E-News from KPMG’s EU Tax Centre

• Council of the EU: DAC9 implementation – state of play
• Council of the EU: DAC8 implementation – state of play
• Infringements: Letter of formal notice requesting France to remove a restriction in breach with the Parent-Subsidiary Directive
• European Commission: KPMG feedback to EU public consultation on upcoming tax omnibus proposal
• Cyprus: Council of Ministers issued three new anti-abuse decrees
• Czechia: Domestic list of non-cooperative jurisdictions updated
• Finland: Amendments to Finnish Pillar Two rules enacted
• Greece: Clarification on Safe Harbour application and notification requirements under Pillar Two
• Ireland: Updated Pillar Two guidance
• Poland: Updated national list of non-cooperative jurisdictions published
• Romania: Ministerial order clarifying accounting treatment of deferred tax under Pillar Two rules
• Slovakia: Clarification on application of withholding tax on software-related payments
• UAE: New R&D tax credit announced

AG opinion on the compatibility of the Italian tax consolidation regime with EU law

On March 26, 2026, Advocate General (AG) Juliane Kokott of the Court of Justice of the European Union (CJEU) rendered her opinion  in case C-592/24. The case concerns the compatibility of the Italian tax consolidation regime with EU law.

Until 2015, the Italian tax consolidation regime was limited to cases where the parent company was either a legal entity tax resident in Italy or a foreign entity with a permanent establishment (PE) in Italy, provided the PE held the shareholdings of each subsidiary in the consolidated group. However, following the CJEU’s judgment in joined cases C-39/13 to C-41/13, Italy revised its tax consolidation rules in 2015 to bring it in line with the EU freedom of establishment. This amendment expanded the regime to include Italian tax-resident sister companies controlled by a parent company based in another EU Member State, regardless of whether the foreign parent had an Italian PE. For more information on the joined cases C-39/13 to C-41/13, please refer to Euro Tax Flash Issue 229.

The plaintiff in the case at hand was a French ultimate parent company that applied the Italian tax consolidation regime through its Italian branch. The plaintiff also held four Italian tax-resident subsidiaries that were not part of the consolidated group, since the shares in these entities were not attributable to the Italian branch. As a result, the subsidiaries could only deduct 96 percent of the interest they paid to the branch. Had the subsidiaries been included in the consolidated tax group, the interest expenses would have been fully deductible.

In 2015, the parent company filed a refund claim with the Italian tax authorities for the excess corporate income taxes paid by the subsidiaries from 2010 to 2012 due to this exclusion. Following several court proceedings, the case was brought in front of the Italian Supreme Court (Supreme Court). The Supreme Court took the view that, based on the law applicable at that time, the restriction on the full deduction of interest expenses could infringe on the freedom of establishment and the equal treatment of companies within the EU. Therefore, the Supreme Court referred several questions to the CJEU for a preliminary ruling. For more details, please refer to E-news Issue 124.

The AG started by noting that the Italian tax consolidation regime does not differentiate on the basis of the parent company’s residence, but on whether Italy has taxing jurisdiction over the relevant shareholdings. In particular, the AG noted that where the shares in the subsidiaries are attributed to the Italian PE, Italy is entitled to tax any gains relating to those shares. In such cases, the PE is treated in the same way as a resident parent company and group taxation is available. By contrast, where the shareholdings remain with the foreign head office and are not attributed to the Italian PE, Italy has no taxing rights over them and, under Italian rules, group taxation is not permitted.

Against this background, the AG held that, for the purpose of assessing whether the Italian rules infringe the freedom of establishment, the relevant comparison is between: (i) a resident subsidiary making payments to a non-resident parent’s Italian PE where the shares are not allocated to that PE, and (ii) a similar situation involving a resident parent company. The AG pointed out that if Italy were to allow group taxation in a scenario involving a resident parent whose shareholdings are, in fact, connected to a foreign PE, this could lead to unjustified unequal treatment based solely on the parent’s place of residence. However, the AG noted that the case file does not indicate that such a situation arises in the present case, and it is ultimately for the national court to verify this.

