E-News from KPMG’s EU Tax Centre

KPMG’s EU Tax Centre compiles a regular update of EU and international tax developments that can have both a domestic and a cross-border impact, with the aim of helping you keep track of and understand these developments and how they can impact your business. Today’s edition includes updates on:

• CJEU referral: Compatibility with EU law of the French tax on share buybacks
• CJEU referral: Taxpayers’ entitlement to interest on refunds under EU law
• European Commission: Letters of formal notice requesting France, Germany and Italy to align local tax legislation with the Parent Subsidiary Directive
• European Commission: Updates on DAC9 infringement proceedings
• European Parliament: Resolution on the feasibility of a 28th tax regime adopted
• European Parliament: FISC Subcommittee hearing on the Tax Omnibus and DAC recast proposals
• OECD: Updates to Pillar Two filing deadlines
• United Arab Emirates: Clarifications on the application of the Side-by-Side Package (Pillar Two)
• Czechia (court decision): Supreme Administrative Court rules on time limit for applying for withholding tax exemption
• Italy (court decision): Italian Supreme Court reaffirms principles on corporate tax residence and effective place of management

Letters of formal notice requesting France, Germany and Italy to align local tax legislation with the PSD

On July 8, 2026, the European Commission (EC) announced its decision to open infringement procedures by sending letters of formal notice to France (INFR(2026)2087), Germany (INFR(2026)2089) and Italy (INFR(2026)2088) with respect to the local application of the Parent Subsidiary Directive (Council Directive 2011/96/EU – PSD).

According to the EC announcement, tax legislation in Germany, France and Italy, respectively, is not aligned with the PSD as it taxes dividends received by a parent company from subsidiaries resident in other Member States multiple times beyond what is allowed in the Directive. The EC’s announcement does not include further details on the specific provisions of the tax laws in each of the three jurisdictions that lead to this outcome.

A letter of formal notice is the first step of the infringement procedure. The three countries are required to reply to the letters and address the issues raised by the EC within two months. If they fail to provide a satisfactory response, the Commission may proceed by issuing a reasoned opinion.

Notably, in August 2025, the CJEU held (in its decision in joined cases C-92/24 to C-94/24) that Article 4 of the PSD prohibits a Member State that has chosen the exemption system¹ under the PSD from taxing more than 5 percent of dividends received from subsidiaries in other Member States. This is the case even where such taxation is imposed through a tax that is not corporate income tax but nevertheless includes those dividends (or a fraction thereof) in its assessment base. The cases concern the compatibility of the Italian regional tax on productive activities (IRAP) with the prohibition on taxing distributed profits in the hands of the recipient (i.e., the parent company) under Article 4 of the PSD. Please refer to Euro Tax Flash Issue 567 for more details.

It should also be noted that the EC recently launched an additional infringement procedure against France finding that the French legislation restricts the withholding tax exemption under the PSD 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. Please refer to E-News Issue 227 for more details

Updates on DAC9 infringement proceedings

On July 8, 2026, the EC announced developments in its infringement proceedings concerning the transposition of Directive (EU) 2025/872 (DAC9) into domestic law.

DAC9 introduces the EU 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. All EU Member States were required to implement DAC9 into domestic law by December 31, 2025.

In January 2026, proceedings were initiated and targeted a total of eleven Member States that had failed to fully or partially notify the Commission of national measures transposing the Directive into domestic legislation. The Commission subsequently announced that it had closed the infringement procedure against Romania. For previous coverage, please refer to E-News Issue 231.

As part of the July infringement package, the EC now announced that it has also closed its infringement procedure against Sweden following the entry into force of the local DAC9 legislation on May 1, 2026.

At the same time, the EC decided to send reasoned opinions to Belgium, Bulgaria and Cyprus on the grounds that the three Member States had not yet adopted or notified all measures required to fully implement DAC9. The reasoned opinions represent the second stage of the infringement proceedings initiated in January 2026 through letters of formal notice. The three Member States now have two months to respond and take the necessary measures. Otherwise, the EC may refer the cases to the Court of Justice of the European Union (CJEU) and request financial sanctions.

Infringement procedures remain open for the other six notified countries (i.e., Czechia, Greece, Malta, the Netherlands, Poland, Portugal).

For more details on DAC9 implementation, please refer to our E-News Issue 230.

CJEU referral on the compatibility with EU law of the French tax on share buybacks

On July 6, 2026, the French Conseil d'État (Supreme Administrative Court) referred several questions to the CJEU concerning the compatibility with EU law of the French tax on capital reductions resulting from the repurchase and cancellation of a company's own shares (Joined cases 508944 and 508946).

