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: CJEU clarifies when double tax treaty may neutralize discriminatory dividend taxation
• CJEU referrals: CJEU referral on the compatibility of the French payroll tax with the Parent-Subsidiary Directive
• European Commission: EC launches public consultation on Tax Omnibus proposal
• OECD: New guidance on Global Minimum Tax framework
• Portugal: Extension of Pillar Two registration deadline
• Serbia: Serbia adopts corporate tax reform aligned with EU directives
• Belgium (court decision): Belgian Constitutional Court confirms that OECD Side-by-Side Safe Harbour developments do not affect pending UTPR challenge
• Germany (court decision): Local fiscal court dismisses challenge of the legality of the German Minimum Tax Act
• Netherlands (tax authority decision): No abuse found where EU holding company demonstrates genuine economic activity despite limited substance indicators
• Poland (court decision): Polish Supreme Administrative Court clarifies beneficial ownership and anti-abuse tests for PSD dividend exemption

CJEU clarifies when double tax treaty may neutralize discriminatory dividend taxation

On September 17, 2026, the Court of Justice of the European Union (CJEU or the Court) gave its decision in case C-139/25. The case concerns the circumstances under which a Member State can achieve the neutralization through a double tax treaty of discriminatory withholding tax imposed on dividends paid to a non-resident investment fund.

The case concerned a US regulated investment fund (the plaintiff) that was subject to a 15 percent Spanish withholding tax on dividends received from Spanish companies, while comparable Spanish resident undertakings benefited from a 1 percent corporate income tax on equivalent dividend income. The plaintiff had elected a tax-transparent regime in the United States, meaning that dividend income was not taxed at the fund level but was instead attributed to its investors, together with the related foreign tax credits. The plaintiff requested a refund with respect to the difference, arguing that the higher tax burden imposed on non-resident funds constituted a restriction on the free movement of capital under Article 63 of the Treaty on the Functioning of the European Union (TFEU).

The Spanish Supreme Court asked the CJEU whether, where a non-resident investment fund elected to be treated as tax transparent and passed both the dividend income and the corresponding foreign tax credit to its investors, the restriction on the free movement of capital could be regarded as neutralized under the applicable double tax treaty and the domestic legislation of its state of residence. In this context, the option to be taxed at the fund level could, in principle, have allowed the plaintiff to deduct the full amount of excess Spanish withholding tax, but the election would have been binding in respect of all income earned by the fund.

The Court first confirmed that the Spanish legislation gave rise to a restriction on the free movement of capital and observed that, once Spain chose to tax dividends received by both resident and non-resident investment funds, their situations were, in principle, comparable for the purposes of that taxation. The Court further held that a merely theoretical possibility for the fund to obtain relief in its state of residence is insufficient where, in practice, the fund opted for tax transparency regime and could not benefit from the deduction itself.

Recognizing that the tax transparent regime operates by passing both the dividend income and the associated foreign tax credit to the investors, it considered whether the neutralization analysis should instead be carried out at the investor level. In particular, it noted that Article 24(2)(a) of the Spain-US double tax treaty the United States allows its residents or citizens to credit against income tax due in the US not only income tax paid in Spain by them but also such tax paid on their behalf. Consequently, it cannot be ruled out that the double tax treaty between Spain and the United States might allow the plaintiff’s unit-holders (investors) to benefit from a deduction or foreign tax credit corresponding to the Spanish withholding tax imposed on the dividends. It is for the referring court to verify whether the treaty could be interpreted in this way. The Court also reiterated that it is not competent, in preliminary ruling proceedings, to interpret the provisions of a tax treaty concluded between a Member State and a third country. In this regard, the Court made clear that neutralization can be established only if the investors are able, in practice and not merely in theory, to obtain full relief for the Spanish tax burden.

For more information, refer to Euro Tax Flash Issue 584. 

CJEU ruling on the Polish taxation of partnership conversions without capital contributions

On September 17, 2026, the CJEU delivered its judgment in case C-197/25 concerning indirect taxation of the raising of capital under Article 9 of Council Directive 2008/7/EC (the “Capital Duties Directive” or the “Directive”). 

