15 September 2025 Global Tax Policy and Controversy Watch | September 2025 edition On 13 August 2025, the High Court of Australia dismissed the Commissioner of Taxation's appeal in the PepsiCo case regarding royalty withholding tax and diverted profits tax (DPT). The Court determined that payments were solely for beverage concentrate and did not include royalties for intellectual property. Consequently, the DPT was deemed inapplicable, and royalty withholding tax was not owed. In today's evolving tax landscape, transparency is reshaping expectations for taxpayers and tax authorities. On the Tax and Law in Focus podcast, Manal Corwin from the Organisation for Economic Co-operation and Development (OECD) joined EY leaders to discuss the implications of recent transparency initiatives. They explored how tax leaders are leveraging transparency as a strategic asset to build trust and align with corporate ESG goals, while technologies like generative AI enhance data governance and predictive insights. In the evolving landscape of tax compliance, businesses face increasing pressures to balance regulatory obligations with cost management. As tax authorities become more sophisticated in their use of AI and data analytics, the risks associated with noncompliance are heightened. On 18 August 2025, the OECD released an update to the Administrative Guidance on the Central Record of Legislation with Transitional Qualified Status. The document provides key information on the qualified status of jurisdictions' Income Inclusion Rule (IIR) legislation and jurisdictions' Domestic Minimum Top-up Tax (DMTT) legislation. The draft Value-Added Tax (VAT) Law Implementation Regulations, released for public comment on 11 August 2025, propose operational details for the China VAT Law taking effect on 1 January 2026. Significant proposed changes include restrictions on input VAT credits for long-term assets and mandatory annual reconciliation requirements. The draft regulations propose new rules for cross-border transactions, clarifying when services are considered consumed in China and introduce general anti-avoidance provisions to target arrangements lacking a reasonable commercial purpose. On 15 August 2025, the Colombian government submitted a tax reform bill aimed at addressing a budget gap of COP26.3t (approximately US$6.5b), with various measures set to take effect from 1 January 2026. The bill proposes a permanent 15% surtax on corporate income tax for financial institutions, increases from 3% to 5% the tax on nonresident tax filers with significant economic presence and increases from 20% to 30% the withholding tax on dividends paid to nonresidents. Kenya has introduced a formal Advance Pricing Agreement (APA) framework to align with the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) Pillar Two, effective from 1 January 2026. APAs will be valid for a maximum of five consecutive years, and the tax authority can invalidate an agreement if there is a misrepresentation of facts, emphasizing the importance of accurate and transparent disclosures. Detailed regulations are expected to be issued within six months from the effective date. Key changes include the introduction of a Qualified DMTT (QDMTT) and an increase in corporate income tax rates across all brackets. The proposals are expected to be deliberated on and passed by the National Assembly within the year. Once approved, the proposals will generally become effective for fiscal years beginning on or after 1 January 2026. Luxembourg plans to implement the EU Directive 2023/2226 (DAC8) by the end of 2025, enhancing tax transparency and automatic information exchange. Mandatory reporting on crypto assets, life insurance income, and certain cross-border rulings will begin on 1 January 2026. The IRS's Large Business and International division has announced that the application period for the Compliance Assurance Process program for tax year 2026 will be open from 3 September 2025 to 31 October 2025. Continuing changes from the 2025 cycle, eligibility now includes privately held corporations with audited financial statements, and exceptions have been added for certain tax issues. On 4 September 2025, the Trump administration released its spring 2025 regulatory agenda, including for the Treasury Department and IRS. On 31 August 2025, the Uruguayan Executive Branch submitted to Parliament the National Budget Bill for 2025—2029, proposing significant tax changes effective from 1 January 2026, including the introduction of a DMTT. Uruguayan tax residents will be taxed on capital gains from foreign assets, with restrictions on using intermediary entities to defer taxation. A revised in-patriate regime will offer new tax residents a full exemption on foreign capital gains for 10 years, followed by a preferential 50% tax rate for five years, creating incentives for foreign investment in Uruguay.
Document ID: 2025-1862 | ||||
