Legislative Environment

Legislation was not the primary driver of tax developments in Q2 2026. With Congress facing a compressed calendar, funding deadlines, and limited consensus, another reconciliation bill with tax provisions before the mid-term elections now appears unlikely. Targeted bipartisan measures, including digital asset taxation and tax administration reforms, remain on the discussion list, but there is no clear timing.

Instead, the bigger US tax accounting story came from outside Congress. Court rulings and tariff developments shaped the quarter, with potential implications for uncertain tax positions, effective tax rate forecasts, deferred tax realizability, and disclosures.

Federal Tax Developments: Court Rulings Drive the Quarter

Treasury and the Internal Revenue Service (IRS) issued limited guidance during the second quarter of 2026. However, the courts addressed several important issues, including the dividends received deduction and application of the economic substance doctrine. 

Key highlights include:

Dividends Received Deduction: Varian Medical Systems Decision

On April 8, 2026, in Varian Medical Systems Inc. v. Commissioner, the Tax Court limited the availability of the section 245A dividends received deduction for certain US multinational groups. The court held that shares owned indirectly through lower-tier controlled foreign corporations are not treated as held by the US consolidated group for purposes of the holding period requirement, causing related dividends to fall outside the deduction.

The court also held that the required foreign tax credit reduction must be calculated based on the net section 965 inclusion after the section 965(c) deduction, increasing the foreign tax credit disallowance.

Economic Substance Doctrine and the Liberty Global Decision

On April 21, 2026, the Tenth Circuit affirmed the district court’s ruling in Liberty Global Inc. v. United States, holding in a 2-1 decision that a four-step restructuring among foreign affiliates lacked economic substance and could not support a section 245A dividends received deduction.

The restructuring sought to exploit a Tax Cuts and Jobs Act (TCJA) “last day” mismatch to avoid Global Intangible Low-Taxed Income (GILTI) and Subpart F inclusions while preserving section 245A eligibility. The court reviewed the integrated transaction as a whole, denied the tax benefits despite literal Code compliance, and emphasized the need for contemporaneous non-tax business purpose support for multi-step restructurings. Liberty Global has filed a petition for rehearing.

A&M TAS Says:

The Q2 court decisions serve as a good reminder that tax provision work cannot rely solely on the form of the transaction and move on. In Varian, companies should reassess 245A eligibility and foreign tax credit measurement, including dividend-related benefits, FTC assumptions, uncertain tax positions, effective tax rate (ETR) forecasts, and disclosures. 

The Liberty Global decision raises the stakes for internal restructurings where the tax result depends on steps that may not have enough business purpose or economic effect behind them. 

For ASC 740 and IAS 12, the answer is not a broad memo to the file. It is a position-by-position review. Organizations should confirm the legal basis for DRD and FTC positions, evaluate economic substance risk for restructurings separately, and ensure supporting documentation aligns with both the technical tax analysis and the underlying business purpose.

Trade Policy Meets the Tax Provision

US trade and tariff developments remained a significant source of uncertainty during the quarter. The Administration modified Section 232 tariff measures and advanced proposed Section 301 actions targeting certain imports.

Separately, the Court of International Trade (CIT) invalidated the Administration’s global tariffs under Section 122, with relief limited to the importer plaintiffs. However, the appellate court subsequently stayed the CIT’s order.

Tariff Refund Uncertainty and IEEPA Developments

Uncertainty also persists regarding refunds for tariffs imposed under the International Emergency Economic Powers Act (IEEPA), which were held invalid by the US Supreme Court.

While US Customs and Border Protection (CBP) has begun processing Phase 1 refund claims, questions remain regarding the timing and scope of later phases, particularly for finally liquidated entries. The Administration has appealed the CIT’s universal orders requiring refunds to all importers and has taken the position that CBP lacks authority to refund duties on finally liquidated entries absent a court order.

As a result, importers may need to file claims with the CIT to preserve their refund rights.