The Capital Duties Directive establishes a harmonized EU framework governing the taxation of transactions involving the raising of capital by companies. Under Article 5 of the Directive, Member States are prohibited from imposing indirect taxes on specific transactions, including contributions of capital (Article5(1)(a)).

The Directive defines the concept of a ‘capital company’ in Article 2. Under Article 2(1), the definition covers company forms listed in Annex I of the Directive, listed entities, and entities operating for profit, whose members have the right to dispose of their shares to third parties without prior authorization. Under Article 2(2), the definition of a capital company is extended to any profit-making company, partnership, association, or legal person that is not specifically listed in Article 2(1). 

Chapter III of the Directive contains special provisions allowing Member States that levied capital duty on contributions to capital companies as at January 1, 2006, to continue doing so, subject to certain conditions. In addition, Article 9 permits Member States, for the purposes of levying capital duty, not to treat the entities referred to in Article 2(2) as capital companies.

The Polish tax on civil-law transactions (PCC) is an indirect tax that applies, inter alia, to execution of company and partnership formation documents and certain amendments thereto, including capital increases and certain reorganizations. The PCC is based on an Act of September 9, 2000, on tax on civil-law transactions, which entered into force on January 1, 2001, and was therefore already in effect at the relevant cut-off date of January 1, 2006. Under the PCC Law, the conversion of a company or partnership may be taxable where it results in an increase in the assets of the partnership or the share capital of the company.

Following the conversion of a Polish limited partnership into a general partnership on July 9, 2021, the taxpayer applied for a refund of PCC that had been levied on the conversion. The taxpayer argued that the transaction merely involved a change of legal form and did not result in any increase in the partnership's assets, as the partners' contributions remained unchanged and no additional cash or in-kind contributions were made. The Polish tax authorities rejected the refund claim on the grounds that the conversion resulted in an increase in the partnership's assets and therefore constituted a taxable event under the PCC Law. The issue was litigated before the Polish administrative courts and ultimately led to a referral to the CJEU.

The CJEU noted that the key issue was whether a Member State that has exercised the option under Article 9 of the Directive (i.e., not to apply the “catch all” provision in Article 2(2) may nevertheless impose an indirect tax on the conversion of one profit-making entity into another profit-making entity that is not expressly listed in Article 2(1) of the Directive. The Court emphasized that Article 9 forms part of Chapter III of the Directive, which exclusively governs the continued levying of capital duty by those Member States that are permitted to maintain such a tax under Article 7. Since the referring court indicated that the conversion appeared not to involve any capital contribution, the transaction fell to be assessed under the Directive's general prohibition on indirect taxation of certain corporate reorganizations set out in Article 5(1)(d)(i), read together with Article 2(2), rather than within the Chapter III exception applicable to capital duty.

The Court left it to the referring court to determine whether the conversion at issue involved a contribution of capital. However, based on the facts presented, the CJEU noted that the transaction did not appear to involve any additional contribution and therefore appeared to fall within the protection of Article 5.

In light of the above, the Court concluded that Article 9 of the Directive must be interpreted as meaning that the exercise, by a Member State, of the option provided for in Article 9 does not allow that Member State to levy an indirect tax on the conversion, not accompanied by a contribution of capital, of an entity operating for profit that is not referred to in Article 2(1) of the Directive into another entity operating for profit that is also not referred to in that provision. As a result, conversions between profit-making partnerships that are not accompanied by capital contributions cannot be subject to indirect taxation, except in the limited circumstances expressly provided for by the Directive.

CJEU referral on the compatibility of the French payroll tax with the Parent-Subsidiary Directive

On July 13, 2026, the preliminary ruling request in Case C-779/26 was lodged with the CJEU. The case concerns a referral made by the French Conseil d’État (Supreme Administrative Court), which asked the Court to clarify whether Article 4 of the Parent-Subsidiary Directive (PSD)¹ applies to the French payroll tax (taxe sur les salaires).

