Background

The Authorized OECD Approach (AOA) represents a significant evolution in the attribution of profits to Permanent Establishments (PEs) by treating a PE as a functionally separate entity and applying a two-step attribution method.[1] Developed to bring consistency and coherence to international tax rules, the AOA treats a PE as a functionally separate entity, even though it is not legally distinct from its head office. This conceptual framework enables the application of transfer pricing principles to intra-entity dealings. The AOA’s two-step process begins with a functional and factual analysis to delineate the functions performed, assets used, and risks assumed by the PE. The second step involves pricing these internal dealings using the OECD Transfer Pricing Guidelines as if the PE were transacting with an independent enterprise. Despite its theoretical robustness and conceptual appeal, the AOA has faced limited adoption globally, which undermines its goal of harmonizing profit attribution.[2] Fundamentally, member countries have diverged significantly in their treatment of: (a) risk and asset attribution, (b) capital endowment and free capital allocation, and (c) documentation and compliance standards.

Therefore, it is not surprising that many jurisdictions continue to rely on older methods, such as the relevant business activity approach, leading to inconsistent outcomes and potential double taxation. This patchwork of practices complicates cross-border compliance for multinational enterprises and weakens the OECD’s efforts to establish a unified standard. Such fragmentation inevitably fuels controversy, exposing multinationals to double taxation when jurisdictions apply different attribution approaches. Achieving a common standard for PE profit allocation is therefore as much a dispute prevention priority as it is a technical necessity. The lack of widespread implementation also reflects concerns about the administrative burden and interpretative challenges posed by the AOA’s detailed methodology.

One of the most persistent criticisms of the AOA is its complexity, particularly in attributing free capital, risk, and intangibles. The approach requires nuanced judgments about economic ownership and risk control, often without clear benchmarks or comparables. For example, determining the appropriate level of capital to allocate to a PE involves assessing its functions and risks relative to the enterprise as a whole, which can be highly subjective. Similarly, attributing intangibles, especially those developed collaboratively across jurisdictions raise thorny questions about ownership and value creation. These challenges can result in disputes with tax authorities and inconsistent documentation across entities.

The post-BEPS landscape has further complicated the AOA’s application by emphasizing substance over form. BEPS Actions 8–10 and 13 have shifted the focus toward actual decision-making and control over risks, rather than relying solely on contractual arrangements. This shift demands a more granular understanding of where significant people functions (SPFs) are performed and by whom. The question of whether to start over or build on the AOA is likely to be central to the reform debate. One view is that the AOA’s reliance on hypothetical constructs makes it too detached from business realities. Another view considers that with targeted improvements, such as simplified models or safe harbours, the AOA could still serve as a viable foundation. Either path will require careful balancing of technical integrity and administrative feasibility, especially given the diversity of domestic tax systems and treaty interpretations.

Recent Case Law

The recent case-law demonstrates the challenges surrounding attribution of profits to PEs and the interpretation and application of the AOA. The amount of case-law up to the introduction of the OECD AOA was relatively scarce while in the past years there appears to be a proliferation of cases dealing with the attribution of profits to PEs.[3]

The latest 2025 decision by the Swedish Supreme Court in the Essity Treasury B.V. Holland (Essity Treasury) and its Stockholm branch is the outcome of a line of Swedish decisions representing one of the most significant judicial scrutiny in any jurisdiction of how the AOA interacts with domestic legislation.[4] The Essity Treasury saga addressed fundamental questions about the allocation of subsidiary shares and associated intra-group financing costs to PEs, the role of SPFs in the AOA framework, and the extent to which OECD guidance can reshape the interpretation of domestic legislation and pre-existing tax treaties. The case dealt with a MNE group which operated in Sweden through a subsidiary and a branch of its Dutch treasury entity. The acquisition of the Swedish subsidiary was financed via an intra-group loan to the Dutch company. The loan and related interest expenses were attributed to the Swedish branch of the Dutch company with the justification that, since the operations of both the branch and the local subsidiary were integrated, the shares should be held through the branch.

In its decision, the Supreme Court held that Swedish domestic rules on PE profit allocation should be interpreted dynamically, with reference to the OECD Model Tax Convention, its Commentary, and the OECD’s reports on attribution of profits, including the AOA methodology. It therefore concluded that the allocation of subsidiary shares and associated financing to a Swedish PE must be determined through a proper functional analysis, with particular focus on the location of personnel with the mandate for risk management and decision-making authority.[5] This represents a landmark development with the Court endorsement of the AOA approach for Swedish PE allocation rules and function-based approach that gives primacy to the location of key decision-making and risk management functions, moving Swedish law closer to a full adoption of the AOA. The ruling clarifies that the mere existence of business integration between a PE and a subsidiary is necessary but may not be sufficient; the functional analysis must examine where the personnel with authority over relevant assets and risks are located.