The AG observed that, based on the facts of the case at hand, the payments were made to an Italian PE, but that the shares in the subsidiaries were allocated to the head office (and not the PE). Accordingly, in the AG’s view, the situation cannot be regarded as comparable to that of a single taxable entity, or of a group in which Italy has taxing rights over the shareholdings. Rather, it is comparable to payments made to a separate taxable entity with no ownership link to the subsidiaries. The AG therefore concluded that, since the situations are not comparable, it is permissible to treat them differently.

In an alternative line of reasoning, the AG noted that even if the situations were considered comparable, any difference in treatment would be justified by the need to preserve a balanced allocation of taxing powers between Member States. Allowing companies to freely choose where to offset losses or allocate profits would, in the AG’s view, distort tax bases across jurisdictions and facilitate tax avoidance. The AG further concluded that the Italian legislation is suitable for achieving this objective, does not go beyond what is necessary, and is therefore proportionate.

The AG also disagreed with the arguments put forward by the referring court, the European Commission, and the plaintiff regarding the relevance of prior case-law on national group taxation schemes – i.e., cases C-39/13 to C-41/13. The AG took the view that such case-law supports the inclusion of domestic subsidiaries (horizontal integration), but does not extend to requiring inclusion of a foreign parent company (vertical integration). Additionally, the AG held that the EU fundamental freedoms do not require extending tax consolidation to cross-border situations where the parent company is not subject to full domestic taxation.

In light of the above, the AG recommended that the CJEU find that the Italian tax consolidation regime is compatible with EU law.

In a subsidiary line of reasoning, the AG examined whether the procedural aspects of benefiting from group taxation are compatible with EU law, should the CJEU interpret EU law as requiring not only ‘horizontal integration’ but also ‘vertical integration’. The AG noted that under Italian law group taxation does not apply automatically and it applies equally to both domestic and cross-border situations. Specifically, the taxpayer must apply for group taxation within a prescribed time limit. In this case, that time limit had expired, and the taxpayer was therefore no longer eligible to apply for group taxation. The AG held that that such time limits are, in principle, compatible with EU law, provided they do not make the exercise of EU rights impossible or excessively difficult. In the case at hand, the AG took the view that the taxpayer had the opportunity to apply within the deadline and to rely on EU law in support of their claim without facing significant obstacles. In light of this finding, the AG concluded that the procedural aspects under Italian law are not contrary to EU law.

Letter of formal notice requesting France to remove a restriction in breach with the PSD

In its March 11, 2026 Infringement Package, the European Commission (EC) issued a letter of formal notice (initial phase of an EU infringement procedure) to France to remove a restriction in breach of the Parent-Subsidiary Directive (PSD) . In its letter, the EC reiterated that the PSD is designed to ensure that profit distributions are taxed only once (at the level of the subsidiary) and to prevent double taxation for EU‑resident companies operating within the internal market.

According to the EC, French legislation restricts the withholding tax exemption to situations where the parent entity’s “place of effective management” is located within an EU Member State. The Commission considers this approach incompatible with the PSD, which defines an eligible parent company solely by reference to its tax residence under the laws of its Member State. As such, France cannot impose additional residency related criteria to deny the PSD’s benefits or to justify imposing withholding tax on distributions to EU resident parent companies.

France has two months to reply and address the shortcomings raised by the EC. If the EC concludes that the concerns have not been adequately addressed, it may escalate the process by issuing a reasoned opinion.

DAC9 implementation – state of play

On May 6, 2025, Council Directive (EU) 2025/872 on Administrative Cooperation to establish a framework for the exchange of Pillar Two information between Member States (DAC9) was published in the Official Journal of the EU. The Directive entered into force the day after its publication in the Official Journal of the European Union, i.e., May 7, 2025. Member States were required to transpose the Directive by December 31, 2025. EU Member States that have opted to delay the implementation of the IIR and UTPR must also transpose DAC9 by this deadline.

The purpose of DAC9 is to introduce a framework for the exchange of Top-up tax information returns filed by groups in scope of Pillar Two with the tax administration of an EU Member State. This allows MNEs to switch from local to central filing in the EU, where the EU UPE or designated filing entity files on behalf of the group in an EU Member State.

Various EU countries had transposed DAC9 into national law by December 31, 2025 (see E-News Issue 224). On January 30, 2026, the European Commission announced its decision to launch infringement procedures by sending letters of formal notice to ten Member States that had not notified national measures transposing DAC9 into domestic legislation (see E-News Issue 225).

