Euro Tax Flash from KPMG's EU Tax Centre

On October 10, 2025, the Economic and Financial Affairs Council of the EU (ECOFIN Council) approved its conclusions on the recommendations issued by the European Commission on July 2, 2025, regarding tax incentives to support the Clean Industrial Deal (the Conclusions).

In addition, the European Commission delivered a presentation on its proposal for a system of EU own resources, followed by a public exchange of views among the Member States’ representatives.

On July 2, 2025, the European Commission issued recommendations  on tax incentives to support the Clean Industrial Deal (CID) in alignment with the Clean Industrial Deal State Aid Framework (CISAF). The CISAF, which was adopted by the European Commission on June 25, 2025, provides conditions for certain types of aid measures to be considered compatible with EU State aid rules with the aim of promoting investments in renewable energy, industrial decarbonization, and clean technology manufacturing.

The recommendations set out common guiding principles for Member States to design cost-effective tax measures that stimulate investment in clean technologies and industrial decarbonization. As a first step, Member States were invited to inform the European Commission by 31 December 2025 of the measures introduced or announced to implement this Recommendation, as well as of any similar measures already in place and changes to them. The recommendations are not binding on Member States but serve as a basis for Member States wishing to design such measures, where feasible, in the context of their national tax systems and fiscal policies.

For more information, please refer to Euro Tax Flash Issue 565.

The ECOFIN Council stresses the need to reignite economic dynamism in Europe and to strengthen competitiveness and resilience. The Conclusions also underline the importance of creating a strong, investable clean technology ecosystem in Europe, safeguarding Europe’s role in crucial global supply chains and minimizing overreliance on a small number of third-country suppliers.

The ECOFIN Council also recalls the Commission’s Competitiveness Compass communication, and notes the Commission’s Clean Industrial Deal communication, which made a strong case for decarbonization as a driver for growth and prosperity within Europe.

In this context, the Council welcomes the EC’s recommendation on tax incentives to support the Clean Industrial Deal. The Conclusions note that tax incentives should be seen as one possible element to be considered by each Member State as part of the evolving policy mix to support clean energy development, industrial decarbonization, and the advancement of clean technologies.

In its Conclusions, the Council also recognizes that Member States have different corporate tax regimes that need to be considered when determining the policy on tax incentives such as those set out in the Commission's recommendations. The Conclusions stress that, in the absence of binding rules at EU level, competence in the field of taxation lies solely with the Member States and underline the importance of flexibility in their application. Whilst noting that some Member States may choose to consider the principles and tax incentives proposed in the Commission’s recommendation, the Council emphasizes that each Member State remains free to design, implement, and apply such incentives in line with its own national circumstances, while also taking into account possible budgetary impacts.

The Council Conclusions also recall that expenditure-based tax incentives may, in some cases, be a more cost-effective way to stimulate additional investment than income-based incentives. The Conclusions note that not all companies may be able to benefit from expenditure-based tax incentives, and therefore encourage Member States to take this into account when designing and implementing such measures.

Finally, the Council Conclusions highlight the need to keep tax incentives simple for companies and tax authorities. The Commission is invited to inform Member States of international developments in the area of tax incentives to support the Clean Industrial Deal.

Member States are encouraged, with the support of the Commission, to evaluate, if appropriate, the effectiveness of any tax incentives they have implemented and to exchange good practices with other Member States. The Commission is invited to consider further steps to support Member States in the implementation and application of tax incentives.  

During the public session of the October 10, 2025 ECOFIN Council meeting, the European Commission held a presentation on its proposal for a system of EU own resources, which was followed by an exchange of views between the Member States. 

On July 16, 2025, the European Commission published a proposal for a Council Decision on the system of own resources of the European Union (Own Resources Proposal). In line with the 2021 and 2023 proposal for a first and second basket of EU own resources, the Commission suggested that national contributions to the EU budget should be based on the Carbon Border Adjustment Mechanism (CBAM) and the Emissions Trading System (ETS). In addition, the EC proposed three additional new own resources in form of a Corporate Resource for Europe (CORE), an e-waste own resource and a tobacco excise duty own resource.

The CORE proposal consists of an annual lump-sum contribution to the EU budget with reference to corporate turnover. The contribution would be levied at the level of EU companies and EU-based permanent establishment of non-EU companies with an annual turnover of at least EUR 100 million (subject to certain exemptions). The contribution amount would be determined as per a ‘bracket system‘, with higher net turnovers resulting in larger contributions. For more details, please refer to EuroTaxFlash Issue 566. 

The Danish Presidency of the Council (July – December 2025) noted that there are no plans to adopt the Own Resources Proposal during its term. However, it stated that it will lay the groundwork for future discussions by preparing a first draft of a negotiation box by the end of the year. This draft will aim to identify sensitive issues and help balance them with the Multiannual Financial Framework.

During its presentation, the Commission emphasized the importance of channeling investments either through national budgets or the EU budget to strengthen competitiveness and defense. The EC favors the latter approach, arguing however that it could not deliver stronger outcomes in innovation and security with the same level of funding. Since Member States are unlikely to support higher national contributions, the Commission believes that progress depends on introducing new own resources.

The EC also acknowledged the fact that additional technical work remains necessary. The Commission highlighted that the proposal should be assessed in its entirety, rather than through separate calculations for individual Member States or specific components. The EC also took the view that the CORE proposal would not apply to approximately 99 percent of companies, as small and medium-sized enterprises would remain unaffected. Instead, the proposal is intended to apply only to large entities, including major technology firms and financial institutions that generate income within the internal market.

During the public exchange of views, several Member States expressed strong criticism of the CORE proposal, mainly over its potential negative effects on EU competitiveness and the administrative or financial burdens it could create. Member States, including Germany, the Netherlands, Luxembourg, Portugal, France, Lithuania, Czechia, Romania, and Slovakia, expressed concerns that CORE could undermine the competitiveness of EU companies, whilst Poland called for a more detailed analysis of its impact.

Adoption of the Own Resources Proposal is subject to unanimous agreement in the Council.

The replay of the public debate is available on the Council’s webpage.

The ECOFIN Council also adopted its Conclusions on the EU list of non-cooperative jurisdictions. No changes were made to Annex I of the EU list of non-cooperative jurisdictions, and the Council agreed to remove Vietnam from Annex II (the grey list), as it had fulfilled its previous commitments, and to add four other jurisdictions – Greenland, Jordan, Montenegro, Morocco. For more details, please refer to EuroTaxFlash Issue 569.

The ECOFIN Council meeting also included a non-public discussion on the European Commission’s Recommendation on Savings and Investment Accounts. According to the Council’s press release, during that part of the meeting the Commission presented its recommendation, and finance ministers exchanged views on the topic. The press release further notes that Member State representatives generally welcomed the initiatives presented by the EC and reiterated their commitment to the Savings and Investment Union. For mor details on the Savings and Investment Accounts Recommendation, please refer to EuroTaxFlash Issue 568. 

Should you have any queries, please do not hesitate to contact KPMG’s EU Tax Centre or, as appropriate, your local KPMG tax advisor.