The case concerns the tax introduced by Article 95 of the 2025 Finance Act and codified in Article 235 ter XB of the French Tax Code. The measure applies to large companies with revenue exceeding EUR 1 billion and imposes an 8 percent tax on capital reductions carried out through share buyback transactions followed by the cancellation of the repurchased shares. The tax base is determined by reference to the amount of capital reduction and a proportional share of share premium reserves. A one-off transitional tax was also introduced for transactions carried out between March 1, 2024, and February 28, 2025.

The plaintiffs challenged the administrative guidance issued by the French tax authorities regarding the application of these taxes. They further argued that the measure is incompatible with Council Directive 2008/7/EC (the Capital Duty Directive) concerning indirect taxes on the raising of capital because it applies to amounts corresponding to capital contributions and share premium previously contributed by shareholders and therefore constitutes prohibited indirect tax on capital transactions.

The Supreme Administrative Court rejected several of the plaintiffs' arguments, including those based on the EU Parent-Subsidiary Directive, alleged discrimination under the European Convention on Human Rights, and principles of legal certainty and legitimate expectations. However, it considered that serious uncertainty remains regarding the interpretation of Article 5 of the Capital Duty Directive, which generally prohibits Member States from levying indirect taxes on certain capital-raising and capital restructuring transactions. The Court therefore decided to refer several questions to the CJEU.

The Supreme Administrative Court asked the CJEU:

• whether the French buyback taxes constitute indirect taxes within the meaning of Directive 2008/7/EC;
• if so, whether Article 5(1)(a) of the Directive precludes those taxes on the basis that they effectively apply to amounts representing capital contributions and share premium previously contributed by shareholders; and
• whether Article 5(1)(d) of the Directive precludes those taxes where the share buyback and subsequent capital reduction result in amendments to the company's constitutional documents.

CJEU referral on taxpayers’ entitlement to interest on refunds under EU law

On July 20, 2026, the preliminary ruling request in case C-314/26, was published in the Official Journal of the European Union. The case stems from a referral made on April 8, 2026, by the Portuguese Tax Arbitration Tribunal (CAAD), which asked the CJEU to assess whether Portuguese rules governing compensatory interest on refunds of taxes levied in breach of EU law are compatible with EU law principles.

The case concerns a German investment fund that received dividends from Portuguese companies in 2022 and 2023 and was subject to Portuguese withholding tax. The fund challenged the withholding taxes, arguing that they were contrary to the free movement of capital under Article 63 TFEU, relying on the CJEU's case law in Case C‑545/19. In addition to a tax refund, the fund claimed compensatory interest.

Under Portuguese law, compensatory interest is generally available where an error attributable to the tax authorities results in the payment of tax exceeding the amount legally due. However, Portuguese case law provides that, in withholding tax cases, interest does not accrue from the date the tax was collected. Instead, it begins only when the tax authorities reject, expressly or tacitly, a prior administrative challenge filed by the taxpayer. Portuguese law also currently provides for a fixed interest rate of 4 percent per annum and calculates the compensation using simple rather than compound interest.

The referring tribunal expressed doubts as to whether these rules comply with EU law principles, particularly the principles of effectiveness and neutrality. It noted that CJEU case law generally requires taxpayers to receive adequate compensation for the loss resulting from the unavailability of amounts collected in breach of EU law and suggests that interest should cover the entire period from payment of unlawful tax until its repayment.

The tribunal therefore decided to ask the CJEU whether:

• the principle of effectiveness, or any other relevant principle of EU law, precludes a national procedural provision which is interpreted as meaning that the interest on a tax in respect of which a deduction at source has been made in breach of EU law (for example, Article 63 TFEU) begins to accrue only from the date on which the prior administrative challenge lodged against the deductions at source in question is rejected, whether expressly or tacitly.
• the principles of effectiveness and neutrality preclude the application of a fixed statutory interest rate of 4 percent per annum that is not linked to inflation, central bank rates, or commercial lending rates, particularly where those market indicators exceed the statutory rate.
• the principles of EU law preclude the payment of ‘simple interest’ (instead of ‘compound interest’) on a tax in respect of which a deduction at source has been made in breach of EU law (for example, Article 63 TFEU), and whether it is relevant that commercial banks generally apply compound interest to deposits.

European Commission publishes 2026 edition of Annual Report on Taxation

On July 10, 2026, the EC published the 2026 edition of the Annual Report on Taxation providing an overview of the state of play of taxation and tax systems in the EU.