Customs Enforcement and Import Compliance Risks

Customs enforcement activity remains elevated, with increased focus on duty underpayment cases. Coordination between CBP and the Department of Justice has intensified, particularly in classification, valuation, and country-of-origin determinations.

As a result, routine audits, customs inquiries, and notices are more likely to escalate into formal enforcement actions, including penalties, civil fraud liability, and litigation. These developments may increase both financial and compliance risk for importers.

A&M TAS Says:

Tariffs and refund claims may fall outside the scope of ASC 740 and IAS 12, but they can still affect the tax provision through forecasting assumptions.

If refunds become supportable, they may increase pretax and taxable income. On the other hand, if tariff costs or enforcement risks keep building, they can squeeze margins, change taxable income forecasts, affect valuation allowance conclusions, move interim ETRs, and require disclosure.

The point is simple: this is not just a customs issue. When trade developments change the earnings story, cash recovery expectations, or the support for tax attributes, tax provision teams should be actively involved.

State and Local Tax Developments

State Tax Conformity and One Big Beautiful Bill Act (OBBBA) Implementation Trends

As mentioned in our previous publications, the corporate income/franchise tax regimes in many jurisdictions are often affected by changes to federal tax law. This is because states generally conform to the IRC for administrative efficiency, either by incorporating the IRC in whole or in part, and/or by using federal taxable income as the starting point. 

Generally, states adopt one of the three approaches to IRC conformity. Under fixed-date conformity, states conform to the IRC as of a specific date. Under rolling conformity, states automatically adopt the version of the IRC in effect for the current tax year. Other states follow a selective conformity approach, adopting only specific IRC provisions.

During the second quarter of 2026, states continued to address IRC conformity questions as many legislative bodies met in regular sessions for the  first time since the enactment of the federal legislation last summer. Unlike the federal government, most states are required to balance their budgets annually. As a result, legislatures have closely scrutinized the potential impact of the changes introduced by OBBBA.  

We expect this trend to continue through the third quarter of the year in a limited number of jurisdictions, and potentially beyond that in some. As exhibited below, although we are entering into the third quarter of 2026, some legislative changes will impact 2025, as well as the current year and beyond, so it is critically important to stay informed.

• Arizona 
  Legislation was enacted on June 13, 2026. H.B. 4168 updated the state’s general IRC conformity to January 1, 2026. It also retroactively updated its conformity provisions for tax years 2022 through 2025 to match similar provisions of the OBBBA.

  In addition, the legislation implemented the following:

  • IRC Section 168(n) Decoupling: Arizona decoupled from IRC § 168(n), with respect to qualified production property for tax periods beginning on and after December 31,2025.
  • GILTI Terminology Update: The legislation replaced language in the law previously referring to GILTI with a reference to IRC § 951A in the state’s corporate foreign dividend subtraction provisions. This change applies retroactively to tax periods beginning on and after December 31, 2024.
  • Research and Development Credit Changes: Modifications were also made to the research and development credit, among others. Taxpayers who claim this credit should review the legislation in greater detail.
• California 
  On June 29, 2026 Governor Newsom signed S.B. 122 which retained the state’s existing current business tax credit limitations until January 1, 2030.  This represents a three-year extension of the current $5 million cap. Effective January 1, 2030, the legislation also implements a modified limitation under which a business cannot claim credits that would reduce tax by more than the greater of either 70% or $5 million.  Notably, the current cap on net operating losses was not extended.
• Connecticut 
  On May 26, 2026, Governor Lamont signed a budget bill containing several tax provisions impacting corporations. Among the changes, Connecticut will decouple from IRC § 168(n) for tax years beginning after 2025; and from IRC § 174A for tax years 2022 through 2025. Beginning with the 2026 tax year, the state will conform to Sec. 174A.  In certain circumstances, taxpayers may be eligible for penalty and interest waivers.