To the best of our knowledge, between January 1 and March 30, 2026, the following EU countries transposed DAC9 into national law:

• France: On February 20, 2026, France published in the Official Gazette the 2026 Finance Act, including rules to transposing the information exchange requirements under DAC9 into domestic law. For more information, please refer to E-News Issue 225.
• Poland: On March 17, 2026, Poland published in the Official Gazette a bill to transpose DAC9 into domestic law.
• Romania: On January 30, 2026, Romania published in the Official Gazette a bill to transpose DAC9 into domestic law.
• Sweden: On March 25, 2026, the bill to transpose DAC9 into domestic law was approved by the Swedish Parliament. The law is pending publication in the Official Journal of Sweden.

The following Member States are yet to transpose the provisions of the Directive into domestic law: Belgium, Bulgaria, Cyprus, Czechia, Estonia, Greece, Lithuania, Malta, Portugal, Spain.

For more details on DAC9, please refer to Euro Tax Flash Issue 572.

DAC8 implementation – state of play

On October 17, 2023, the Council of the European Union adopted amendments to the Directive on Administrative Cooperation (DAC) to introduce, amongst others, provisions for the exchange of information on crypto-assets (DAC8). This includes rules on due diligence procedures and reporting requirements for crypto-asset service providers, based on the OECD’s Crypto-Asset Reporting Framework (CARF). DAC8 further aims to extend the scope of the exchange of information on cross-border rulings to those involving the tax affairs of high-net-worth individuals. Other changes brought by DAC8 include the extension of the automatic exchange of information to cover non-custodial dividend income and requirements to report the Tax Identification Number (TIN) for certain elements where this was not previously prescribed – including, inter alia, for certain categories of income and capital under DAC1, advance cross-border rulings and advance pricing agreements (DAC3), CbyC reports (DAC4) and reportable cross-border arrangements (DAC6).

With the exception of the provisions related to the TIN¹ Member States were required to transpose DAC8 by December 31, 2025. Most, but not all, EU countries met this deadline (see E-News Issue 224). On January 30, 2026, the European Commission announced its decision to launch infringement procedures by sending letters of formal notice to twelve Member States that had not notified national measures transposing DAC8 into domestic legislation (see E-News Issue 225).

To the best of our knowledge, between January 1 and March 30, 2026, the following EU countries transposed DAC8 into national law:

• Belgium: On March 16, 2026, Belgium published in the Official Gazette a bill to transpose DAC8 into domestic law.
• Cyprus: On March 27, 2026, Cyprus published in the Official Gazette a bill to transpose DAC8 into domestic law.
• Luxembourg: On March 27, 2026, Luxembourg published in the Official Gazette a bill to transpose DAC8 into domestic law.
• Netherlands: On March 31, 2026, the bill to transpose DAC8 into domestic law was approved by the Dutch upper house of the Parliament. The law is pending publication in the Official Journal of the Netherlands.
• Poland: On March 17, 2026, Poland published in the Official Gazette a bill to transpose DAC8 into domestic law.

The following Member States are yet to transpose the provisions of the Directive into domestic law: Bulgaria, Czechia, Estonia, Greece, Malta, Portugal, Spain.

For more details on DAC8, please refer to Euro Tax Flash Issue 572.

KPMG feedback to EU public consultation on upcoming tax omnibus proposal

On March 30, 2026, the deadline to provide feedback to the European Commission (EC) call for evidence on the upcoming tax omnibus proposal ended – see E-News Issue 226 for more details.

The EC received a total of 117 written responses to the call for evidence, including a response letter submitted by KPMG member firms in the EU. Key recommendations made in the KPMG submission include:

• reduce compliance burden and complexity by eliminating overlaps with Pillar Two,
• expand the scope of withholding tax relief for intra-EU payments,
• streamline and modernize the ATAD interest limitation rules,
• make key taxpayer‑friendly options mandatory, and
• improve and strengthen dispute resolution mechanisms.

In addition, KPMG encourages the EC to go beyond the current exercise and pursue a more ambitious and holistic tax project taking into account other key areas of direct taxation (e.g., Pillar Two, tax incentives, cross-border work), as well as the need for clear guidance and robust monitoring tools such as a tax simplification index.