The report discusses the role of tax incentives in encouraging investment and supporting the uptake of low-carbon technologies. In addition, the report provides an overview of tax revenues by tax types in the EU (social contributions, personal income tax, corporate income tax, value added tax, environmental and property taxes) as well as of the most recent reforms in tax systems at EU country level.

Key takeaways from a corporate tax perspective include:

• Corporate tax revenue: The report notes that corporate income taxation (CIT) revenues remained above 3 percent of gross domestic product (GDP) and 8 percent of total tax revenue in 2024. The report finds that broader tax bases have largely compensated for gradual declines in statutory CIT rates. The report refers to recent evidence suggesting that lowering statutory tax rates is a costly way to encourage investment and notes that rising CIT revenues seem instead to be driven by other factors, including shifting capital income from personal income tax to CIT and progress in curbing base erosion and profit shifting (BEPS).
• Tax incentive policies: The report notes that the effectiveness of tax incentives depends on their design and their complementarity with other policy efforts. The report finds that expenditure-based tax incentives are more cost-effective compared to income-based tax incentives. The report shows that Member States increasingly use CIT incentives to promote clean investment, including accelerated depreciation, tax credits and enhanced deductions. According to the report, tax incentives are being expanded across multiple Member States to support innovation and investment, with Ireland, Czechia, Germany, Bulgaria, Greece and Finland being mentioned as specific examples.
• CIT rate policies: The report notes the heterogeneity of the CIT rate policies in Member States, with some raising rates (e.g., Cyprus, Poland, Lithuania), while others introduced cuts (e.g., Germany and Portugal).
• EU tax policy: The report takes note of the recent EU tax policy initiatives, including the Tax Omnibus proposal, DAC recast proposal, the EU Inc. proposal (a starting point for the EU’s 28th regime), the Recommendation on Savings and Investment Accounts and the tax incentives to support the Clean Industrial Deal. According to the report, these initiatives are instrumental in improving competitiveness and attaining other key policy objectives.

Resolution on the feasibility of a 28th tax regime adopted

On July 9, 2026, the European Parliament (EP) adopted a resolution on the feasibility of a 28th tax regime and its potential to support EU competitiveness. The resolution feeds into the ongoing legislative process on the 28th regime (‘EU Inc.’) and sets out possibilities for the tax aspects of the broader regime. The European Commission proposal for a regulation creating a voluntary, EU‑wide corporate form called ‘EU Inc.’ was released on March 18, 2026.

The ‘EU Inc.’ 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. For more details, please refer to E-News Issue 227.

Whilst the EP resolution is generally supportive of the EC proposal, it calls for the 28th regime initiative to be ambitious in its substance and to be established through a modular approach, including on taxation (tax module). Key recommendations from a direct tax perspective include:

• Digital one‑stop‑shop for registration and filings: according to the resolution, a central operational feature of the new EU Inc form should be a digital one‑stop‑shop platform. It would allow companies to complete a single, fully digital registration and receive one EU tax identification number, use standardized documentation and templates, and file tax returns through a single interface. Communication would be conducted with English as the primary working language, without prejudice to the other official EU languages.
• Single consolidated corporate tax base: the EP recommends that a single consolidated corporate tax base should apply to companies that opt into the new EU Inc form. According to the resolution, this should build on previous initiatives such as the Common Consolidated Corporate Tax Base (CCCTB), Business in Europe: Framework for Income Taxation (BEFIT) and the head‑office taxation model for SMEs. Taxable income of EU Inc entities would be determined under uniform rules in all participating Member States and then apportioned between them using a pre-agreed formula reflecting real economic activity, based on factors such as sales, labor, tangible assets and digital presence. The resolution further notes that tax rates should remain within Member States’ competence and that Member States should consider establishing specialized chambers in national courts to deal with disputes related to the tax module.
• Neutrality between debt and equity financing: with reference to the debt-equity bias reduction allowance (DEBRA) Directive proposal, the resolution proposes that the tax module should promote tax neutrality between debt and equity financing for companies that opt into the EU Inc form. The objective is to remove structural tax biases favoring debt over equity and to strengthen equity-based investment, which the resolution considers particularly important for start-ups and scale-ups relying primarily on equity financing in the early stages of their development.
• Simplified withholding tax and clear and transparent beneficial owner definition: the resolution proposes a common simplified withholding tax procedure for companies opting into the EU Inc form with respect to dividend, interest and royalty payments, including minimum effective taxation safeguards. It calls for a centralized EU digital registry to enable immediate recognition of tax residence as well as a clear and transparent definition of beneficial ownership, or as a minimum, a widely accepted set of criteria for granting withholding tax relief at source.
• EU employee stock options: the EP calls for a mandatory application of the proposed use of EU employee stock options for companies opting into the EU Inc. form. The EP notes that gains under the schemes in the context of the EU Inc form should be treated as capital income rather than employment income with taxation triggered at disposal of the shares. The EP also proposes a standardized EU valuation method as well as rules to prevent double taxation at the point of the disposal of the shares for employees moving between Member State.
• Coordinated tax incentives: the resolution proposes a conditioned and coordinated offering of R&D tax incentives under the tax module of companies opting into the EU Inc form. Furthermore, the resolution notes that R&D incentives should be aligned with the OECD Pillar Two framework, in particular with the rules on Qualified Refundable Tax Credits.
• Opt‑in legal design of the tax module: where unanimity under the special legislative procedure cannot be reached, the resolution proposes for the tax module to be a voluntary regime with the possibility of accession for other Member States at any time. Alternatively, the resolution considers the possibility of enhanced cooperation as a last resort option.