• Florida 
  Florida updated its income tax code on June 11, 2026, to adopt the IRC as in effect on January 1, 2026, subject to specified exceptions. However, rather than broadly conforming to the OBBBA's corporate tax provisions, the state adopted a series of targeted decoupling provisions intended to preserve its historical tax treatment and limit potential revenue reductions from automatic conformity.  

  Key provisions include:

  • Retention of prior-law treatment: Florida retained its prior-law treatment of bonus depreciation under IRC § 168(k) and business interest expense limitations under IRC § 163(j). 
  • IRC Section 174A decoupling: The state fully decoupled from IRC § 174A, which permits the immediate expensing of certain domestic research and experimental expenditures, and from the 100% depreciation allowance for qualified production property under IRC § 168(n). 
  • Additional OBBBA decoupling measures: The state declined to conform to the OBBBA's expanded expensing provisions under IRC § 179 and its expanded business meal deductions under IRC § 274.
• Hawaii  
  On May 26, 2026, governor signed H.B. 2329, updating the state’s IRC conformity date to December 31,2025. However, Hawaii has decoupled from some OBBA provisions, including IRC § 174A’s election to expense certain prior year amounts and the qualified production property special depreciation allowance in IRC § 168(n).
• Kansas 
  On April 27, 2026, Kansas enacted S.B. 300, updating state tax terminology by replacing references to GILTI in the state’s subtraction modification for certain non-US source income. The law now refers more generally to IRC § 951A.

• Kentucky 
  On April 14, 2026, Kentucky enacted H.B. 757 and H.B. 869.

  • H.B. 757 – IRC Conformity and Corporate Tax Changes

  Signed on April 14, 2026, H.B. 757 updated the state’s IRC conformity date to December 31, 2025, applicable to tax years beginning on or after January 1, 2026.