Also in India, the Hyatt case endorsed the fundamental AOA principle when dealing with the broader question of whether a PE can be profitable when the enterprise as a whole is not.[6] The court confirmed that a PE should be treated as a functionally separate entity for tax purposes, with its profitability assessed independently from the rest of the enterprise. This was supported by extensive reference to the OECD Commentary and to the 2010 final report on Attribution of Profits to PEs.

However, earlier Indian jurisprudence had taken a more restrictive view on PE profit attribution in loss‑making scenarios. In particular, the Delhi High Court in CIT (International Taxation) v. Nokia Solutions and Networks OY and the Special Bench of the Income Tax Appellate Tribunal in Motorola Inc. v. DCIT[7] had accepted the position that where the enterprise as a whole was incurring global losses, no independent profits could be attributed to the Indian PE. These decisions effectively linked PE profitability to the overall results of the enterprise, reflecting a more formulary and outcome‑based methodology rather than a functional analysis grounded in separate‑entity principles.

Also a more conversative approach has been followed by the German Bundesfinanzhof (BFH).[8] In two decisions published in 2025, the German BFH considered that the German law implementing the AOA is merely an income adjustment provision and not an independent rule for determining PE profits. In other words, it is considered that the AOA is not a primary profit attribution methodology. As a consequence, adjustments to the profits of a PE may only occur if it is first demonstrated in law that there is a non-ALP outcome.

On a regulatory level, the UK recently introduced reforms aiming to align its domestic legislation with the AOA, the latest OECD Model Tax Convention on Article 7 and related Commentary effective from January 1, 2026.[9] The revised legislation includes specific references to OECD documents for determining an appropriate attribution of profits including in particular the 2010 OECD Report on the Attribution of Profits to PEs.

Meanwhile, the next phase of the OECD work on global mobility to continue during 2026, may address some of the problems surrounding the attribution of profits to PEs and the application of the AOA. Issues requiring attention involve the need for clarity on identifying significant people functions in teleworking or remote management functions, as well as how to deal with the interaction between home-office PE and profit attribution rules under the AOA. As mentioned, SPF under the AOA is the reference for the attribution of economic ownership of assets and/or the assumption of risks. Therefore, the appropriate allocation of functions is critical for the overall profit attribution. And this requires determining the location of the important decision-making in the context of the relevant business for every case. However, there is very limited guidance on what constitutes SPF and is almost nonexistent in the global mobility context. The 2010 Report on the Attribution of Profits to PEs refers, in relation to risks, that SPF are those which involve active decision making. Being at the core of what constitutes Significant People Functions, more guidance is required on what constitutes active decision making[10].

Conclusions and Practical Considerations

Overall, the AOA’s complexity and reliance on hypothetical dealings have hindered its practical application. The global mobility challenge presents a unique opportunity to pilot simplified income attribution models. This could be strengthened by the growing view that there is indeed the need to revise the attribution of profits to PEs. However, achieving consensus among jurisdictions will be no small feat. Countries differ not only in their legal frameworks but also in their policy priorities and risk appetites, which complicates the alignment of attribution principles. Nonetheless, reform is essential. Greater integration with transfer pricing documentation standards, clearer guidance on capital and risk allocation, and more robust examples tailored to real-world scenarios could help bridge the gap. These could serve as a precursor to broader reform in PE profit allocation and help resolve long-standing disputes over branch income. Some of the key benefits include: (a) administrative simplicity; (b) reduced compliance costs, and (c) greater harmonization across jurisdictions.

The OECD’s 2018 guidance on PE profit attribution acknowledges the need for such simplification, especially in non-financial sectors.[11] In the meantime, the divergent approaches on attribution of profits to PEs create significant compliance challenges and double taxation risks. The recent case-law illustrates these differences. The functional analysis and profit allocation need to be undertaken taking into account the different methodologies adopted by jurisdictions. Groups should maintain jurisdiction-specific documentation and adopt proactive controversy readiness to prepare to defend different characterizations of the same underlying economic activities before different courts.