The resolution’s recommendations are intended to guide and influence the EC’s future work, including any potential initiatives in the tax field based on Article 115 TFEU (i.e., Directives subject to unanimous approval by the Member States), but they do not have a legally binding effect on the EC or the Council. 

Further background can be found in the press release.

FISC Subcommittee hearing on the Tax Omnibus and DAC recast proposals

On July 14, 2026, the European Parliament's Subcommittee on Tax Matters (FISC) held public hearings on the Tax Omnibus proposal and the proposal for a recast of the Directive on Administrative Cooperation (DAC) that were both published by the EC on June 24, 2026.

DAC recast proposal

In relation to the DAC recast proposal, the public hearing focused on exploring to what extent the aims of the proposal can be achieved without compromising the EU's core policy objective of effectively combating tax evasion and tax avoidance. The following experts contributed to the discussion: Prof. Dr Nadine Riedel (Professor and Director of the Institute for Public and Regional Economics, University of Münster), Dr. Miroslav Palanský (Head of Research, Tax Justice Network) and Mr. Philip Kerfs (Head of the International Co-operation Unit, Centre for Tax Policy and Administration, OECD). Dr. Benjamin Angel (Director for Direct taxation, Tax coordination, Economic analysis and Evaluation, DG TAXUD, European Commission) also participated in this hearing.

Key takeaways from the discussion include:

• Mr. Philip Kerfs welcomed the continued alignment between international standards and regional implementation frameworks such as the Directive on Administrative Cooperation. Mr. Kerfs observed that extending the reporting obligation on platform operators to intermediary sellers could improve reporting outcomes, although any such measure should carefully balance the information needs of tax authorities against the compliance burden for SMEs. He also stressed the critical role of Tax Identification Numbers (TINs) in enabling authorities to match received information with domestic taxpayer records. In his view, improving TIN validation would increase the effectiveness of information exchanges and reduce the need for resource-intensive follow-up inquiries.
• Prof. Nadine Riedel supports the focus of the recast proposal on consolidating various DAC texts (DAC1 to DAC9) into a single cohesive text, simplifying the EU mandatory disclosure rules (MDRs) and strengthening automatic exchanges, beneficial ownership transparency, and TIN verification. Prof. Riedel cautioned that the envisaged clarifications relating to the substance‑related hallmark D2 could become the reference point for later substantive tax rules. From her perspective, a cleaner approach would be to define a narrow reporting-only substance hallmark directly in the directive, or to return later with a proper legislative amendment.
• Dr. Miroslav Palanský welcomed the consolidation of the DAC amendments but criticized the proposed carve‑out from the EU MDRs for groups in-scope of the Pillar Two rules, arguing in particular that the benefits are overstated and that minimum tax returns cannot replace EU MDR reports because they only present tax outcomes rather than the underlying arrangements. According to Mr. Palanský, the carve‑out would effectively reward multinationals that engage in the most aggressive tax planning and should therefore be removed.
• Dr. Benjamin Angel outlined the building blocks of the DAC recast proposal as well as the policy intentions and reasons for certain measures, which are based on extensive consultations and evaluations. With respect to the EU MDRs, Mr. Angel provided further insights regarding the proposed removal of the category A hallmarks, the carve-out for Pillar Two groups and the envisaged clarifications on the substance criterion under hallmark D2. With respect to the filing requirements under Country-by-Country Reporting and Pillar Two, Mr. Angel noted that, ideally, the Country-by-Country Report template would have been merged with the template for the GloBE Information Return. However, Mr. Angel explained that the GIR is still subject to changes at OECD level. Therefore, the proposal focuses on providing a common and centralized notification process for both regimes.