  • H.B. 757 added a new subtraction related to domestic research and experimentation expenses under IRC § 174 as it existed at the end of the 2024 calendar year. The bill also looks to IRC § 163(j) as in effect on December 31, 2024, excluding any subsequent amendments.
  • H.B. 757 also continues to delay implementation of the state’s corporate deferred tax deduction to tax years beginning on or after January 1, 2028.
• H.B. 869 – Research and Experimental Expenditure Modifications 
  Signed on April 27, 2026, H.B. 869 clarified that, for tax years beginning on or after January 1, 2026, an addition modification is needed for amounts deducted for domestic research and experimentation expenses under IRC § 174A. The legislation also permits a subtraction modification for those expenses computed under IRC § 174, as in effect on December 31, 2024.
• Maine 
  On April 10, 2026, Maine enacted H.P. 1491codifying various OBBBA-related changes previously announced under the state’s temporary conformity adjustment framework in the fall of 2025.  
  • IRC Conformity Update: H.P. 1491updates the state’s general IRC conformity date from December 31, 2024, to December 31, 2025, generally applicable to tax periods beginning on or after January 1, 2025.
  • IRC Sections 174 and 174A Decoupling: Maine decoupled from federal changes to IRC §§ 174 and 174A. Key provisions include:
    • Addition Modification Requirement: For tax years 2025 through 2029, taxpayers must make an addition modification for qualifying domestic expenditures that are immediately expensed for federal income tax purposes, including expenditures deducted under the “catch-up” election available for tax years through 2022 to 2024.  
    • Phase-Down Schedule: In 2025, the addition is 100%; it drops to 70% for some items in 2026 (other than 100% for catch up amounts); 50% in 2027, 30% in 2028, and 10% in 2029. 
    • Deduction Recovery Provisions: Deductions are permitted for certain items under the former IRC § 174 in the 2022 through 2025 tax periods. For other expenditures, a ratable deduction Is permitted in the following year, through 2030.
  • IRC Section 168(n) Depreciation Decoupling: Maine requires an addition for IRC § 168(n) amounts, with a corresponding deduction equal to the excess depreciation allowable under IRC §§ 167 and 168 before the enactment of the OBBBA.
  • IRC Section 163(j) Conformity: The legislation preserves Governor Mills’ decision to conform to the OBBBA’s changes to IRC § 163(j).
  • GILTI to NCTI Terminology Update: The legislation replaces all references to GILTI with Net CFC Tested Income (NCTI). 
• Maryland 
  On April 8, 2026, the governor signed S.B. 284. This legislation decouples the state from IRC § 168(n) for tax periods beginning on or after December 31, 2025. It also limits the amount of bonus depreciation that qualifying manufacturing entities may claim in the state to 20% of the adjusted basis of qualifying property.
• Massachusetts 
  On June 12, 2025, Governor Healey signed H.B. 5470 into law. For corporations, a supplemental budget bill phases in Massachusetts' conformity to certain OBBBA provisions over a two-year period.
  • IRC Section 174A: The return to immediate expensing for qualified domestic research and experimental expenditures under IRC § 174A is not permitted until 2026 (representing a one-year delay), with no retroactive application allowed.
  • IRC Sections 163(j), 179, and 168(n): Conformity to changes impacting IRC §§ 163(j), 179, and 168(n) is postponed until 2027 (a two-year delay).
  • Opportunity Zones: Conformity with the opportunity zone expansion is delayed until 2027 and will be limited to Massachusetts-based investments only. 
  • Penalty and Interest Relief: The legislation also provides penalty and interest relief, under certain circumstances, for previously filed 2025 returns submitted by September 10, 2026.
• Minnesota 
  On May 27, 2026, Governor Walz signed House File 2438 into law, updating various provisions of Minnesota’s tax law. 
  • IRC Conformity Update: H.F. 2438 updated the state’s general IRC conformity from May 1, 2023, to May 1, 2026. This change became effective on the day following enactment, except for provisions that apply retroactively under federal law. In those cases, Minnesota generally adopts the same retroactive effective dates.
  • Research and Experimental Expenditures: The legislation decoupled from the immediate expensing of domestic research and experimentation costs. Instead, Minnesota will require an 80% addback, with a ratable 4-year amortization period. This provision is effective for tax years beginning after December 31, 2024. Additional provisions govern those making a small business election, and those making elections under Secs. 70303(f)(2)(A)(i) or (ii) of the OBBBA. 
  • NCTI and GILTI Conformity: H.F. 2438 also substitutes NCTI for GILTI and makes it clear that NCTI is subject to the state’s 50% dividends received deduction. This change is effective for tax years beginning after December 31, 2025. A similar treatment is afforded to Subpart F income.
  • Business Meals Addback: The legislation also requires an addback for business meals exceeding the 50% limitation found in IRC §274(n)(2)(C), as well as amounts deducted under IRC § 274(e)(8).
  • Opportunity Zone Gains: Beginning in 2027, corporations must add opportunity zone capital gain income to their federal taxable income in Minnesota. A subtraction will be allowed in the year the gain is recognized for federal purposes.
• New Jersey 
  On May 6, 2026, the Division of Taxation issued a revised version of Technical Bulletin 110 (TB-110), reflecting the OBBBA’s transition from FDII to FDDEI and from GILTI to NCTI. Their treatment remains unchanged from a New Jersey perspective.

On June 30, 2026, Governor Mikie Sherrill signed A5322. The legislation imposed a temporary limitation on the utilization of net operating losses by corporation business tax filers (other than public utilities). The limitation is applicable to a collective pool of pre-combination losses and post-combination losses. The limitation is set at an apportioned amount of $1 million per tax year, effective for periods ended on or after July 31, 2026, and before July 31, 2030. The limitation is pro-rated for short tax periods of less than 12 months. Any unused losses may be claimed in tax periods ending on or after July 31, 2030, and before July 31, 2032, up to a reduction in allocated entire net income of 75%. Any amounts that were subject to the reduction will be allowed an additional 6-year carryforward period.  The legislation also includes an estimated tax penalty safe harbor for amounts due between December 31, 2025, and January 1, 2027, to the extent an underpayment is related to this mid-year change in the law.