USA

January 9, 2026: Proposed IRS Rules Aim to Align Backup Withholding with OBBBA Thresholds[12]

The IRS and the US Department of the Treasury have issued proposed regulations (REG-112829-25) introducing amendments to the regulation governing backup withholding. The proposal aims to align backup withholding requirements for third-party network payments with the thresholds reinstated by the One Big, Beautiful Bill Act (OBBBA). Under the proposed framework, backup withholding would apply only when a payee exceeds both more than 200 transactions and total payments of over USD 20,000 within a calendar year. Once these thresholds are crossed, the full amount of the transaction that triggers the breach would be subject to withholding. Although third-party settlement organizations already follow reporting thresholds consistent with OBBBA, the new proposal seeks to ensure that reporting and withholding obligations operate in harmony. If finalized, the rules would take effect for payments made in calendar years beginning on or after December 31, 2024, and the IRS is accepting public comments until March 10, 2026.

Belgium

January 1, 2026: Belgium Moves to Implement DAC8 law[13]

The Belgian Government has lodged a bill to transpose the Amending Directive on Administrative Cooperation (DAC8) into Belgian Law, with the measure proposed to take effect on January 1, 2026. The draft requires crypto-asset service providers to collect and report detailed client and transaction data with the first report due on June 30, 2027, in respect of calendar year 2026, and onward automatic exchanges with other Member States by September 30 of the year following the reporting year. The bill narrows the scope of reportable users (carving out listed companies, governments, international organizations, and certain financial institutions), preserves lawyer confidentiality in limited circumstances, and establishes a tiered penalty regime for registration, due-diligence, and reporting failures (including enhanced sanctions for repeated breaches).

Cyprus

January 8, 2026: Cyprus Approves Application of OECD Side-by-Side Safe Harbour Package Under EU Minimum Tax Framework[14]

Cyprus notified its consent under Article 32 of Directive 2022/2523 to adopt the OECD Side-by-Side package on safe harbours and incentive alignment. The Director for Direct Taxation, Tax Coordination, Economic Analysis and Evaluation of Cyprus has confirmed that the European Commission will publish an information notice in the Official Journal to acknowledge the Agreement and confirm its application within the Directive’s framework.

European Union

January 30, 2026: European Commission’s Infringement Action Over DAC9 Transposition[15]

Formal notices have been issued to Belgium, Bulgaria, the Czech Republic, Cyprus, Greece, Malta, the Netherlands, Portugal, Romania and Sweden for failing to fully transpose Amending Directive to the 2011 Directive on Administration Cooperation (2025/872) (DAC9), which amends the Directive on administrative cooperation in the field of taxation (Directive 2011/16/EU). The Directive requires the Member States to fully implement the new information exchange rules on administrative cooperation in the field of taxation. The European Commission has given the concerned Member States two months to reply, finalize the transposition, and inform the Commission accordingly. In case of inadequate responses, the Commission may proceed with next stage infringement process by issuing a reasoned opinion.

January 30, 2026: European Commission’s Infringement Action Over DAC8 Transposition[16]

Formal notices have been issued to Belgium, Bulgaria, the Czech Republic, Cyprus, Estonia, Greece, Luxembourg, Malta, the Netherlands, Poland, Portugal and Spain for failing to fully transpose Amending Directive to the 2011 Directive on Administrative Cooperation (2023/2226) (DAC8). This Directive amends the Directive on administrative cooperation in the field of taxation (Directive 2011/16/EU) to enable tax transparency and information exchange regarding crypto-assets and to enhance the information exchanges regarding financial accounts. The European Commission has given the concerned Member States two months to reply, finalize the transposition, and inform the Commission accordingly. In case of inadequate responses, the Commission may proceed with next stage infringement process by issuing a reasoned opinion.

Finland

January 1, 2026: Finland Enacts DAC9 Framework for Pillar Two Information Exchange[17]

Finland published the law transposing the Amending Directive to the 2011 Directive on Administrative Cooperation (2025/872) (DAC9) in the official gazette. The law enters into force on January 1, 2026, and implements the DAC9 obligation to collect and automatically exchange GloBE information.

January 2, 2026: Finland Tables Bill to Update Pillar Two Rules and Introduce Anti-Avoidance Provision[18]

The Finnish government has submitted a bill to amend the Law on Minimum Tax by Large Groups. The proposal primarily implements minor technical changes to align domestic Pillar Two rules with recent OECD Inclusive Framework guidance, introduces a formal advance-ruling procedure for taxpayers, and adds a general anti-avoidance rule that treats arrangements put in place with the apparent purpose of avoiding the law as ineffective for Pillar Two purposes. The draft would enter into force by March 31, 2026, and apply to financial periods beginning on or after January 1, 2024; the new anti-avoidance rule would take effect for financial periods beginning on or after January 1, 2027.