Tax omnibus proposal

In relation to the Tax Omnibus proposal, the public hearing aimed to examine whether the objectives of simplification and burden reduction can be achieved without undermining the EU's efforts to combat tax avoidance and ensure fair taxation. The following experts contributed to the discussion: Mr. Gerhard Huemer (Director Economic and Fiscal Policy, SME Europe), Ms. Mariella Caruana (Deputy Director of the Taxation Economics Department, Business Europe) and Dr. Alison Schultz (Research Fellow, Tax Justice Network). Dr. Benjamin Angel also participated in the hearing.

Key takeaways from the discussion include:

• Mr. Gerhard Huemer stressed that the Tax Omnibus proposal mainly targets multinationals and has limited direct impact on typical SMEs, as most do not operate cross‑border. Mr. Huemer highlighted that the main concerns as regards corporate taxation for SMEs are not covered by the Tax Omnibus proposal as they rather relate to a lack of harmonization of EU taxation rules. Mr. Huemer notes that the Tax Omnibus proposal alone may not be sufficient to increase cross‑border activity among SMEs. In addition, Mr. Huemer criticized the long implementation timeline (2032 and 2037) as insufficiently ambitious from an SME perspective.
• Ms. Mariella Caruana underlined that the EU must remain attractive for investment. Ms. Caruana considered the Tax Omnibus proposal as a welcome step to enhance competitiveness by removing unnecessary complexity, in particular with respect to withholding tax procedures, overlapping CFC and minimum tax rules, and interest limitation rules, while creating a more supportive framework for R&D.
• Dr. Alison Schultz warned that weakening anti‑avoidance rules as a part of simplification risks may erode tax revenues. Dr. Schultz advocated for reforms to create simpler tax system such as unitary taxation under a single consolidated tax base.
• Dr. Benjamin Angel outlined the building blocks of the Tax Omnibus proposal as well as the policy intentions and reasons for certain measures. With respect to the proposed changes to the Parent Subsidiary Directive and Interest and Royalties Directive, Mr. Angel argued that withholding tax refund procedures create unnecessary costs and unrecovered tax burdens for cross-border investors, undermining the EU single market despite long-standing efforts to eliminate such barriers within the EU. With respect to the proposed changes to the EU interest limitation rules, Mr. Angel explained that the proposal seeks to make the rules more consistent and proportionate by aligning key parameters across Member States and to provide targeted relief including instances where companies experience significant profitability declines. With respect to the proposed removal of the imported mismatch rule, Mr. Angel argued that the rule is effectively unenforceable in practice and has produced no enforcement outcomes in the EU, and therefore runs counter to the objective of meaningful simplification.

For more information, please refer to the press release of the European Parliament. For more information on the EC proposal, please refer to E-News Issue 232.

ESMA publishes first market capitalization data for EU Member States

On July 10, 2026, the European Securities and Markets Authority (ESMA) published the first calculation of market capitalization and market capitalization ratios of EU Member States relevant for the application of the Council Directive (EU) 2025/50 on faster and safer relief of excess withholding taxes (FASTER Directive).

The FASTER Directive introduces a harmonized EU framework aimed at improving the efficiency of withholding tax relief procedures on cross-border investment income, by establishing:

• a common EU digital tax residence certificate (eTRC), with common content, regardless of the issuing Member State;
• two fast-track procedures complementing the existing standard refund procedure in each Member State, namely: (i) a relief at source system, and (ii) a quick refund system (in-scope Member States will be required to implement one of the two systems or a combination of both);
• national registers for certified financial intermediaries (CFIs) that will be able to facilitate the fast-track procedures. Such financial intermediaries will be subject to additional due diligence and common reporting requirements

However, certain exemptions are provided for Member States that (1) have established a comprehensive national relief system and (2) that have a market capitalization ratio (a percentage of the overall market capitalization of the EU) that remains below 1.5 percent for at least four consecutive years.

The ESMA report covers the annual market capitalization and market capitalization ratios of EU Member States for the reference years 2024 and 2025. Based on the calculation, the following twelve EU countries had a market capitalization ratio above the minimum threshold in both 2024 and 2025 (and therefore do not meet the second relief condition): Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Poland Spain and Sweden.

Member States that fulfill the two criteria before the transposition deadline of the FASTER Directive (December 31, 2028) are exempt from the obligations of Chapter III (including provisions regarding national registers of CFIs and the fast-track procedures). Once these Member States reach or exceed the market capitalization ratio threshold for four consecutive years, they will be required to irrevocably adhere to Chapter III. In such cases Member States will have five years to transpose the rules of the Directive into national law.