The dispute concerns a French banking group that sought a partial refund of payroll tax paid between 2014 and 2019. Under French law, employers that are not fully subject to VAT are liable to payroll tax on a proportion of their remuneration expenses. For businesses carrying out both taxable and exempt activities, including financial institutions, that proportion is determined by a ratio comparing exempt turnover with total turnover. Dividends received by a parent company, including dividends covered by the French parent-subsidiary regime, are included in the calculation of that ratio and may therefore affect the proportion of remuneration subject to payroll tax.

The taxpayer argues that the inclusion of dividends received from qualifying EU subsidiaries in the payroll tax calculation infringes Article 4 of the PSD. Under Article 4(1)(a), Member States applying the exemption system must refrain from taxing profits distributed by qualifying EU subsidiaries, subject only to the exception in Article 4(3), which allows a fixed add-back of management costs not exceeding 5 percent of the distributed profits. The taxpayer argues that, by increasing the proportion of remuneration subject to payroll tax, the French rules indirectly impose an additional tax burden linked to dividends that should benefit from the PSD's exemption.

The referring court notes that recent CJEU case law has interpreted Article 4 of the PSD as prohibiting not only the direct taxation of exempt dividends but also certain mechanisms that increase the tax burden borne by parent companies receiving such dividends. However, unlike the cases previously considered by the Court, the French payroll tax is levied on remuneration expenses rather than on profits or dividend income. The referring court therefore seeks clarification as to whether Article 4 also applies where exempt dividends affect the calculation of the taxable base of another tax.

The Supreme Administrative Court asked the CJEU:

• Whether Article 4(1) of the PSD precludes national legislation under which dividends received from EU subsidiaries are taken into account in a turnover ratio used to determine the proportion of remuneration expenses subject to payroll tax, thereby increasing the payroll tax base as the amount of dividends increases.
• If Article 4(1) applies, whether Article 4(3) allows Member States to take such dividends into account when determining the payroll tax base up to the limit of the flat-rate management costs referred to in that provision, or whether those dividends must be disregarded for that purpose where the corresponding 5 percent add-back is already reflected in the corporate income tax base.

EC launches public consultation on Tax Omnibus proposal

On September 10, 2026, the EC launched a public consultation on the Tax Omnibus proposal.

As a reminder, the proposal was published on June 24, 2026 and is aimed at simplifying EU tax rules, reducing compliance burdens for businesses, and strengthening the competitiveness of the Internal Market by proposing updates to the EU legislative framework for corporate taxation (including the Parent-Subsidiary Directive, Interest and Royalties Directive, Anti-Tax Avoidance Directive, Dispute Resolution Directive and Merger Directive).

The consultation period ends on November 5, 2026.

For more information on the Tax Omnibus proposal, please refer to Euro Tax Flash Issue 582 and our dedicated KPMG webcast.

FISC Subcommittee hearing on Taxation Trends, Compliance and Simplification

On September 7, 2026, the European Parliament's Subcommittee on Tax Matters (FISC) hosted a public hearing on "Taxation trends in EU Member States: How tax policy or tax compliance can be improved?"

Discussions examined current taxation trends in EU Member States in the context of growing revenue demands, focusing on how tax systems can become fairer, more resilient and simpler while supporting competitiveness and economic activity. The following experts contributed to the discussion: Ms. Lotte Taylor (Head of Unit for Economic Aspects of Taxation, Directorate General for Taxation and Customs Union, European Commission), Mr. Michael Jäger (President, Taxpayers Association of Europe, Munich) and Mr. Pascal Saint-Amans (Bruegel Senior Fellow and Project Lead for the EU Tax Compass).

Key takeaways from the discussion include:

• Ms. Lotte Taylor presented the main findings of the European Commission’s Annual Report on Taxation 2026. She noted that labor taxation remains the backbone of public revenues across the EU, accounting for more than half of total tax revenues. Referring to the EU's competitiveness agenda, Ms. Taylor stressed that tax policy should focus on taxing better rather than taxing less, notably through reducing compliance costs and improving the effectiveness of revenue collection. She further emphasized that tax compliance is shaped not only by enforcement measures and tax rates, but also by tax system design, perceptions of fairness and taxpayer trust. In her view, simpler tax systems, broader tax bases and well-targeted taxpayer support can improve both compliance outcomes and the taxpayer experience while ensuring the effective collection of taxes due.
• Mr. Michael Jäger argued that strengthening tax compliance requires more than effective enforcement and penalties. He stressed that the waste of public funds can be just as damaging to society as tax evasion and noted that excessive tax burdens may increase incentives for avoidance. While welcoming the digitalization of tax administration, Mr. Jäger warned that new compliance obligations, including e-invoicing requirements, can create significant administrative and financial burdens, particularly for SMEs. He therefore called for thorough impact assessments of new tax measures, greater legal certainty and efforts to minimize unnecessary compliance costs for taxpayers.
• Mr. Pascal Saint-Amans noted that the global tax policy debate is increasingly shifting from combating tax avoidance towards fostering competitiveness and economic growth. He described the challenge facing policymakers as balancing tax sovereignty, revenue protection and investment neutrality. While supporting the simplification efforts under the Tax Omnibus package, he warned that easing CFC and hybrid mismatch provisions could reopen tax avoidance opportunities. Mr. Saint-Amans therefore called for deeper tax coordination within the EU and a coherent approach to protecting the EU’s external tax base.

For more information, please refer to the press release of the European Parliament. Further information on the Tax Omnibus proposal and the related FISC public hearing is available in E-News Issue 233.

New guidance on Global Minimum Tax framework

On September 11, 2026, the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting issued three documents on the Global Minimum Tax (GMT):

• Updated GloBE Information Return (GIR): The updated GIR, applicable for fiscal years commencing on or after December 31, 2025, incorporates changes to reflect the Side-by-Side (SbS) Package ageeed in January 2026. This includes simplifications in relation to the SbS Safe Harbour and UPE Safe Harbour as well as additional data points required for the application of the Simplified ETR Safe Harbour and Substance-based Tax Incentive Safe Harbour. The update also introduces new reporting requirements for “Benefits” provided by QDMTT jurisdictions. There are also several clarifications on existing data points in the current GIR template.
• New Administrative Guidance (AG7): AG7 provides that “explicitly conditional taxes”, including Domestic Minimum Top-up Taxes (DMTTs) and Top-up Tax arising from the application of the  Income Inclusion Rule (IIR) and Undertaxed Profits Rule (UTPR), will not be treated as Covered Taxes. This targets taxes that are designed to apply where tax liabilities would otherwise arise under a foreign IIR or UTPR and that would not apply where no such tax liabilities would otherwise arise. A DMTT that is an Explicitly Conditional Tax will also not be a QDMTT (except for certain DMTTs in 2024). In addition, AG7 clarifies the treatment of situations where the fiscal year used for QDMTT purposes differs from that of the MNE group. In particular, it explains when local financial accounting standards may be relied upon and how the QDMTT Safe Harbour applies where there is a misalignment of reporting periods.
• Full Legislative Review: The publication provides the terms of reference and assessment methodology for the full legislative peer review process to determine whether jurisdictions’ IIRs, UTPRs, DMTTs are “qualified” and whether  a jurisdiction’s DMTT is eligible for the QDMTT Safe Harbour for the purposes of the GMT rule order. The methodology establishes a three-phase review process under which jurisdictions must submit a detailed self-assessment and comparison of their domestic rules against the GloBE Model Rules, followed by input from peers and stakeholders, including businesses, to identify potential inconsistencies. The review concludes with a Secretariat report, containing recommendations and any items requiring ongoing monitoring, for approval on a consensus-minus-one basis by Working Party 11 (i.e., the Working Party responsible for the GMT).

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

Extension of deadlines for submitting GIR notification, QDMTT and IIR top-up tax returns

On September 28, 2026, the Belgian tax administration announced an extension of the GIR notification deadline as well as an extension of the deadline for filing the IIR and QDMTT returns.