January 20, 2026: New Guidance Clarifies Pillar Two Calculations Under National Minimum Tax Rules[19]

The Finnish tax administration has published official guidance on the application of certain Pillar Two rules under the Law on Minimum Taxation for Large Groups. The guidance focuses on the calculation of the global effective tax rate and the supplementary tax and includes examples of these computations. It also clarifies the operation of the substance-based income exclusion, explaining how qualifying payroll costs and tangible assets may reduce the group’s net income and how the deduction is applied depending on the nature of the underlying costs or assets.

France

January 1, 2026: Government Releases Priority Tax Measures Ahead of Debate on 2026 Finance Bill[20]

The French government issued a press release outlining the tax measures it intends to back when parliamentary discussions on the Finance Bill for 2026 resume in the coming weeks. The statement reaffirms support for initiatives benefiting the agricultural sector, the social and solidarity economy, overseas territories, alongside broader measures aimed at encouraging business development. These positions are indicative and will require confirmation during the forthcoming parliamentary debates on the draft 2026 budget. The announcement follows the adoption of a special law to avoid a budgetary shutdown.

Germany

January 14, 2026: Federal Cabinet Clears Draft Bill on Tax Consultancy Framework and Other Selected Tax Rules[21]

The Federal Cabinet has adopted a draft Ninth Act amending the Tax Consultancy Act and related tax laws to modernize and digitize tax advisory services, expand access for taxpayers, and reduce administrative burdens. Key measures include broader advisory powers for income tax assistance associations, regulated limited tax advice by other professionals, expanded free tax assistance (including university tax law clinics), and relaxed management requirements for advisory centers. The draft also raises the minimum municipal trade tax rate to 280% to prevent artificial relocations of company headquarters and introduces targeted amendments to real estate transfer tax to avoid double taxation and extend notification deadlines.

Ireland

January 1, 2026: Ireland Passes Finance Act 2025 Including Transposition of DAC8 and DAC9[22]

Ireland formally enacted the Finance Act 2025 on December 23, 2025, following Presidential approval. The legislation aims to implement the tax measures announced, including transposition of EU’s DAC8 and DAC9 Directives, personal income tax reliefs, VAT rate reductions, extensions of housing incentives etc.

Italy

January 1, 2026: Italy Defers Implementation of Consolidated Tax Codes to 2027[23]

Italy enacted a decree delaying the application of consolidated frameworks governing indirect taxes, tax penalties, minor taxes, tax judicial system and tax payments and collection to January 1, 2027, instead of the previously planned start date (January 1, 2026).

January 1, 2026: Italy Adopts Implementing Provisions for DAC8[24]

The Italian Ministry of Economy and Finance has adopted legislation to provide implementation rules for DAC8 transposed recently, extending tax information-sharing requirements to cover e-money and crypto-asset transactions reported by crypto-service providers and operators.

Luxembourg

January 13, 2026: Luxembourg Endorses New Carried Interest Tax Framework[25]

The Chamber of Deputies has adopted a reform, applicable from the 2026 tax year, modernizing and clarifying the Luxembourg tax regime for carried interest introduced in July 2025, by redefining it as fund outperformance exceeding a hurdle rate while retaining the internationally recognized term “carried interest.” The law expands the scope of eligible beneficiaries to natural persons genuinely involved in AIF management, including employees, partners, directors, managers and certain advisers, thereby preventing the recharacterization of fixed remuneration as carried interest, and broadens the range of qualifying AIF structures, including deal‑by‑deal arrangements. It confirms a clear distinction between purely contractual carried interest, taxed at one quarter of the overall tax rate, and carried interest linked to a direct or indirect participation, which may benefit from capital treatment subject to holding‑period and substantial participation rules, assessed based on economic substance. Finally, the reform makes permanent favorable tax treatment previously available under a transitional regime, ensuring continuity and legal certainty for managers transitioning to the new framework.

Netherlands

January 5, 2026: Netherlands Proposes Timeline for Adopting ‘Side-by-Side’ Rules[26]

The Dutch State Secretary for Finance updated the Parliament on the OECD Inclusive Framework’s agreement on the Pillar Two GloBE Side-by-Side Package and confirmed plans to introduce implementing legislation by summer 2026. Implementation will follow a separate legislative process, with a stakeholder consultation preceding submission to Parliament.