Updates to Pillar Two filing deadlines

On June 30, 2026, calendar year MNE groups in scope of Pillar Two were required to file their GloBE Information Return (GIR) for the 2024 fiscal year in accordance with the GloBE Model Rules and the Commentary. In order to benefit from the GIR central filing approach (i.e., designated group member files the GIR on behalf of the MNE group), other group members were required to notify their local tax authorities of the identity and location of the designated filing entity (GIR notification).

A number of jurisdictions have also introduced transitional filing relief and extended GIR filing and notification deadlines. For an overview of the developments reported to date, please refer to E-News Issue 232. Since then, several additional jurisdictions have announced filing deadline extensions, filing procedures or notification deadlines. Recent developments include:

• France: On July 8, 2026, the French Ministry of Economy and Finance announced an extension of the Pillar Two compliance deadline from June 30 to September 1, 2026. Accordingly, in-scope groups with a fiscal year ending on December 31, 2024, have until September 1, 2026, to file the GIR, file local top-up tax returns and pay any French top-up tax due.
• Greece: On July 9, 2026, the Independent Authority for Public Revenue in Greece issued an updated Q&A regarding Pillar Two compliance obligations in Greece. Following the extension of the deadline for submitting the GIR and the related notification until October 30, 2026, the updated Q&A confirms that the deadline for filing the corresponding Pillar Two returns has been further extended to November 30, 2026. This extension applies to MNE Groups with a financial year ending on or before March 31, 2025. For more details, please refer to a report prepared by KPMG in Greece.
• Netherlands: On July 13, 2026, updated non-binding guidance in the form of a Q&A document was issued by the tax authorities in the Netherlands. The guidance clarifies that the Dutch tax authorities do not have the authority to grant extensions for the submission of the GIR. However, they indicated that they will adopt a pragmatic approach and generally refrain from imposing penalties for late filings during the initial filing period. The updated Q&A document also notes that the first GIRs are expected to be exchanged with other countries by the end of August 2026. Accordingly, taxpayers are encouraged to submit their GIR as soon as possible and, in any event, no later than that date. For more information on the Q&A document, please refer to E-News Issue 231.

Pillar Two: list of signatories of the GIR MCAA updated

On July 3, 2026, the OECD updated the list of jurisdictions that have signed the GloBE Information Return Multilateral Competent Authority Agreement (GIR MCAA) to include Guernsey and Türkiye.

Guernsey and Türkiye signed the GIR MCAA on June 23 and April 20, 2026, respectively.

The list of 38 signatories now includes Australia, Austria, Barbados, Belgium, Canada, Croatia, Cyprus, Czechia, Denmark, Finland, France, Germany, Gibraltar, Greece, Guernsey, Hong Kong (SAR, China), Hungary, Ireland, Isle of Man, Italy, Japan, South Korea, Liechtenstein, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Romania, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Türkiye and the UK.

For previous coverage on the GIR MCAA list of signatories, please refer to E-News Issue 230.

2026 Economic Impact Assessment of the Global Minimum Tax released

On July 15, 2026, the OECD published the 2026 Economic Impact Assessment of the Global Minimum Tax (GMT), providing new estimates of the expected effects of the GMT and presenting preliminary evidence from its first year of implementation.

Compared to the initial economic impact assessment from 2024 (see E-News Issue 190), the 2026 estimates are based on data for the years 2019 to 2022 and the current state of local GMT implementation. The assessment is also based on a GMT framework that already includes the recently agreed Side-by-Side Safe Harbour and Substance-based Tax Incentive Safe Harbour and no transitional SBIE percentages (i.e., five percent on payroll and tangible assets).

Key takeaways include:

• Average jurisdiction-level effective tax rates (ETRs) are estimated to increase by 2.8 – 3.7 percentage points on average under the current GMT framework, with ETRs in investment hubs estimated to rise by 5.5 – 6.9 percentage points.
• The GMT is estimated to reduce profit-shifting substantially with an estimated reduction of between 22.6 – 44.6 percent.
• Global CIT revenues are estimated to rise by 3.2 – 5.4 percent per year.
• Initial post-implementation 2024 data suggests an increased impact on effective tax rates i of the GMT and finds no evidence of negative effects on investment or employment.

In addition, the OECD released a separate analysis, MNE Responses to the GMT, based on 2024 consolidated financial statement data, providing an initial assessment of outcomes following the first year of GMT implementation. Key takeaways from this second study include:

• The GMT implementation resulted in a rise in consolidated ETRs among in-scope MNEs between 1 and 2 percentage points.
• The GMT raised EUR 79 – 109 billion in additional global revenue in 2024, equivalent to an increase of 2.4 – 3.4 percent of global CIT.