For more information, please refer to Euro Tax Flash Issue 577.

European Commission proposal for ‘EU Inc.’ under the 28th Regime

On March 18, 2026, the Commission published a draft Regulation creating a voluntary, EU‑wide corporate form called ‘EU Inc.’ as part of its broader ‘28th Regime’ initiative. The proposal aims to establish a single, optional and harmonized set of corporate rules covering the entire lifecycle of a company. This new regime would not replace existing national company law frameworks. Instead, it would operate as a parallel system alongside the national regimes of the 27 Member States.

The regime is primarily designed for innovative and high-growth businesses, but it would also be accessible to established groups and non-EU investors operating through EU-based structures. Entrepreneurs setting up a new company in the EU would be able to choose between the EU Inc. form and existing national company forms. Additionally, entrepreneurs would retain the flexibility to choose the Member State in which they wish to incorporate.

The proposal does not introduce an EU‑level corporate tax system, i.e., the tax rules of the Member State of incorporation would generally apply. Nevertheless, the proposal includes several tax-relevant features, as follows:

• Once-only principle for tax registration: Information submitted at incorporation would be automatically shared with tax, VAT, social security, and beneficial ownership authorities, reducing administrative burdens and duplication.
• Harmonized approach to employee stock options (EU-ESO): The proposal introduces an optional EU-wide employee stock option regime available for members of the board and employees of the company and its subsidiaries. An anti-avoidance rule would exclude individuals who hold, or have held within the previous 24 months, more than 25 percent of voting rights or rights to proceeds. From a tax perspective, income derived from the warrant would not be considered to arise at the time of grant, vesting, or upon exercise of the warrant. Instead, taxation would be deferred until the disposal of the shares acquired through its exercise. The accompanying Communication encourages Member States to treat such income as capital gains rather than employment income.
• Tax clearance in fast-track liquidation: national tax authorities would play a defined role in fast-track liquidations. They would have 30 days to issue a tax clearance certificate or oppose the liquidation, with a possible one-time extension of up to 30 additional days. If no response is provided within the applicable deadline, clearance will be deemed granted. Once all deadlines expire and no objections are raised, including by tax authorities, the company may be removed from the business register.

The draft Regulation will be examined under the ordinary legislative procedure, with the European Parliament and the Council acting as co-legislators. The Commission has called for an agreement by the end of 2026, though timing will depend on political negotiations. 

Council of Ministers issued three new anti-abuse decrees

On March 13, 2026, Cyprus published three new decrees introducing strengthened anti-abuse measures applicable to payments of interest, dividends, and royalties to low-taxed jurisdictions (LTJ) and EU non-cooperative jurisdictions (NCJ), effective from January 1, 2026.

The measure requires additional documentation to be provided by any Cyprus company paying interest, dividends, or royalties to an associated company for which no withholding tax was applied and a tax deduction was claimed in the paying company (for interest and royalties).

The measure includes the following requirements:

• Obtain documentation demonstrating that the foreign entity satisfies the necessary substance requirements. If the recipient company does not meet two or more of the substance criteria, including having a qualified independent director, local presence of decision-makers, office premises and staff in the jurisdiction, board meetings held locally, local, operational costs and beneficial ownership, payments will be treated as subject to withholding tax.
• Several exemptions apply for the documentation requirements, including when payments are made to (i) Cyprus/EU/EEA tax residents, (ii) entities within MNE Groups subject to 15 percent minimum tax under EU or OECD Pillar Two rules, (iii) holders of listed securities (where the payer is not aware that income is ultimately routed to LTJ or NCJ), (iv) non-residents with permanent establishment (PE) in a LTJ/NCJ, and (v) arrangements where the payer demonstrate valid commercial reasons.
• Maintain the documentation for the statute of limitations period (i.e., six years in Cyprus).
• Disclose relevant information in their annual income tax returns, and the tax authorities may request evidence of compliance.
• Penalties for late submission of requested documents range from EUR 2,000 to EUR 10,000.

For further background, please refer to our E-News Issue 211.

Domestic list of non-cooperative jurisdictions updated

On March 20, 2026, Czechia published a revised list of non-cooperative jurisdictions with respect to its controlled foreign company (CFC) rules.