• New York & New York City
  On May 28, 2026, Governor Hochul signed the state’s 2026 – 2027 budget.  Significant items impacting corporate taxpayers in this legislation (S. 9009 & A. 10009) include:
  • Corporate Tax Rates: Extension of the 7.25% corporate income tax rate for taxpayers with business income exceeding $5 million through tax periods ending before January 1, 2030. The legislation also extends the capital base tax rate of 0.1875% for tax periods ending before January 1, 2030.
  • Decoupling from Certain Provisions of the OBBBA: Both New York State and New York City (NYC) decouple for tax years beginning on or after January 1, 2025. 
    • Research and Experimentation Expenses: 
      • IRC §§ 174 & 174A: New York will continue to require both domestic and foreign expenses to be amortized over a five-year period. The legislation also decouples from the federal transition rules for costs incurred before the 2025 calendar year, and instead continues to apply the amortization rules in effect as of January 1, 2022, under the TCJA.
      • IRC § 174: For New York City tax purposes, decoupling is limited to domestic expenses incurred on or after January 1, 2025. Foreign/non-US expenses will continue to follow the 15-year period under IRC § 174. NYC also appears to conform to the accelerated deduction provisions for costs incurred prior to 2025.
      • IRC § 163(j): NYC decouples from OBBBA changes and retains an EBIT-based calculation for tax periods beginning on or after January 1, 2025. However, New York State did not follow this approach.
      • IRC § 179: NYC decouples from federal changes while New York State has not decoupled.
      • IRC § 951A: NYC updated the language in its statutes to refer to NCTI rather than GILTI, effectively continuing to include these amounts in the receipts/sales factor.
• Differences in tax conformity between the city and state will increase complexity in this area. In certain circumstances, taxpayers may qualify for penalty and interest relief for the 2025 tax year where underpayments result from retroactive decoupling rules. Amended returns may also be required in some circumstances.
• Oregon 
  On March 31, 2026, Governor Kotek signed S.B.1510 followed by S.B.1507 on April 9, 2026. The legislation updated the state’s IRC conformity date from December 31, 2023, to December 31, 2025, and addressed OBBBA related provisions. 
  
  Oregon updated its statutory nomenclature to refer to NCTI rather than GILTI. The state also decoupled from the IRC § 168(k) bonus depreciation rules. However, it will follow IRC § 168(n).
• Texas 
  As mentioned in our fourth quarter 2025 newsletter (see here), the Comptroller’s office published a statement earlier this year that certain aspects of the franchise/margin tax would be computed using the current IRC, rather than the 2007 IRC, beginning with reports filed in 2026.
  
  Effective June 21, 2026, amendments to 34 Texas Admin. Code § 3.588 took effect to implement these changes. 
  
  Among other updates, these amendments alter the treatment of depreciation included in the cost of goods sold (COGS) deduction. The rule also creates a one-time net depreciation adjustment for 2026 reports intended to address historic federal vs. state differences.
• Vermont 
  On June 18, Governor Scott signed legislation that retroactively updated the state’s conformity to the IRC for 2025, incorporating many OBBBA provisions.  
  However, Vermont has not fully conformed to IRC §§ 174A, 168(n), and the 250 deduction in relation to GILTI and FDII. 
  
  The Department of Taxes has published a supplement to its 2025 tax instructions (Federal Conformity) to provide more information to assist taxpayers in understanding these changes, as well as in determining whether any previously filed 2025 returns need to be amended. Penalty and interest waiver requests related to conformity changes will be considered on a case-by-case basis.

A&M TAS Says: 

Companies must reflect the impact of state and local tax law changes, and any related federal deduction on their current tax provision in the period during which the change becomes effective. and the deferred tax provision impact during the period of enactment.

This will require adjusting the tax provision to account for the new rates or rules for taxable income generated after the effective date. Management should ensure that their systems and processes capture these law changes promptly. Financial statement disclosures should also clearly explain the impact on the current period tax expense and overall tax positions.