As a reminder, the previous deadlines were set as follows:

• GIR notification: The deadline for submitting the GIR notification was previously set to September 30, 2026, for fiscal years that start on or before December 31, 2024, and end no later than February 28, 2025; or that start on or after January 1, 2025, and end no later than May 31, 2025.
• QDMTT return: Under the original rules, the QDMTT return is due 11 months after the end of the relevant fiscal year. Previously, the Belgian tax authorities had granted an extension to September 30, 2026, for fiscal years that begin on or after December 31, 2023, and end no later than September 30, 2025.
• IIR top-up tax return: Under the original rules, the IIR top-up tax return is due 15 months after the end of the relevant fiscal year (18 months for the transition year). The deadline was previously extended to September 30, 2026, for fiscal years that begin on or after December 31, 2023, and no later than December 31, 2024, and end no later than February 28, 2025; or that begin on or after January 1, 2025, and end no later than May 31, 2025.

According to the September 28, 2026, announcements, the deadlines for submitting the GIR notification, QDMTT return and IIR top-up tax return have now been further extended from September 30, 2026, to October 31, 2026, for fiscal years that:

• GIR notification: start on or after December 31, 2023, and at the latest on December 31, 2024, and end no later than March 31, 2025; or that start on or after January 1, 2025, and end no later than June 30, 2025.
• QDMTT return: begin on or after December 31, 2023, and end no earlier than January 1, 2024, and no later than October 31, 2025.
• IIR top-up tax return: start on or after December 31, 2023, and at the latest on December 31, 2024, and end no later than March 31, 2025; or that start on or after January 1, 2025, and end no later than June 30, 2025.

For more information, please refer to E-News Issue 234 and a report prepared by KPMG in Belgium.

Global minimum tax order amended to incorporate Side-by-Side Package

On July 23, 2026, the Parliament in the Isle of Man (Tynwald) passed the updated Global Minimum Tax (Pillar Two) (Amendment) Order 2026, to incorporate the OECD January 2026 Side-by-Side Package.

The amendment confirms that, under Isle of Man minimum tax 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.

In addition, the order includes a dynamic reference to the OECD central record (i.e., the outcome of the Pillar Two transitional peer review process) with a view to reduce the need for further legislative amendment each time the central record is updated.

For previous coverage on the implementation of Pillar Two in the Isle of Man, please refer to E-News Issue 214.

Mauritius obtains transitional qualified status of its Domestic Minimum Top-up Tax (QDMTT)

On September 10, 2026, the Mauritius Revenue Authority (MRA) announced that Mauritius has obtained a "transitional qualified status" for its QDMTT following the completion of the peer review process under the OECD's transitional qualification mechanism.

The transitional qualified status applies from the effective date of the Mauritian QDMTT legislation, namely for years of assessment commencing on July 1, 2025 and will remain valid until the OECD completes a full legislative review. The publication in the OECD Central Record for purposes of the Global Minimum Tax is currently pending.

For more information on the OECD Central Record, see E-News Issue 230. 

Extension of Pillar Two registration deadline

On September 1, 2026, the Portuguese tax administration announced an extension of the registration deadline for Pillar Two purposes.

As a reminder, every constituent entity located in Portugal and included in the scope of the GloBE rules must submit a notification to the Portuguese tax authorities within nine months after the end of the fiscal year in which the group falls within the scope of the GloBE rules or when there are any changes in the elements contained in the notification.

According to the September 1, 2026, release, the registration deadline was extended from nine to twelve months after the end of the fiscal year for in scope entities with a fiscal year-end between December 31, 2025, and March 31, 2026. This means that for calendar taxpayers, the annual registration should be completed by December 31, 2026. 

For more information, please refer to E-News Issue 234. 

Serbia adopts corporate tax reform aligned with EU directives

On September 8, 2026, Serbia enacted amendments to its corporate income tax law to align its tax framework with key EU directives and anti-avoidance standards. Most of the measures will take effect upon Serbia's accession to the EU.²

Key measures include:

• Tax-neutral cross-border reorganizations: Serbia will introduce tax-neutral treatment for qualifying mergers, demergers, asset transfers, share-for-share exchanges and certain seat transfers, in line with the EU Merger Directive.
• Parent-Subsidiary and Interest & Royalties Directive alignment: qualifying dividends, interest and royalty payments between associated entities in Serbia and EU Member States may benefit from withholding tax relief and participation exemption treatment, subject to prescribed ownership and holding period requirements.
• Introduction of anti-avoidance measures in line with ATAD: The law introduces a package of anti-avoidance rules broadly aligned with ATAD, including an interest limitation rule replacing the current thin capitalization regime and limiting net borrowing cost deductions to the higher of 30 percent of EBITDA or EUR 3 million, as well as CFC rules, exit taxation, anti-hybrid mismatch provisions and a GAAR.