According to the Czech CFC rules, a controlled company which, as at the end of its taxation period, is a tax resident of a state included on the Czech list of non-cooperative jurisdictions, or a permanent establishment located in such a state, is automatically considered a CFC. Controlled subsidiaries located in listed countries are automatically taxed at the level of the controlling entities. Tax is levied not only on passive income but income from all activities of the controlled entities.

The update reflects the recent updates to the EU list of non-cooperative jurisdictions (Annex I) adopted by the Council of the EU on February 17, 2026 (see Euro Tax Flash Issue 574) and includes the following countries with effect from March 6, 2026: American Samoa, Anguilla, Guam, Palau, Panama, Russian Federation, Turks and Caicos Islands, US Virgin Islands, Vanuatu and. Viet Nam.

Compared to the previous list that was applicable from February 26, 2024, to March 5, 2026, Antigua and Barbuda, Fiji, Samoa Turks and Caicos Islands were removed, whilst Turks and Caicos Island and Viet Nam were added.

For more details on defensive measures adopted by EU Member States against non-cooperative jurisdictions, please refer to KPMG’s dedicated summary.

Amendments to Finnish Pillar Two rules enacted

On March 24, 2026, the Finnish Official Gazette published Law No. 187/2026, which introduces amendments to the Minimum Tax Act, further aligning Finland’s Pillar Two rules with the latest OECD administrative guidance.

The new law incorporates elements from the Inclusive Framework’s Side-by-Side (SbS) Package that was released in January 2026, including the SbS Safe Harbour, the Ultimate Parent Entity (UPE) Safe Harbour, the Substance-Based Tax Incentive Safe Harbour, and the extension of the Transitional Country-by-Country Reporting Safe Harbour (TCSH). Notably, the Simplified ETR Safe Harbour has not been included yet but will be later this year.

Other amendments to the Finnish Pillar Two rules include:

• Implementation of elements from the OECD June 2024 Administrative Guidance (e.g., rules on allocating cross-border current and deferred tax expenses, updated guidance on DTL recapture rules, guidance on the treatment of securitization entities) and January 2025 Administrative Guidance, (e.g., guidance on the application of article 9.1. of the OECD Model Rules, including related amendments to the TCSH and Qualified Domestic Minimum Top-up Tax (QDMTT) Safe Harbour.
• The scope of domestic advance rulings has been expanded, allowing taxpayers to obtain binding clarification on issues such as Finnish Top-up Tax calculations, entity status, or the application of certain Safe Harbours.
• The amendments also introduce a General Anti-Avoidance Rule (GAAR) aimed specifically at countering arrangements designed to circumvent the minimum tax rules or manipulate Safe Harbour eligibility.

The amendment generally applies to fiscal years beginning on or after January 1, 2024, except for the new anti-avoidance rule (fiscal years beginning on or after January 1, 2027) and the new Safe Harbour provisions (fiscal years beginning on or after January 1, 2026).

Clarification on Safe Harbour application under Pillar Two

On March 23, 2026, a ministerial decision was published in the Official Gazette of Greece confirming the application of the TCSH and UTPR Safe Harbour for fiscal years starting on or after December 31, 2023.

For more information on the Pillar Two rules in Greece, please refer to the KPMG BEPS 2.0 tracker in Digital Gateway.

Guidance issued on the notification requirements under Pillar Two

On March 12, 2026, the Independent Authority for Public Revenue in Greece (IAPR) issued Decision A. 1055/2026 outlining the form, content, and filing procedure in respect of the GloBE Information Return (GIR) notification requirement. The notification is required for groups in scope of the Greek Pillar Two legislation to inform the Greek tax authorities about the identity and location of the entity submitting the GIR on behalf of other group members.

The guidance includes the following requirements:

• The notification shall be filed by the domestic Constituent Entity (CE) of the MNE Groups. Where multiple Greek CEs exist, the notification must be filed by the designated local entity.
• The notification must be submitted no later than fifteen months after the end of the relevant fiscal year (extended to 18 months for the first transitional year in which the group enters the scope of Pillar Two). Failure to submit or late submission of the notification may result in penalties.
• If no changes occur in the content of the notification for a given reporting fiscal year, no new submission is required.
• The notification must be submitted electronically to the competent office responsible for receiving the Top-Up Tax returns for the domestic constituent entity or the designated local entity, as applicable.

