Form 241: GIR submission

The GIR for a constituent entity located in Spain must be submitted no later than 15 months after the end of the tax period, respectively 18 months for the transitional year. The draft order provides an outline of the GIR information required to be submitted, which aligns with the GIR template published by the OECD in January 2025.

Form 242: Local top-up tax return

The local top-up tax return must be filed within 25 days of the 15-month deadline (18 months for the transitional year) for GIR submission, but not before June 30, 2026. Based on the draft form, the following information is required:

• start and end of fiscal year;
• identification of reporting entity: tax identification number, company name, telephone number, indication whether taxpayer files as a local designated filing entity on behalf of other local group members;
• identification of the group: group name, information about the UPE, including tax identification number, jurisdiction in which it is incorporated;
• GIR information: filing jurisdiction, reference number, filing date;
• notification of top-up tax liability: amount of top-up tax liability for the fiscal year (for QDMTT, IIR and UTPR purposes) and the relevant split (where relevant) between different Spanish regions.

The deadline for submitting comments to the public consultation was June 24, 2025.

The draft order requires governmental approval, before being published in the Official Gazette. It will enter into force on the day following its publication and apply to tax periods beginning on or after December 31, 2023.

For earlier coverage on this topic, please refer to E-News Issue 210. For more information, please refer to a report prepared by KPMG in Spain.

Proposed changes to interest deduction limitation rules

On June 5, 2025, the Swedish Ministry of Finance published a draft legislative proposal to amend interest deduction limitation rules. The proposal is based on the Swedish government’s study of the domestic interest deduction limitation rules launched in 2021 (for more details, please refer to our previous E-News Issue 197).

Key proposed changes include:

Interest deduction limitation rules stemming from the Anti-Tax Avoidance Directive (ATAD):

• Introduction of the possibility to calculate exceeding borrowing costs and tax EBITDA on a joint group basis. Companies that have the possibility to equalise profits under the rules of group contributions will form a calculation unit that determines a joint net interest and a joint deduction basis.
• Abolition of the six-year time limit for the possibility to carry forward any remaining non-deductible interest.
• Increase of the de minimis threshold from SEK 5 million (approximately EUR 449,000) to SEK 25 million (approximately EUR 2.22 million), which would still be lower than the maximum EUR 3 million de-minimis threshold allowed by the ATAD.
• Whilst the infrastructure exemption allowing companies undertaking public infrastructure projects to be exempt from interest deduction limitation rules was considered, the Swedish government decided against implementing it at this time. The proposal indicated the need for further investigation.

Specific interest deduction limitation rules:

• A new provision is proposed to be introduced to only limit interest deductions for cross-border interest payments (to companies located in another European Economic Area (EEA) state) to those cases where the Swedish tax authorities can demonstrate that the debt relationship is part of a wholly artificial arrangement exclusively or almost exclusively put in place to obtain a substantial tax advantage.

The new rules are set to take effect from January 1, 2026, subject to approval by Parliament and publication in the Official Journal.

For more details, please refer to a report prepared by KPMG in Sweden and to our ATAD Implementation overview.

Local courts

French digital service tax under constitutional review

On June 17, 2025, the French Supreme Administrative Court (Conseil d'État) referred a question to the French Constitutional Court (Conseil Constitutionnel) with respect to the constitutionality of the digital services tax (DST) introduced in 2019.

Under French law, a DST applies to both resident and non-resident companies with a global turnover exceeding EUR 750 million and a French turnover over EUR 25 million. The DST is levied at a tax rate of three percent and applies to French source turnover from digital interfaces, targeted advertising, and user data transmission.

The applicant based its challenge against the DST on multiple grounds, including unjustified differences in treatment between companies offering the same service depending on whether it is digital or not. The taxpayer also argued that the group-based thresholds create unequal treatment and introduce an irrebuttable presumption of fraud.

The Constitutional Court will evaluate the DST's constitutionality, and a decision is expected within three months.

For more details, please refer to the TaxNewsFlash prepared by KPMG in France. 

Greek Supreme Court ruling on infringement of Greek withholding tax and the Parent Subsidiary Directive

On September 2, 2024, the Greek Supreme Administrative Court ruled that Article 5 of Directive 2011/96 (Parent-Subsidiary Directive or PSD)¹ does not prevent the levy of a corporate income tax on previously untaxed undistributed profits at the time of their distribution.