January 28, 2026: Dutch Lower House Passes DAC8 Bill; Finance Ministry Aims Expedited Approval[27]

The Dutch State Secretary for Finance has called on the upper house (Senate) of the Netherlands Parliament to swiftly approve the bill implementing the Amending Directive to the 2011 Directive on Administrative Cooperation (DAC8), which introduces mandatory reporting and exchange of tax information on crypto-assets and electronic money. The bill was previously adopted by the lower house on January 27, 2026, and is scheduled for discussion by the Finance Committee on February 10, 2026.

Romania

January 23, 2026: Romania Releases Draft Bill to Implement DAC9[28]

The Romanian Ministry of Finance released a draft ordinance to amend Law No. 207/2015 (Fiscal Procedure Code), aimed at implementing DAC9 (Directive 2025/872). The draft transposes most DAC9 provisions, introducing reporting obligations for financial institutions and enhancing the automatic exchange of information, while excluding certain rules that Romania has already applied.

Spain

January 12, 2026: Supreme Court Invokes Beneficial Ownership to Deny Withholding Exemption for Royalty[29]

The Spanish Supreme Court held that royalties paid by a Spanish company through a Dutch intermediary to a Curaçao group entity were subject to Spain’s full domestic withholding tax rate (24.75%), denying both the EU Interest and Royalties Directive exemption and the reduced treaty rate, because the Dutch company was not the beneficial owner of the income. Relying on the European Court of Justice’s Danish cases and OECD Commentary, the Court found the Dutch entity acted merely as a conduit with no economic control over the royalties, which were almost entirely passed on to the Curaçao entity. It further ruled that, under the primacy of EU law, once the Directive’s beneficial ownership requirement is not met, the Spain–Netherlands tax treaty cannot be applied to obtain a reduced rate, as the Directive fully governs the matter between EU Member States and cannot be circumvented.

Sweden

December 29, 2025: Sweden Enacts 2026 Tax Amendments[30]

On December 29, 2025, the Swedish government released a list of key laws and regulations effective from January 1, 2026, highlighting several tax changes. These include lower taxes on employment income, pensions and sickness or disability benefits, a reduced electricity energy tax rate, and simplified taxation of partners in small cap companies through a single unified rule. Additional measures include a new corporate tax reduction for cash donations to approved research and social welfare activities, a phased reduction of the special income tax for non-residents from 25% to 20% by 2027, and a temporary extension of the agricultural diesel relief for consumption in 2026.

Switzerland

January 30, 2026: Swiss Tax Authority Updates Safe-Haven Interest Rates for 2026[31]

The Federal Tax Administration has issued updated circulars setting out safe harbour interest rates for shareholder and related party loans, covering both Swiss‑franc (CHF) and foreign‑currency denominations. For CHF loans, the circular prescribes minimum interest rates of 0.75% on equity‑financed loans and, for debt‑financed loans, prime costs plus 0.5% (up to CHF 10 million) or plus 0.25% (above CHF 10 million), subject in all cases to a 0.75% floor, while also defining maximum permissible rates depending on whether the loan is for real estate or operational purposes and on the borrower’s business profile. For loans denominated in foreign currencies, another circular sets minimum rates of 2.5% for EUR and 4.0% for USD on equity financed loans, and prime costs plus 0.5% on debt‑financed loans, again subject to the same minimum thresholds; these rates also apply to loans received from shareholders or related parties. Higher rates may be accepted if justified under the arm’s‑length‑principle, provided the taxpayer can substantiate the commercial rationale for using a foreign currency rather than CHF.

United Kingdom

January 20, 2026: ‘Capital Interest’ to Consulting Firm Partners Held to be Income[32]

The Upper Tribunal (UT) in Mark Benedict Holden and Others v HMRC [2026] UKUT 25 (TCC) upheld the first-tier Tribunal’s finding that payments made to Boston Consulting Group UK (BCG LLP) partners under “capital interest” arrangements were taxable as income, not capital gains. The UT held that these rights did not constitute genuine capital interests but were instead contractual remuneration linked to increases in BCG Inc’s share value. The amended mixed membership partnership rules (MMRs) applied for tax years 2014/15 to 2016/17, meaning payments allocated to BCG Ltd and made available to Partners met the conditions for reallocation under section 850C of ITTOIA 2005 and should be reallocated to the Partners and taxed as income, while for 2012/13 and 2013/14, when the MMRs did not apply, the payments to Partners were taxable as miscellaneous income under section 687 of ITTOIA 2005, as they were rewards for services forming a part of overall remuneration rather than capital.

