EU: Update on European Trust and Cooperation Approach to transfer pricing, BEFIT proposal, creation of Capital Markets Union

KPMG’s EU Tax Centre prepared reports regarding the following tax developments in the EU:

• ETACA pilot progresses with updated guidelines and feedback from stakeholders: The European Commission (EC) on September 25, 2025, held a conference on the European Trust and Cooperation Approach (ETACA) to present conclusions from the first pilot and plans for the second phase. ETACA is the EU’s flagship cooperative compliance initiative for multinational enterprises (MNEs) focusing exclusively on transfer pricing risks and is designed to provide practical (rather than legal) certainty through multilateral risk assessment and dialogue between tax administrations. ETACA is not a mechanism for coordinating or replacing audits, nor does it deliver binding outcomes like advance pricing agreements (APAs). Instead, it offers advance preventative certainty: when transactions are classified as low risk through the process, participating tax administrations are in principle expected not to re-audit those transactions, provided the underlying facts remain unchanged. The second pilot will be launched from January 2026, with 18 member states participating. Admission is normally limited to groups with global consolidated revenues above €750 million, though smaller groups may also be accepted if they can provide equivalent country-by-country (CbC) reporting information. Participation is voluntary for both taxpayers and member states, and entry is decided on a case-by-case basis by the coordinating member state in consultation with other participating authorities. Read the September 2025 report
• ECON Committee adopts position and suggested changes on the BEFIT proposal: The Economic and Monetary Affairs Committee (ECON) of the European Parliament on September 24, 2025, adopted its position on the Business in Europe: Framework for Income Taxation (BEFIT) proposal, which broadly supports the main elements of the EC’s proposal, while also introducing several significant amendments. The ECON’s amendments will be subject to a plenary vote in November, and, if adopted, will be shared with the member states in the Council. Despite progress on the proposal in the European Parliament, the future of BEFIT remains uncertain. Read the September 2025 report
• European Parliament adopts resolution on facilitating the financing of investments and reforms to boost European competitiveness and creating a Capital Markets Union: The European Parliament on September 10, 2025, adopted a resolution based on Mario Draghi's report on Europe's future competitiveness (the Draghi Report), which addresses several key issues, including the need for better tax coordination across member states to support economic growth and private investment. Resolutions adopted by the European Parliament are not binding on the Council and EC, but must be considered by the EC and member states when proposing or agreeing on new rules. Read the September 2025 report