The notification form follows the OECD template that was issued in January 2025 as part of the revised GIR release.

For more information on local Pillar Two compliance requirements, please refer to the KPMG BEPS 2.0 tracker in Digital Gateway.

Updated Pillar Two guidance

On March 24, 2026, Irish Revenue published updated guidance on the application of the Irish minimum taxation rules (Pillar Two) as well as guidance on administrative aspects, including:

• Administration and compliance requirements under Pillar Two, including new obligations stemming from the Council Directive (EU) 2025/872 (DAC9) and the GloBE Information Return Multilateral Competent Authority Agreement (GIR MCAA).
• Updated technical interpretation of Pillar Two rules, such as the treatment of orphan entities and securitization entities, allocation of UTPR Top-up Tax among domestic entities, intragroup financing and confirmation that the loss-related deferred tax assets (DTAs) may only be recognized as adjusted covered taxes when they genuinely reverse and are utilized.
• Updates to clarification on the application of the Qualified Domestic Top-up Tax (QDMTT) Safe Harbour and TCSH.
• Clarifications on when the local Generally Accepted Accounting Principles (GAAP) may be used for QDMTT calculation purposes even if the fiscal year of a constituent entity differs from that of the UPE.

For more information on the recent Pillar Two amendments in Ireland, please refer to E-News Issue 225.

Updated national list of non-cooperative jurisdictions published

On March 10, 2026, the Polish Ministry of Finance published the list of countries identified by the European Union as non-cooperative for tax purposes that are not included in Poland’s domestic list of jurisdictions applying harmful tax regime.

In comparison to the previous update in 2025, Fiji and Trinidad and Tobago have been removed while Turks and Caicos Islands and Viet Nam have been added. As a result, the list includes the following six jurisdictions: Guam, Palau, Russia, American Samoa, Turks and Caicos Islands, and Viet Nam.

Poland uses a national tax haven list that includes some of the jurisdictions on the EU List, as well as jurisdictions listed by Poland. Changes to the EU List are not automatically reflected in the national tax haven list. For this reason, Poland operates a second list that covers those jurisdictions that are included on the EU List but not on the national tax haven list. Jurisdictions included on the national tax haven list are subject to a broader scope of defensive measures compared to those applicable in the case of payments to jurisdictions on the EU list (e.g., an increased WHT only applies to those countries included on the national tax haven list).

For more details on the list of jurisdiction with harmful tax regimes, please refer to our E-News Issue 207. 

Ministerial order clarifying accounting treatment of deferred tax under Pillar Two rules

On March 13, 2026, Romania’s Ministry of Finance issued Order No. 203/2026 confirming the accounting treatment of deferred tax for constituent entities within the scope of Pillar Two. The Order reflects no substantive change compared to the draft published on February 9, 2026.

As from the 2025 financial year, Romanian entities within the scope of Pillar Two may opt to transition from Romanian Accounting Standards (OMFP 1802/2014) to the accounting regulation compliant with IFRS (OMFP 2844/2016).

With respect to entities that do not opt for the transition, the Order clarifies that entities applying Romanian Accounting Standards must calculate deferred tax based on IAS 12 principles and must present the computation in the explanatory notes to the annual financial statements (i.e., deferred tax should not be recorded in the accounting ledger). Deferred tax is determined based on temporary differences between accounting carrying amounts of balance sheet items and their tax bases. Disclosures must separately identify deferred tax related to the current year’s profit or loss, and that related to retained earnings.

For further background, please refer to KPMG’s Tax News Flash. 

Clarification on application of withholding tax on software-related payments

On December 29, 2025, the Ministry of Finance of the Slovak Republic issued updated guidance providing clarification on the type of software-related payments that are subject to withholding tax in Slovakia from a local tax and treaty perspective.

A key change is the removal of reservations to Article 12 – Royalties, of the OECD Model Tax Convention, which previously resulted in payments for non-standardized software being in most cases considered to be royalties subject to withholding tax in Slovakia.