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

Belgian Constitutional Court confirms that OECD Side-by-Side Safe Harbour developments do not affect pending UTPR challenge

On September 24, 2026, the Belgian Constitutional Court (Case No. 8267, Judgment No. 107/2026) confirmed that the ongoing challenge to Belgium's Undertaxed Profits Rule (UTPR) provisions remains pending notwithstanding the OECD's January 2026 agreement on the Side-by-Side Safe Harbour and the UPE Safe Harbour.

In July 2025, the Constitutional Court referred questions to the Court of Justice of the European Union (CJEU) concerning the validity of the UTPR provisions contained in the EU Minimum Tax Directive. The referral follows an appeal seeking the annulment of the Belgian UTPR rules. The appeal challenges the requirement for a Belgian constituent entity within an MNE group to be liable for UTPR top-up tax in respect of low-taxed profits earned by other group entities located outside Belgium, without regard to the financial position of the Belgian entity. More broadly, the referral concerns whether the UTPR mechanism is compatible with various provisions of EU law, including the fundamental freedoms, the principle of legal certainty and the principle of fiscal territoriality.

Following the OECD Inclusive Framework agreement of January 5, 2026 on several Pillar Two Safe Harbour measures, including the Side-by-Side Safe Harbour, and the European Commission's subsequent confirmation that those measures apply within the framework of the EU Minimum Tax Directive, the CJEU requested clarification as to whether those developments affected the relevance of the questions referred to the CJEU.

The Belgian Constitutional Court concluded that they do not. The Court noted that the Side-by-Side Safe Harbour has not yet been implemented in Belgian law and that the mere fact that legislation may be under preparation is insufficient to affect the continuation of the proceedings.

The Court further observed that, even if implemented, the Side-by-Side Safe Harbour would only apply where the ultimate parent entity (UPE) is established in a qualifying jurisdiction and would therefore not necessarily eliminate all potential UTPR exposure. The Court also noted that the Transitional UTPR Safe Harbour does not apply in all circumstances, with the result that Belgian entities could still be subject to UTPR liabilities in respect of fiscal year 2025. The Constitutional Court therefore confirmed that the challenge remains relevant and that the preliminary reference remains pending before the CJEU.

For additional background on the referral to the CJEU and the underlying challenge, see E-News Issue 215 as well as the report prepared by KPMG in Belgium.

Local fiscal court dismisses challenge of the legality of the German Minimum Tax Act

On June 24, 2026, the local fiscal Court in Cologne issued a decision concerning the legality of the German Minimum Tax Act and the requirement to file GIR and local minimum top-up tax returns.

The case concerns a taxpayer that is in scope of the German Minimum Tax Act and would be required, from 2026 onwards, to file the GIR as well as annual local minimum tax returns in respect of fiscal year 2024 and subsequent years. The taxpayer argued that these obligations should not apply because the underlying EU Minimum Tax Directive (Council Directive (EU) 2022/2523) is invalid. 

 According to the plaintiff, the EU lacked legislative competence to adopt the EU Minimum Tax Directive. The taxpayer also argued that the Directive violates several principles of EU law, with reference made to arguments raised in the CJEU referral from the Belgian Constitutional Court on the compatibility of the UTPR with EU Law (see above). Where the Directive would be found to be invalid, the German Minimum Tax Act would lose its legal basis because the German legislature adopted the law on the assumption that the Directive was valid. As a result, the taxpayer argued that the invalidity of the Directive would render the German Minimum Tax Act unlawful and inapplicable. 