January 21, 2026: UK Updates Pillar Two Reforms as per OECD Rules[33]

The UK government has amended the Pillar Two rules in the Finance Bill 2025/26 to update the income inclusion rule, undertaxed profits rule, and qualifying domestic minimum top-up tax, ensuring continued alignment with the OECD/G20 Inclusive Framework’s 15% global minimum tax. The changes incorporate refinements to the Finance (No.2) Act 2023 following stakeholder feedback. Correspondingly, HMRC has updated its policy paper on further amendments to multinational and domestic top up taxes published on January 21, 2026.

Türkiye

January 7, 2026: Türkiye Sets Out Operational Rules for Domestic Minimum Top-Up Tax Filings[34]

Türkiye’s Ministry of Treasury and Finance released a guideline outlining the procedures for filing Domestic Minimum Top-Up Tax returns. The guidance clarifies compliance obligations for multinational groups with revenues above EUR 750 million, including the need to appoint a single Türkiye based entity and to file returns in the group’s functional currency, while settling the final tax liability in Turkish lira using the Central Bank’s exchange rate applicable at the start of the filing period. It also details the structure of the electronic return, sets out new entity classification codes, and provides instructions on transitional safe harbours, substance-based income exclusion reporting, and deferred tax adjustments. Although filings are normally due 12 months after the fiscal year-end, the deadline for financial year 2024 was extended to January 15, 2026.

China

January 13, 2026: China Renews Tax Exemptions for Overseas Institutional Investors in Domestic Bonds[35]

China has prolonged preferential tax treatment for foreign institutional investors in its domestic bond market. Under an announcement jointly issued by the Ministry of Finance and the State Taxation Administration on January 13, 2026 (Announcement 2026 No. 5), interest income earned by eligible foreign institutions will continue to be exempt from both corporate income tax and value added tax for the period from January 1, 2026, to December 31, 2027. The scope of the temporary exemption from corporate income tax does not include the interest on bonds related to the institution or venue established by the overseas institution or place in China.

January 14, 2026: China Confirms Ongoing VAT Exemption for Foreign Holders of Government Bonds Issues Abroad[36]

The Ministry of Finance and the State Taxation Administration issued Announcement 2026 No. 6, confirming that interest paid to foreign institutions on state and local government bonds issued outside China remains exempt from value-added tax for the period August 8, 2025, to December 31, 2027.

Hong Kong

January 8, 2026: Hong Kong Revises Pillar Two Guidance[37]

Hong Kong’s Inland Revenue Department has updated its global minimum tax guidance, confirming that Hong Kong has obtained transitional qualified status for its IIR, HKMTT and QDMTT Safe Harbour from January 1, 2025, and has been included in the OECD’s central record of qualifying legislation pending full review.

January 19, 2026: First Phase of Hong Kong Pillar Two Portal Goes Live for Notification Filings[38]

The IRD has launched the first phase of its Pillar Two Portal, allowing Part 4AA entities of in-scope multinational enterprise groups to submit top-up tax notifications electronically. The notification requirement applies to fiscal years beginning on or after January 1, 2025. The IRD has confirmed that the second phase of the portal is expected to be launched in the fourth quarter of 2026, enabling the filing of top-up tax returns as well as access to notices of top-up tax assessments. Top-up tax notifications must be submitted within six months after the end of the relevant fiscal year. When filing a notification, entities are required to provide the MNE group code assigned to the group, and the groups are to apply early for these codes using Form IR1485.

India

January 9, 2026: Supreme Court Clarifies Taxability on Amalgamation: The “Commercial Realizability” Test [39]

The Supreme Court (SC), in Jindal Equipment Leasing & Consultancy Services Ltd. & Ors. (Taxpayers) v. CIT, laid down the “commercial realizability” test to determine taxability in cases of share substitution pursuant to amalgamation under Section 28 of the Income-tax Act, 1961 (ITA). The Court held that where shares of an amalgamating company, held as stock-in-trade, are replaced by shares of the amalgamated company, and such shares are freely marketable and possess definite commercial value, the event constitutes a commercial realization, giving rise to taxable business income under the ITA. While the judgment has provided legal guidance on the interpretation of the provisions, the matter has been remanded to the Tribunal for factual verification of whether the shares were held as stock-in-trade or as an investment/capital asset.

Please refer to A&M’s Tax Alert for detailed analysis.[40]

January 15, 2026: Supreme Court Redefines Tax Treaty Protection: GAAR Trumps DTAA in Indirect Transfers[41]

In its landmark judgment dated January 15, 2026, in Tiger Global International III Holdings and others, the Supreme Court set aside the Delhi High Court’s August 28, 2024, ruling and upheld the AAR’s view that the proposed arrangement was prima facie aimed at tax avoidance, thereby overturning the HC’s decision. The Court also made significant observations on the applicability of GAAR and clarified that a Tax Residency Certificate alone may not suffice to claim treaty benefits under the India–Mauritius DTAA, particularly for investments or arrangements made prior to April 2017.