Miscellaneous Developments

A. Public Law 86-272 Developments

Public Law 86-272 (“P.L. 86-272”), 15 U.S.C. §§ 381 – 384, continues to be an important topic in the state and local tax world. This federal law, enacted in the late 1950s, operates to protect taxpayers from the imposition of net income taxes when their only activity in a state is the solicitation of sales of tangible personal property, and orders are approved and shipped from outside of the state.  

P.L. 86-272 has long been a source of confusion and litigation, with states taking varying positions; the Multistate Tax Commission (MTC) proposed a modern-day Wayfair-type narrowing of the rules a few years ago, which has led to additional action and scrutiny of taxpayers in certain states as well.

Recent examples include:

• California – In a 2026 decision, the Office of Tax Appeals ruled that the activities of Ken’s Foods, Inc. exceeded the protections of P.L. 86-272 in the state. Company employees collected competitor samples, gathered certain customer information, and worked on new products. The office concluded that these activities provided a competitive advantage rather than being merely ancillary to sales. See Cal. Office of Tax Appeals, No. 20076391, rehearing denied 3/20/26.  
• Illinois – In a March 16, 2026, general information letter (IT 26-0001), the Illinois Department of Revenue determined that ownership of merchandise in an in-state warehouse exceeded the protections of P.L. 86-272 for an out-of-state S corporation. The goods were stored at an independent contract packager’s warehouse for bottling, packaging, and shipment throughout the country.  
• Maine – In an April 2, 2026, decision (Case No. 2026 ME 30), the Maine Supreme Judicial Court upheld a determination that an out-of-state S corporation manufacturer’s activities exceeded the protections of P.L. 86-272. The activities arose from compliance with the state’s liquor laws, which required the use of a licensed broker to ship products to an in-state bailment warehouse. The court stated that the retention of title to the stock of goods until it was removed or sold resulted in the ownership of property in Maine, creating a withholding obligation for the company.
• New York – On May 7, 2026, New York’s Appellate Court affirmed a lower court’s finding that the state’s regulation applying the MTC’s updated and expanded version of P.L. 86-272 was not preempted by federal law. See American Catalog Mailers Ass’n. v. Dep’t. of Tax’n. & Fin., N.Y. App. Div. (3rd Dep’t.), No. CV-25-0865 (May 7, 2026).  

The decision was purely a facial one, meaning the court did not rule on the merits of the case. The trial court’s refusal to allow the regulation to be applied retroactively was not appealed and remains in place. Whether this decision will be appealed to the state’s highest court remains to be seen.

B. Other Developments

• Arkansas – In a rare taxpayer-favorable decision, the Arkansas Supreme Court held that certain income constituted non-business income rather than business income, in Hudson vs. US Beef Corporation (2026 Ark. 63) issued on April 16, 2026. As a result, the income was allocated to the taxpayer's state of commercial domicile instead of being subject to apportionment.

  The case involved gains resulting from a complete liquidation, which were treated as a solitary or extraordinary event given that this was not the taxpayer’s usual line of business under the functional test outlined in the Uniform Division of Income for Tax Purposes ACT (UDITPA).  

• Illinois – Governor Pritzker signed S.B. 3019 into law on June 16, 2026, introducing the following tax changes:
  • The legislation changed the state’s cap on net operating loss (NOL) carryovers to one based on the greater of $500,000 or a percentage of net income starting in 2027. 
  • The applicable percentage is 15% for tax year 2027, increasing to 30% in 2028, 50% in 2029, 65% in 2023, and 80% for tax periods beginning after 2030.
  • The legislation also extended a number of state tax credits for varying periods of time, including the research and development tax credit for activities in Illinois (now in place until January 1, 2037).
• Rhode Island – As part of state’s FY 2027 budget, H.B. 7127, enacted on June 12, 2026, establishes a tax amnesty program. The program will run for 75 days, ending on February 15, 2027. Eligible taxpayers will receive a full waiver of all penalties and a 25% reduction in interest otherwise due. Additional guidance from the Department of Revenue is expected in the coming months.