In dismissing the claim, the local fiscal court in Cologne held that challenging the legality of the Minimum Tax Act in advance (by way of a preventive declaratory action) was inadmissible because it violated the subsidiarity principle under the German General Fiscal Code. The fiscal court notes that the taxpayer could instead challenge the validity of the Minimum Tax Act through an appeal against a future local minimum (self-assessment) return treated as a tax assessment (even in case of a "nil return").

With respect to the validity of the EU Minimum Tax Directive, the Court held that the Directive was validly adopted on the basis of Article 115 of the Treaty on the Functioning of the EU (TFEU) because the harmonization of a minimum level of taxation is directly relevant to the functioning of the internal market. The authorities further noted that the Directive is binding on Member States until declared invalid by the CJEU and that national courts are not entitled to disregard the validity of EU legislation themselves under the CJEU's Foto-Frost doctrine. According to that position, doubts as to the validity of the Directive could only justify a referral to the CJEU and not the disapplication of the German implementation legislation. 

 The taxpayer has appealed the decision to the Federal Fiscal Court (BFH case I R 12/26).

No abuse found where EU holding company demonstrates genuine economic activity despite limited substance indicators

On September 14, 2026, the Dutch Tax Authorities' Knowledge Group (the Knowledge Group) for Dividend Withholding Tax and Withholding Taxes issued guidance on the level of substance required for a personal holding company to qualify for the Dutch dividend withholding tax exemption.

The case concerned an EU-resident individual who owned an EU holding company that, in turn, held a Dutch operating subsidiary. The holding company employed the individual as a director, paid an arm's-length annual salary of EUR 75,000, maintained office space in the individual's home country, and provided strategic oversight and management services to the Dutch subsidiary under a management agreement.

Under Dutch tax law, the dividend withholding exemption available for intra-group payments does not apply when the following two conditions are met:

• Subjective test: the interest is held with the principal purpose, or one of the principal purposes, of avoiding Dutch dividend withholding tax for another person.
• Objective test: the structure, transaction, or series of transactions is artificial insofar as it had not been set up on the basis of business reasons reflecting economic reality

Based on settled case-law of the Dutch Supreme Court, the subjective condition is in principle met if the underlying shareholder of the interposed foreign company, who directly holds the interest in the company established in the Netherlands, would owe more Dutch dividend tax without the intervention of the interposed foreign company. 

Furthermore, substance conditions are included in the Dutch Implementing Decree on Dividend Tax. The Knowledge Group noted that these substance conditions play a role in the distribution of the burden of proof for determining whether the anti-abuse provision above applies. If the substance conditions are met, the beneficial owner is deemed not to hold the interest with the primary purpose, or one of the primary purposes, of avoiding the levy of tax on another party, and valid business reasons reflecting economic reality are deemed to exist. If not all substance conditions are met, the beneficial owner or withholding agent may provide counter-evidence on other grounds that the anti-abuse provision does not apply.

The Knowledge Group recalled that, according to both CJEU and Dutch case law, the existence of the elements of abuse of EU law, including the subjective element and the purpose test, must be determined on the basis of a comprehensive assessment of all relevant facts and circumstances. Such an assessment must reveal a series of objective and consistent indicators of abuse and requires the structure to be examined as a whole.

Considering the above, the Knowledge Group concluded that, although the subjective anti-abuse condition was, in principle, met because a direct distribution to the individual would have been subject to Dutch dividend withholding tax, the overall facts and circumstances demonstrated valid business reasons that reflected economic reality. As a result, the structure was not considered artificial, and the dividend withholding tax exemption remained available. Notably, the Knowledge Group confirmed that the holding company’s failure to meet all formal substance requirements, including the EUR 100,000 payroll threshold, was not, in itself, sufficient grounds to deny the exemption where the arrangement reflected genuine economic activity.

Polish Supreme Administrative Court clarifies beneficial ownership and anti-abuse tests for PSD dividend exemption

On February 6, 2026, the Polish Supreme Administrative Court (SAC or the Court) issued a decision (case no. II FSK 1150/25) concerning the refund of withholding tax (WHT) on dividends paid by a Polish company to a Luxembourg Reserved Alternative Investment Fund (RAIF).