It is noted, however, that the results of both assessments should be considered with caution due to a number of data limitations (e.g., potential relocation of real activity not taken into account).

BEPS Action 5 peer review results (harmful tax regimes)

On July 23, 2026, the OECD released the latest peer review conclusions on preferential tax regime reached by the Forum on Harmful Tax Practice (FHTP), as part of their on-going review of the implementation of the BEPS Action 5.

According to the release, the FHTP for the first time applied the revised BEPS Action 5 peer review methodology. Under the new approach, preferential tax regimes are initially subject to a BEPS impact assessment to determine whether a full legislative review is required or whether the expected BEPS impact is low.

Using this methodology, the FHTP reached new conclusions on 13 regimes:

• Seven regimes (Azerbaijan’s tax exemption regime for micro-businesses, Japan’s IP box regime, Peru’s special development zone (ZEDs) and four preferential regimes in Fiji), are considered “not harmful”.
• Six regimes (Azerbaijan’s Alat free economic zone, industrial parks and technology parks regimes, Malaysia’s digital tax incentive, Peru’s special economic zone regime (Zofratacna), and Serbia’s IP box regime) will remain “under review”. 

Note that the EU Code of Conduct Group is expected to take into account the peer review recommendations when updating the EU list of non-cooperative jurisdiction (section 2.1) in October 2026.

Please refer to E-News Issue 226 for previous coverage.

Budget Accompanying Act 2027–2028 introduces progressive corporate tax rate

On July 16, 2026, the Austrian Federal Council approved the Budget Accompanying Act 2027–2028 providing for a range of different tax and procedural measures.

The key measure from a corporate tax perspective is the introduction of a progressive corporate tax rate. For financial years beginning after December 31, 2027, the currently applicable corporate tax rate of 23 percent will only be available up to EUR 1 million of taxable income. Taxable income in excess of EUR 1 million will be subject to a 24 percent corporate tax rate. The new progressive corporate tax will not apply to certain corporations subject to limited tax liability.

For more details, please refer to a report (in German) prepared by KPMG in Austria.

Tax framework for Investment Funds clarified

On June 25, 2026, Greece enacted Law 5313/2026 introducing corporate tax measures affecting Alternative Investment Funds (AIFs), their investors, and fund management structure. The legislation aims to remove uncertainties regarding the tax treatment of investment funds and to facilitate the provision of investment management services from Greece.

Key corporate tax developments include:

• Alignment of the tax treatment of Greek AIFs with AKES regime: The legislation aligns the tax treatment of Greek AIFs with that applicable to close-ended mutual funds (AKES). Under these rules, either the AIF itself is subject to tax at a rate equal to 5 percent of the European Central Bank (ECB) main refinancing rate, calculated annually on the difference between the year-end value of fund participations and their acquisition cost increased by cumulative operating expenses, or, where the AIF is treated as tax transparent, taxation occurs at the level of its unitholders.
• Tax exemption for EU and third-country funds: The law also confirms that AIFs established in other EU Member States are not subject to Greek taxation and extends the exemption to funds established in third countries, provided they are not resident in a non-cooperative jurisdiction and are supervised by the International Organization of Securities Commissions (IOSCO).
• Tax residence and permanent establishment protections for foreign funds and fund managers: Effective January 1, 2026, the management, delegated management, or portfolio management of qualifying EU and third-country investment funds from Greece will not, by itself, give rise to Greek tax residence for the funds or their underlying portfolio companies. In addition, portfolio management and consulting services provided by Greek legal entities to EU AIF managers and qualifying third-country fund managers in the ordinary course of business will not, by themselves, create a permanent establishment in Greece for those managers.

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

Clarifications on the application of the Side-by-Side Package (Pillar Two)

On June 22, 2026, the United Arab Emirates (UAE) updated the guidance on the domestic minimum top-up tax (DMTT) rules to confirm the application of the latest OECD materials (including the Inclusive Framework’s Side-by-Side Package and the central record of legislation with qualified status).

The updated guidance confirms that, under the UAE DMTT rules, the following Safe Harbour provisions may be applied to fiscal years beginning on or after January 1, 2026, where the respective conditions are met:

• Side-by-Side Safe Harbour,
• UPE Safe Harbour,
• Substance-based Tax Incentive Safe Harbour, and
• Simplified ETR Safe Harbour.

The update further confirms the extension of the transitional CbyC Reporting Safe Harbour to fiscal years beginning no later than December 31, 2027, and ending no later than June 30, 2029.

For previous coverage on Pillar Two rules in the UAE, please refer to E-News Issue 223.