Please refer to A&M’s Tax Alert for detailed analysis.[42]

Indonesia

January 9, 2026: PMK No. 112 of 2025: Procedures for Implementing Double Taxation Avoidance Agreements[43]

The regulation sets out comprehensive procedures for the application of Double Taxation Avoidance Agreements in Indonesia, including documentation, administrative processes, withholding obligations and compliance checks required to claim treaty benefits.

Please refer to A&M’s Tax Alert for detailed analysis.[44]

Japan

January 6, 2026: Japan Unveils Proposed Tax Measures for 2026[45]

The Ministry of Finance’s 2026 tax reform proposals aim to strengthen the economy through generous investment incentives, including immediate depreciation and tax credits (7% generally, 4% for buildings), enhanced credits for strategic technologies such as AI and quantum, limited carry‑forward of tax credits for approved companies, and a review of existing incentives, including scaling back wage‑increase credits for large enterprises. Indirect tax and other measures include expanding Nippon Individual Savings Account for children, tightening consumption tax rules on low‑value imports and e‑commerce platforms, revising vehicle taxes to promote fuel efficiency and address EV taxation, extending transitional relief under the consumption tax invoice system, increasing the international tourist tax to fund overtourism measures, and introducing a new 1% income tax from 2027 to strengthen defense capacity while adjusting reconstruction surtaxes to ease household impact.

January 23, 2026: Japan Advances Framework to Align Domestic Minimum Tax Rules with OECD Side-by-Side Package[46]

Japan’s Cabinet approved a policy decision setting out measures to incorporate elements of the OECD’s Side-by-Side Package into its global minimum tax framework, with amendments expected to be included in the 2026 tax reform bill. The statement indicates that the Side-by-Side Safe Harbour (intended to apply for fiscal years beginning on or after January 1, 2026), a one-year extension of the Transitional CbCR Safe Harbour, the Substance-Based Tax Incentive Safe Harbour, and the UPE Safe Harbour would be implemented, while no reference was made to the Simplified ETR Safe Harbour. Although the policy was announced, the legislation has not yet been introduced.

Korea

January 5, 2026: Korea Plans Alignment with Side-by-Side Package[47]

Korea announced that it will reflect the OECD Inclusive Framework’s Pillar Two Side-by-Side Package in future tax legislation. A notable outcome for Korea is the acceptance of refundable tax credits as qualified tax incentives under the SBTI safe harbour whereby Korea expects incentives like the US IRA advanced manufacturing production credit and Korea’s investment and R&D tax credits to qualify as qualified incentives.

Malaysia

January 29, 2026: Malaysia Introduces New Tax Incentive Framework[48]

The government has introduced a New Incentive Framework (NIF) under Budget 2026. Effective from Q1 2026 for manufacturing and Q2 2026 for services, the NIF rewards measurable contributions, such as value creation, high‑quality jobs, technology transfer, supply‑chain development, and sustainability rather than investment size alone, through a tiered system offering either a Special Tax Rate (STR) or Investment Tax Allowance (ITA). New manufacturing incentive applications will cease after February 28, 2026, while existing approvals will continue unchanged.

Singapore

December 29, 2025: Singapore Introduces Administrative Rules and Registration Steps for Minimum Tax Regime[49]

Singapore has moved forward with GloBE implementation through the 2025 Administrative Regulations, effective December 31, 2025, which clarify conditions for appointing a GloBE filing entity and domestic top up tax filing entity, define prescribed reportable events, set recordkeeping periods, outline interest rules on delayed refunds, and formalize electronic service. IRAS has also launched a registration webpage detailing that in-scope multinational enterprise groups - those meeting the EUR 750 million revenue threshold and having a Singapore constituent entity, joint venture entity, or reverse hybrid entity - must register within six months after their financial year end. Registration opens in May 2026 and must be completed online by the ultimate parent entity or an authorized Singapore entity or tax adviser, with the IRAS expected to process complete filings within one month and issue letter of notification to the relevant Singapore entities.

Thailand

December 30, 2025: Thailand Advances Pillar Two Implementation[50]

Pillar Two has been incorporated into Thailand domestic law through the enactment of the Emergency Decree on Top-Up Tax (B.E. 2567) in December 2024, formally implementing the GloBE rules with effect from January 1, 2025.