A&M TAS Says:

P.L. 86-272 remains a highly fact-specific area, and recent developments demonstrate that activities once viewed as ancillary to solicitation may, depending on the facts, exceed its protections. 

At the same time, states continue to scrutinize income characterization, tax attribute utilization, and other taxpayer positions while pursuing additional revenue-generating and compliance initiatives. 

Taxpayers should periodically reassess their nexus positions, filing methodologies, and reserve analyses to ensure they remain supportable under evolving state law and administrative guidance. Companies should also evaluate whether amnesty or voluntary disclosure opportunities may help mitigate historical exposure through reduced lookback periods, penalty relief, and potential interest savings.

Featured Experts 

Emilio Martinez

Leanne Scott 

Permanent Loss Carry-Back Regime Proposed

As part of the 2026-27 Federal Budget, the government proposed a permanent two-year loss carry-back regime for companies with aggregated global turnover below AUD 1 billion, applying to income years beginning on or after July 1, 2026.

Under the proposal, eligible companies could offset current-year tax losses against taxable income from the prior two years, generating a refundable tax offset limited by the franking account balance. A separate measure from 2028-29 would allow early-stage companies to convert losses into a refundable offset, subject to PAYG withholding and FBT-based caps on Australian wages.

A&M TAS Says:

The proposal adds a more objective recovery source for tax losses by allowing carryback to prior taxable income. This could have significant implications for deferred tax asset realizability, especially where future-profit forecasts are less certain.

Key implications include:

• Valuation Allowance/Recognition: Carryback to prior taxable income may support release or avoidance of a valuation allowance because it relies less on future-profit projections.
• Recognition Timing: Carryback benefits should be recognized when management has the ability and intent to pursue the claim.
• Measurement: The benefit is limited by prior taxable income and the franking account balance, making both key constraints in the amount recognized.
• Character of Benefit: Recovery through carryback is generally reflected as a current tax receivable rather than a deferred tax asset.
• Legislative Status: Because the measure is not enacted, recognition is not appropriate yet, though disclosure may be warranted if enactment could materially affect valuation allowance conclusions.

Capital Gains Tax Reform: Removal of Pre-CGT Status for Corporate Assets

Legislation has been introduced to reform the capital gains tax (CGT) regime from July 1, 2027. For individuals, trusts, and partnerships, the 50% CGT discount would be replaced with CPI-based indexation and a 30% minimum tax on gains accruing from that date. Pre-July 1, 2027, gains would retain existing treatment.

For corporates, the more important proposal is the prospective removal of pre-CGT status for assets held before September 20,1985, so that gains accruing after July 1, 2027, would fall within the CGT regime.

A&M TAS Says:

This could be a material deferred tax development for corporate balance sheets. Pre-CGT assets historically have not generated deferred tax liabilities. If post-July 1, 2027 growth becomes taxable on disposal, companies may need to recognize new taxable temporary differences for assets previously outside the CGT net.

Key tax accounting considerations include:

• Identify affected pre-CGT assets that currently carry no deferred tax.
• Determine the transition cost base or reset value as of July 1, 2027.
• Assess recognition and measurement under ASC 740 and IAS 12, including expected manner of recovery, enacted or substantively enacted law considerations, and any relevant initial recognition or outside basis concepts.

Because the legislation has not yet been enacted for ASC 740 purposes or substantively enacted for IAS 12 purposes, no immediate recognition impact would generally arise. Disclosure may still be warranted if the proposal could materially affect deferred tax balances, valuation allowance conclusions, or deferred tax asset recognition once enacted or substantively enacted.

The key open issues are transition valuation and scope. From a tax accounting purpose, these uncertainties may affect the timing and amount of deferred tax recognition, tax basis assumptions, and disclosures around material judgments.