The case involved two German companies that filed an annulment request concerning the tax paid on dividends distributed by their Greek subsidiary for the fiscal year 2015. The dividends were derived from profits that had initially remained untaxed due to exemptions or the use of loss carryforwards, but became subject to corporate income tax upon distribution or capitalization, as per article 47 (1) of the Greek Income Tax Code. This provision mandates that previously untaxed, undistributed profits are treated as taxable business income when distributed or capitalized.

The key legal issue was whether the corporate tax paid by the Greek subsidiary on profits subsequently distributed as dividends to EU-based parent companies constituted a tax withheld at source, prohibited under Article 5 (1) of the PSD. The applicants relied on the CJEU’s decision in case C-294/99, which held that similar provisions in the former Greek Income Tax Code constituted a prohibited withholding tax. The applicants argued that the revised Code² maintained the same tax mechanism – imposing tax upon dividend distribution without allowing the offset of prior-year losses, thus resulting in a measure that was economically equivalent to a WHT.

The Court noted that subsequent case law³ of the CJEU had overruled the interpretation in case C-294/99. The Court concluded that, under both the old and current tax regimes, the tax was levied on the subsidiary's income rather than on the shareholder. As a result, no WHT was applied within the meaning of Article 5(1) of the EU PSD. Consequently, the parent companies lacked legal standing to claim a refund, and the request for annulment was dismissed.

Supreme Administrative court rules in favor of taxpayer on tax deductibility of consulting costs

On May 26, 2025, the Swedish Supreme Administrative Court (Court) ruled in a case concerning the tax treatment of consulting service expenses. The consultancy services were contracted by the plaintiff for advice on operational efficiency improvement ahead of a planned sale of its corporate group. The stated purpose of the consultancy services was to increase the owners' profit from the sale, and it was the company's owner that hired the consultants. The Swedish Tax Agency had denied the deductibility for corporate income tax purposes of the consulting costs arguing that the related expenses were not linked to the company's business operations and should instead be considered attributable to the owners.

The Court held that, for an expense to be deductible, it is sufficient that it relates to the company’s business activity. The fact that the group’s owners benefited financially from the streamlining of operations and increased profitability was deemed irrelevant, as it is inherent in the nature of corporate ownership that a company’s profitability is reflected in the value of its shares. Moreover, in the Court’s view, the fact that the consultants were engaged by the parent company in anticipation of a potential sale of the group, and that their fee was partially contingent on the sale price, did not affect the deductibility of the expenses. The consultancy fees were therefore considered a business expense of the company and allowed as a deduction.

EU financial services tax perspectives webcast – July 4, 2025

On July 4, 2025, a panel of KPMG professionals shared their insights with respect to some of the latest proposals that are likely to impact asset managers, banks and insurers.

The session focused on:

• Status of key EU Commission tax initiatives impacting Financial Services including the Crypto Asset Reporting Framework which requires the reporting of crypto transactions from January 1, 2026.
• Latest developments impacting Financial Services across Europe with a spotlight on the US, France, Germany.
• Legal Entity Structures - a closer look at why many financial services groups are reviewing their European business operations.
• Pillar Two compliance - practical challenges.

The replay of the webcast is available on the event page.

Decoding global tax transparency: Public CbyC strategies for MNEs webcast – July 8, 2025

On July 8, 2025, a panel of KPMG professionals will explore public country-by-country (CbyC) strategies for large multinational enterprises (MNEs).

The global tax transparency landscape is undergoing a significant transformation. The European Union and Australia require large MNEs to publicly disclose key tax and operational data under the public CbyC reporting rules. Some businesses have already been facing disclosure obligations as early as 2024, covering the previous financial year. These developments are not just about tax compliance – they are reshaping the way MNEs think about transparency, governance, and risk. Meanwhile, the Pillar Two CbyC Safe Harbor requires a high level of accuracy and reliability of the private CbyC data, and in-scope MNEs have been working at establishing robust process to prevent errors or inconsistencies.

These parallel workstreams are converging in ways that will require coordinated, forward-looking strategies. With this in mind, our panel of KPMG specialists invites you to join a webcast covering the following topics:

• Back to the basics – what does private CbyC entail and how to get from private CbyC reporting to public CbyC
• Frequently asked questions and practical experience on how to comply with the Pillar Two CbyC Safe Harbor
• How multinationals approached Romania’s 2024 early adoption of EU public CbyC reporting
• Strategies on how to prepare a public CbyC report that aligns both with the EU and the Australian public CbyC disclosure requirements
• The new dimension that public CbyC brings to looking at data and telling your story.

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.