Please refer to A&M’s Asia–Pacific Private Capital Tax Top 10 – 2025 Q4 for more details.[51]

Kingdom of Saudi Arabia

January 1, 2026: Saudi Arabia Announces Extension of Tax Penalty Relief Initiative[52]

Saudi Arabia has granted a further extension of its penalty relief initiative, allowing taxpayers more time to regularize unresolved tax matters. The extension applies to ZATCA registered taxpayers and grants exemptions from penalties under the income tax, VAT, excise tax and real estate transaction tax regimes, except in cases involving tax evasion. Relief covers penalties for late registration, filing and payment, as well as VAT return adjustments, provided outstanding returns are submitted and the principal tax is paid or included in an approved instalment plan, with full relief also available where the tax was settled before January 1, 2026.

Australia

January 1, 2026: Australia Formalizes Pillar Two Filing Relief for Groups Unlikely to Owe Top-Up Tax[53]

The Australian Taxation Office (ATO) registered a legislative instrument (Taxation Administration (Exemptions from Requirement to Lodge Australian IIR/UTPR Tax Return and Australian DMT Tax Return) Determination 2025) that formalizes circumstances in which constituent entities may be exempt from lodging Income Inclusion Rule, Undertaxed Profits Rule and Domestic Minimum Top-up Tax returns.

January 5, 2026: Australia Confirms Technical Updates to Global Minimum Tax Regime and Signals Further Refinements[54]

On January 5, 2026, Australia registered and brought into force the Taxation (Multinational Global and Domestic Minimum Tax) Amendment (2025 Measures No. 1) Rules 2025. The instrument clarifies the treatment of certain equity holdings, introduces rules for qualified flow through tax benefits, creates an elective rule for regulated mutual insurance companies and adjusts the tax treatment of structured finance vehicles to reflect OECD GloBE guidance.

January 30, 2026: Australia Initiates Statutory Review of Thin Capitalization Rules[55]

The Australian federal government has asked the Board of Taxation to undertake an independent review of the thin capitalization changes introduced in 2023–2024, to assess whether the reforms are operating in line with their policy objective of curbing excessive debt deductions. The review will examine, among other aspects, the operation of the AUD 2 million exemption threshold, the design of the default tax EBITDA measure, and the compliance impact of the debt deduction creation rules following restructures. A public consultation process will commence from February 1, 2026, with the Board expected to deliver its final report to the government within 12 months.

New Zealand

January 29, 2026: Inland Revenue Outlines Tax Rules for Crypto Asset Disposals in DeFi[56]

The Inland Revenue (IR) Issues Paper IRRUIP18 sets out IR’s preliminary view that many decentralized finance (DeFi) transactions involving crypto assets give rise to taxable income, primarily because disposals of crypto assets are integral to such activities. Taxable disposals arise where crypto assets are transferred out of a person’s control (for example, to pools, vaults, lending protocols, bridges, or smart contracts), including in wrapping, bridging, staking, lending, and liquidity arrangements, particularly where the assets are held as part of a business, profit-making scheme, or for the purpose of disposal. Gains are generally taxable at the market value of any crypto assets received in return, and rewards earned from DeFi activities are treated as money’s worth and usually taxed on receipt. Public submissions close on March 12, 2026.

• On January 13, 2026, Nigeria and the United Arab Emirates have signed a Comprehensive Economic Partnership Agreement (CEPA). The UAE will remove tariffs on over 7,000 Nigerian products, allowing agricultural and industrial goods to enter duty free immediately, with tariffs on machinery, vehicles, electronics, apparel, and furniture phased out over three to five years. The agreement also enables Nigerian firms to establish operations in the UAE, grants business visitors up to 90 days’ entry annually, and allows intracompany transferees to relocate for renewable three‑year terms. Nigeria will gradually reduce tariffs on about 6,000 UAE products, mainly constituting industrial and capital goods. Tariffs on 60% of these products will be lifted immediately, with the rest being eliminated over five years.[57]
• On January 14, 2026, the United States announced a 25% tariff on select advanced semiconductors, effective January 15, 2026, following a national security review. The measure targets high‑end chips used in artificial intelligence and advanced computing, while imports that support domestic technology supply chains such as chips for data centers, R&D activities, and industrial applications are exempt.[58]
• The European Union and India concluded negotiations on a bilateral free trade agreement on January 27, 2026, marking a significant step in deepening economic ties between the two economies.[59] Please refer to A&M’s Tax Alert for detailed analysis.[60]