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

New R&D tax credit announced

On March 18, 2026, the UAE issued Ministerial Decision No. 24 of 2026 introducing a new non-refundable R&D tax credit.

Key features of the measure include:

• The credit rate varies between 15, 35 and 50 percent depending on the amount of qualifying R&D expenditure and the average number of R&D staff per qualifying entity or tax group in each fiscal year.
• Qualifying R&D expenditure comprises staff costs, consumables costs, subcontracting fees and arm’s length contributions to cost contribution arrangements, provided that they are attributable to qualifying R&D activity, with a maximum expenditure of AED 5 million (approximately EUR 1.2 million).
• The credit is non-refundable and may be utilized against UAE corporate income tax and/or Top-up Tax liabilities of the qualifying entity, tax group or domestic group.
• Where the tax credit has not been used in a given fiscal year, it can be carried forward to subsequent fiscal years, subject to conditions.

The new R&D tax credit applies from January 1, 2026.

According to its release, the Ministry of Finance will – in a next step, evaluate potential enhancements to the regime, including consideration of a refundable credit and/or expanding the level of qualifying expenditure eligible for relief, either across the economy or within priority sectors.

For more information on R&D tax incentives available across the globe, please refer to KPMG’s Global R&D Incentives Guide, which will be updated on a regular basis.

French Supreme Court decision on the interplay between the French domestic anti-tax avoidance rule and double tax treaties

On March 12, 2026, the French Supreme Administrative Court (Conseil d’État or the Court) issued a decision (no. 501298) in a case concerning additional French income tax imposed on an individual under the domestic anti‑avoidance provision of Article 155 A of the French General Tax Code. This provision allows the French tax authorities to tax income invoiced through a foreign entity where the services are in fact performed in France by an individual who is a French tax resident and who controls that foreign structure.

The dispute concerned the situation of Mr. B, a French tax resident who acted as both manager and sole shareholder of an Italian company (ItCo). The latter invoiced a French company for services that were in fact physically performed in France by Mr. B himself. Following a desk-based audit, the French tax authorities reassessed Mr. B’s taxable income for the 2015 and 2016 tax years by including the amounts invoiced through ItCo. Mr. B challenged the assessments before the administrative courts and, after several stages of litigation, the matter was ultimately brought before the Conseil d’État.

The Court examined whether France could rely on its domestic anti-avoidance rule to tax income that would generally fall under the ‘business profits’ article of the relevant double tax treaty. In this context, the Conseil d’État noted that under the France – Italy double tax treaty the profits of an enterprise of a contracting state are taxable exclusively in that state unless the enterprise carries on its activities in the other state through a permanent establishment situated there. In this context, the Court took the view that the income at issue constituted profits derived by ItCo and noted that it was undisputed that the Italian company did not have a permanent establishment in France. Consequently, in the Court’s view, France could not tax those profits without infringing the treaty’s allocation of taxing rights.

In light of the above, the Conseil d’État found that the lower courts erred in upholding the assessments made by the French tax authorities and ruled that Mr. B was entitled to seek annulment of the appellate judgment.

Italian Supreme Court rules on discriminatory dividend tax treatment of payments made to non-EU companies

On February 17, 2026, the Court of Abruzzo (second-tier court) (the Court), issued ruling no. 4761/2026 concerning a refund of dividend withholding tax borne by a non-EU company, in light of the free movement of capital.

The case concerns a US company incorporated in Delaware that held a 35 percent participation in an Italian subsidiary. In 2018, the US company received dividends on which the Italian distributing company applied a 5 percent withholding tax as provided under the Italy – United States double tax treaty. The US company challenged the withholding by filing a refund claim for the 3.8 percentage point difference between the 5 percent tax paid and the 1.2 percent effective rate applicable, under Italian domestic law, to corporate shareholders resident in Italy or in another EU/EEA Member State. Specifically, the plaintiff argued that this less favorable treatment of US-resident shareholders amounted to an unjustified restriction on the free movement of capital. After the Italian tax authorities rejected the refund claim, the taxpayer brought an action before the first‑instance tax court, which upheld the claim. The tax authorities subsequently appealed that decision to the second‑instance court.