Supreme Administrative Court rules on time limit for applying for withholding tax exemption

On July 19, 2026, the Czech Supreme Administrative Court (the SAC) ruled that applying for a withholding tax exemption with respect to royalty payments is not subject to any time limit.

The plaintiff was a company resident outside Czechia that applied in June 2019 for an exemption from Czech withholding tax with respect to royalty payments for the years 2014–2018. The Czech tax authorities granted the exemption only for 2017 and 2018, denying the request for 2014–2016 on the grounds that the deadline for claiming an exemption had expired.

Whilst the Czech legislation does not set a time limit for submitting an application for a tax exemption decision, the lower court in the present case ruled that, in the absence of a national deadline, the applicable limit is the one set out by the Interest and Royalties Directive (IRD). Under Article 1(15) of the IRD, if tax has been withheld at source by the paying company, the beneficial owner of the payment can submit a refund claim, provided the substantive requirements listed above are met. The period for submitting this claim may be determined by the source State, but must run for at least two years after the date when the interest or royalties were paid. On that basis, the lower court held that the maximum period for submitting an application amounted to two years.

The SAC decision now overrules the local court’s ruling and follows the decision by the CJEU in case C‑828/24 that was rendered on March 5, 2026. The CJEU held that the Interest and Royalties Directive does not impose any EU‑level deadlines for submitting the attestation that the substantive conditions under the Directive are met or other supporting documents, nor does it limit the period prior to their submission for which a withholding tax exemption may be granted. The CJEU held that any such deadlines must therefore be determined exclusively under national law. For more details, please refer to Euro Tax Flash Issue 576.

In light of this ruling, the SAC has changed its previous interpretation and confirmed that there is no time limit for filing an application for withholding tax exemption with respect to royalty and interest payments.

At the same time, the SAC clarified that the existing time limit for applying for a refund of tax already withheld remains unchanged, as it is governed by a separate procedural regime. The deadline for filing an application for a refund of tax already withheld continues to be two years.

For more details, please refer to a report prepared by KPMG in Czechia.

Italian Supreme Court reaffirms principles on corporate tax residence and effective place of management

On June 11, 2026, the Italian Supreme Court (Court of Cassation, Order No. 19092/2026) ruled on the application of the Italian tax residence rules to a Slovak company accused of esterovestizione (artificially locating its tax residence abroad).

The case concerned a Slovak-incorporated company that the Italian Revenue Agency regarded as effectively managed from Italy and therefore subject to Italian corporate income tax (IRES).

The tax authorities argued that, although the company was formally established in Slovakia, its effective place of management was in Italy. The company challenged the assessment, maintaining that it had been validly established in Slovakia for business reasons and that its management activities were carried out there. It also argued that the reassessment was inconsistent with EU freedom of establishment principles and the Italy-Slovakia double tax treaty.

The Court confirmed that, under Article 73(3) of the Italian Income Tax Code, a company is tax resident in Italy if its registered office, principal business activity or effective place of management is located in Italy for the greater part of the tax year. In line with its existing case law, the Court confirmed that the effective place of management corresponds to the location where the company’s strategic and administrative decisions are actually taken and implemented.

In the case at hand, the Court agreed that the company's effective management was located in Italy. Relevant factors included the Italian residence of the directors, the absence of management activity in Slovakia, invoices prepared in Italy and issued to a related Italian company, contracts drafted in Italy, and evidence that the company had been established in Slovakia primarily because operating through an Italian entity would have been more costly.

The Court also confirmed that the tax authorities may demonstrate the existence of an artificial foreign residence by relying on multiple factual indicators considered as a whole. It further held that Italian anti-avoidance rules on esterovestizione are compatible with the EU freedom of establishment where they target purely artificial arrangements lacking genuine economic substance. Finally, the Court rejected the taxpayer’s arguments concerning the Italy-Slovakia double tax treaty and dismissed the appeal in its entirety. 

KPMG Pillar Two mid-year stocktake webcast – replay now available

As Pillar Two implementation continues to evolve and jurisdictions gain experience with the first round of GIR filings, MNE groups are facing an increasingly complex compliance landscape.

On July 21, 2026, a panel of KPMG Pillar Two specialists shared insights on recent developments and practical considerations, including:

• The 2024 GIR filing experience and key lessons learned from the first compliance cycle.
• Operational readiness considerations for managing ongoing Pillar Two compliance obligations.
• Expected technical and administrative developments and priorities for the months ahead.

The webcast replay and presentation materials are now available. Please visit the event page to access the recording and related resources.

Key links

• Visit our website for earlier editions.