The case concerned dividends paid by a Polish listed company, through a brokerage house, to a Luxembourg RAIF. The Polish tax authorities denied the WHT refund, arguing that the RAIF did not qualify for the domestic dividend exemption because it benefited from a full tax exemption, was not the beneficial owner of the dividends, and formed part of an artificial arrangement established primarily to obtain treaty or domestic WHT relief. The authorities further challenged the existence of genuine economic activity and applied Poland's anti-abuse provision under Article 22c of the Corporate Income Tax Act. The denial was upheld by both the appellate tax authorities and the Regional Administrative Court.

The Court overturned the lower court judgment and the tax authorities' decisions. It held that beneficial ownership is not one of the conditions for the dividend exemption under Article 22(4) of the Polish Corporate Income Tax Act. The Court further found that Article 22(4)(4) refers to an exemption from taxation of all income and does not require effective taxation of dividends. Accordingly, the fact that the Luxembourg RAIF benefited from a dividend exemption did not prevent it from satisfying the condition, particularly as it remained subject to Luxembourg taxation, including the minimum net wealth tax.

The Court also rejected the application of the domestic anti-abuse provision under Article 22c of the Corporate Income Tax Act. According to the SAC, the tax authorities failed to demonstrate that the arrangement resulted in a tax advantage contrary to the objectives of the Parent-Subsidiary Directive. The Court emphasized that links between the entities involved, allegations of artificiality, or an alleged lack of genuine economic activity cannot, on their own, justify denying the exemption. The authorities must demonstrate that the arrangement is inconsistent with the purpose of the Directive. The Court also noted that the taxpayer had demonstrated that a comparable Polish structure could have achieved a similar tax result, including the availability of a dividend exemption.

Swiss Federal Court upholds claw-back of Geneva tax incentive following cross-border restructuring

On July 8, 2026, the Swiss Federal Court (joined cases 9C_725/2024 and 9C_418/2025) confirmed that the Geneva authorities could reclaim the full amount of a cantonal and communal tax exemption previously granted to a multinational group following a cross-border business restructuring.

The taxpayer had benefited from a partial tax exemption for the 2011 to 2020 fiscal years in connection with the consolidation of its Swiss operations in Geneva. The incentive was subject to a claw-back clause providing that the tax savings would become fully repayable if, during the exemption period or within five years thereafter, the company ceased its activities, transferred its seat, or moved a predominant part of its activities outside the canton.

As part of a 2023 reorganization, the company transferred significant headquarters, management and strategic functions to a German group entity and adopted a limited-risk distributor profile in Switzerland. The Geneva authorities considered that the restructuring resulted in the transfer of a predominant part of the activities benefiting from the incentive and sought recovery of the full tax relief.

The Federal Court upheld that position and confirmed that the claw-back clause applied, allowing the Geneva authorities to recover the tax benefit granted for the 2011 to 2020 fiscal years. The Court considered that the restructuring went beyond a mere change in operating model and resulted in the transfer of a predominant part of the activities for which the incentive had originally been granted.

The Court further confirmed that Swiss cantons have broad discretion to grant tax incentives subject to conditions designed to ensure that the anticipated economic benefits remain in the canton over time. It also rejected the taxpayer's arguments based on legitimate expectations and property rights.

EU financial services tax perspectives – October 7, 2026

Against a backdrop of ongoing regulatory change and increasing tax transparency, Financial Services institutions across Europe are navigating a growing range of tax developments that are reshaping compliance, reporting and operating models.

Designed for Heads of Tax, Tax Directors, senior Finance leaders and other FS decision makers, join our KPMG specialists as they share fresh insights on the tax initiatives poised to have the greatest impact for financial services.

The next instalment of this series is scheduled for October 7, 2026, and will cover:

• Omnibus and DAC simplification proposals – what they mean for simplification, compliance and future tax administration across Europe.
• FASTER directive– practical implications, implementation timelines, and what financial institutions need to do now to prepare for these changes
• Pillar Two– lessons learned from the 2024 returns, what to expect for 2025 compliance and predicting future compliance as it relates to the region.

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.

Please visit the event page to register. 

Key links

• Visit our website for earlier editions.