The Court first examined whether the situation of the US shareholder was comparable to that of companies that are resident in Italy or in the EU/EEA. In this context, the Court held that, for the purposes of dividend taxation, non-EU residents are indeed comparable to domestic residents, since in both cases the dividends constitute participation income and are subject to the same risk of economic double taxation. The Court further held that no valid justifications existed for the higher rate, noting that Italy and the United States maintain a comprehensive tax treaty with exchange of information provisions and that the United States is included on Italy's ‘white-list’ of cooperative jurisdictions. Consequently, the Court ruled that the discriminatory treatment based solely on residence outside the EU was unjustified and ordered the refund of the excess tax.

For more details, please refer to an alert prepared by KPMG in Italy. 

Dutch Supreme Court clarifies anti-abuse test for tax-neutral demergers

On February 27, 2026, the Dutch Supreme Court issued a decision concerning the application of the tax‑neutral demerger regime under the Dutch Corporate Income Tax Act (CITA).

Under the CITA, a legal demerger may be carried out without immediate taxation, provided certain conditions are met, including the requirement that the transaction is not primarily aimed at tax avoidance. The Dutch law establishes a rebuttable presumption that valid commercial reasons are absent – and that the demerger is tax-driven, if shares in the demerged or demerging company are transferred to a third party within three years. This presumption may be overturned if the taxpayer can demonstrate that the transaction was primarily motivated by genuine business reasons, such as the restructuring or rationalization of operational activities.

In its ruling, the Supreme Court referred to the CJEU’s decision in the case C-14/16 that concerned the application of the anti-abuse rules in the Merger Directive – for more details, please refer to EuroTaxFlash Issue 320. In this context, the Supreme Court clarified that the three-year presumption cannot automatically shift the burden of proof to the taxpayer. In the Supreme Court’s view, in line with the EU Merger Directive, the tax authorities must first provide prima facie evidence that the demerger lacks valid commercial reasons or is primarily motivated by tax avoidance. In the Supreme Court’s view, a mere plan to dispose of shares within three years, even if it existed prior to deciding on the demerger, is insufficient to trigger the presumption.

The Supreme Court further emphasized that assessing valid business reasons requires consideration of both the overarching purpose of the transaction, such as a carve-out or divestment, and the specific route chosen, which in this case would be a legal demerger. Importantly, shareholder-driven motives, including the intention to sell demerged activities, may themselves constitute valid commercial reasons. 

The tax impact of remote work: state of play and future horizons - replay now available

Global workforce mobility remains a key issue for multinational groups, both from the perspective of retaining and attracting talent and in responding to the increased flexibility now expected by employees. These developments have driven a significant transformation in how international workforces are managed. In many regions, remote work – whether temporary or permanent, has increased substantially in recent years, both in scale and in permanence.

Against this background, in November 2025, the OECD released its highly anticipated update to the Commentary on the Model Tax Convention (MTC), addressing aspects of the permanent establishment risks arising from cross-border remote working arrangements.

During the March 25 session, a team of KPMG speakers explored key insights on the impact of the updated Commentary as well as outstanding issues that should be addressed in the future, including:

• Clarifications brought by the revised Commentary, as well as expected approaches to the application of the revised Commentary by jurisdictions across the globe.
• Remaining unresolved corporate tax, transfer pricing and personal income tax implications.
• Best practices and practical challenges for businesses in managing the global mobility of individuals.
• Potential future OECD initiatives in this area and their anticipated impact on multinational groups.

The webcast playback and presentation materials are now available. Please click on the link to access them.

KPMG European Financial Services Tax perspectives webcast – April 29, 2026

With Europe’s tax landscape evolving at speed, asset managers, banks and insurers are facing a level of change and scrutiny that is reshaping how they operate across the region.

On April 29, 2026, a panel of KPMG tax specialists will share their insights on the tax initiatives poised to have the greatest impact on financial services, including a closer look at:

• Tax Simplification Initiative – what the European Commission’s plans for simplification in Tax could mean for financial services institutions and what to prepare for.
• Bank Taxes in Europe – survey of the plethora of new, and not so new, specific taxes that can impact banks (and also their customers). 
• Non-Harmonized Directives Across the EU – navigating the practical risks created for FS organizations by fragmented approaches across Member States. 

Please access the event page to register.

Key links

• Visit our website for earlier editions.