11 February 2025 Global Tax Policy and Controversy Watch | February 2025 edition On 20 January 2025, Donald Trump was inaugurated as United States (US) President. Following the inauguration, President Trump signed dozens of Executive Orders (EOs) covering a range of policy issues. One EO states that the Economic Co-operation and Development (OECD) Global Tax Deal has no force and effect in the US and directs the US Treasury Secretary to develop options for response, with a report to be delivered to the President in 60 days. Another EO establishes an "America First Trade Policy" directing US economic agencies to undertake reviews and propose recommendations across a range of trade issues. On 1 February 2025, another EO was issued imposing additional tariffs on Canada, Mexico and China, with a one-month delay on the Mexico and Canada tariffs following on 3 February 2025. US economic and tax policy in President Trump's second term is highly fluid and will likely remain so for the foreseeable future. As the number of large, complex cross-border tax disputes continues to increase, joint and simultaneous tax audits, while not a complete solution, may offer certain taxpayers a new avenue relief. The OECD on 13 January 2024, released a statement describing the current status and remaining open issues with respect to the text of the Multilateral Convention on Amount A and the ongoing negotiations regarding Amount B. In December 2024, the OECD released a "fact sheet" that explains, step-by-step, the application of Amount B and an "automated tool" for pricing the return on sales for baseline distribution activities under Amount B. On 15 January 2025, the OECD released Administrative Guidance on the application of Article 9.1 of the Global Anti-Base Erosion (GloBE) Model Rules, Administrative Guidance on a Central Record of Legislation with Transitional Qualified Status and an updated question-and-answer (Q&A) document on Qualified Status of jurisdictions' global minimum tax legislation. On the same date, the OECD also released technical documents on the operation of the GloBE Model Rules. These documents include an updated GloBE Information Return (GIR) and related Administrative Guidance, together with documents regarding the exchange of data from the GIR between tax administrations. The new law marks a significant step toward the implementation of tax reform in Brazil, with the transition starting on 1 January 2026. The final text of the law was not greatly changed from the text of underlying Bill No. 68/24, although some provisions were vetoed. China's Value-Added Tax (VAT) Law was passed on 25 December 2024 and will take effect on 1 January 2026. The law maintains the current three-tier tax rate system (13%, 9% and 6%) while introducing significant policy changes and improvements in international alignment. Changes were made to almost all Estonian tax laws in 2024. Several tax rates have been slightly increased in Estonia from 2025, and some new taxes were introduced: a new motor vehicle tax from 2025 and a new defense tax from 2026. German tax authorities have issued updated administrative principles on transfer pricing, including final guidance on new rules addressing intercompany financing introduced with the Growth Opportunities Act. The guidance provides several clarifications concerning the practical application of the newly introduced rules regarding intercompany financing. On 1 February 2025, the Finance Minister of India presented the Union Budget for 2025. Proposed changes to tax law aim to promote ease of doing business in India, provide certainty and reduce litigation and continue to encourage corporations and individual to utilize the International Financial Service Center. Italy issued final legislation for corporate income tax reform, effective as of 31 December 2024. Part of an ongoing broader tax reform, the decree is aimed at amending some aspects of the Italian corporate income tax framework by specifically focusing on the elimination of mismatches between accounting and tax values as well as mitigating cases of tax arbitrage. The 2025 Budget Law also introduced several tax measures concerning corporate income tax, banking and insurance, VAT and individual income tax. Further, Italy approved significant changes to the Digital Services Tax. A penalty protection regime for tax-hybrid mismatches is now available. The regime requires taxpayers to prepare qualifying documentation disclosing each covered transaction for each fiscal year. Alternatively, for imported hybrid mismatches, the penalty protection may be achieved by adopting a single internal control framework. The regime is also available for past fiscal years, provided that certain deadlines are respected. Limitations may apply with reference to transactions for which the Italian tax authorities have already started audit activities. The tax amnesty program was initially offered up to 30 June 2024 and covered historical tax periods up to 31 December 2022. The law has increased the covered tax period up to 31 December 2023. The tax amnesty provides for waiver of penalties and interest for taxpayers who have already paid the principal tax and those who will have settled the principal tax by 30 June 2025. A Presidential Decree, published in Mexico's Federal Official Gazette on 21 January 2025, grants tax incentives to taxpayers without regard to size, industry or location, consisting of an accelerated depreciation for investment in new fixed assets and an additional deduction for training and innovation expenses. Saudi Arabia has extended its tax amnesty initiative for an additional six months, starting from 1 January 2025. The tax amnesty initiative had previously been extended until 31 December 2024 and the further extension until 30 June 2025 is expected to provide relief to taxpayers who meet the requirements. South Korea's 2025 tax reform, enacted on 31 December 2024, includes additional clarifications on the global minimum tax rules to reflect the OECD BEPS 2.0 Pillar Two, defers taxation on virtual assets and extends the application period for research-and-development tax credits, among other measures.
Document ID: 2025-0451 | ||||