Featured Experts 

Andrew Moore

Compliance Framework for the Additional CSLL under Pillar Two

The Brazilian Federal Revenue Service (RFB) issued Normative Instructions (IN) No. 2,319/2026 and 2329/2026, introducing procedural rules for the reporting and payment of the Additional Social Contribution on Net Profits (CSLL) established under Brazil’s Pillar Two framework.

The rules confirm that the Additional CSLL must be reported through DCTFWeb and establish filing and payment deadlines, including transitional rules for the first reporting year. For calendar-year groups, reporting generally is due by June 30 of the following year, with payment due by July 31.

The guidance does not change the calculation of Brazil’s domestic Pillar Two top-up tax, but it moves the regime into operational compliance by setting the procedures for administration, reporting, and payment.

A&M TAS Says:

The focus has shifted from legislative adoption to execution. In-scope groups should test whether existing reporting processes, governance, data collection, and controls can support calculation, reporting, and payment of the Additional CSLL. The practical risk is not just missing a filing deadline; it is having Pillar Two compliance sit outside the close, transfer pricing, and tax provision processes that need to support the reported position.

Featured Experts

Rodrigo Kurayama

Kleiton Nakumo 

Luiz Andolfato 

Following three by-election wins and several MPs crossing the floor since the last general election, the Canadian government led by Mark Carney now holds a majority in the House of Commons.

Bill C-31, Budget 2025 Implementation Act, No. 2, received Second Reading on June 3, 2026. 

Key measures include:

• Immediate Expensing for Eligible Manufacturing Buildings: It allows immediate expensing for certain Canadian manufacturing buildings, additions, and alterations acquired after November 3, 2025, where at least 90% of floor space is used for manufacturing before 2030, with a phase-out for qualifying use beginning from 2030 through 2033.
• Debt Forgiveness Rules - Amends the forgiven amount definition to prevent corporations, partnerships, and trusts from temporarily entering and annulling bankruptcy to avoid the debt forgiveness rules.
• Foreign Affiliate and DMTT Relief - Provides relief for certain domestic minimum top-up taxes paid by foreign affiliates in computing deductions for foreign accrual tax on FAPI, with related changes to foreign tax credit and surplus account rules.
• Global Minimum Tax Act - Implements the UTPR with an effective date deferred to fiscal years beginning on or after December 31, 2025, and adds side-by-side safe harbor and ultimate parent entity safe harbor rules reflecting recent OECD guidance and prior legislative proposals.
• Clean Economy Investment Tax Credits - Implements January 2026 draft legislation and related technical amendments, including changes to related-party transfer rules and to the clean hydrogen and carbon capture, utilization, and storage credits.

Bill C-30, Spring Economic Update 2026 Implementation Act, received royal assent on June 19, 2026. It temporarily suspends the federal fuel excise tax on gasoline, diesel, and aviation fuels from April 20 to September 7, 2026.

A&M TAS Says:

Bill C-31 should not be reflected in the provision until the relevant recognition threshold is met. It has received Second Reading and is under committee consideration, but it has not been enacted for ASC 740 purposes or substantively enacted for IAS 12 purposes. 
Companies should monitor the bill and consider disclosure if the proposed measures could materially affect deferred tax balances, ETR forecasts, or Pillar Two current tax exposures once enacted or substantively enacted.

Bill C-30 is enacted, but the fuel excise tax suspension is not a tax based on net income and generally does not fall under ASC 740 or IAS 12. Any provision impact is indirect: lower excise costs may affect pretax income, margins, forecasts, DTA realizability, valuation allowances, and interim ETR estimates. 

Companies should run those effects through the broader forecast rather than treating the excise change as an income tax law change.

Featured Experts

Andrew Morreale

Joey Bogle

Stephanie Tse 

China’s New VAT Law: Indirect Tax Changes That Impact Earnings

China’s new Value-Added Tax (VAT) Law, effective January 1, 2026, consolidates the VAT framework into a comprehensive statute. The law represents less of a technical overhaul and more of a move toward a stable, codified indirect tax system.

VAT is generally viewed as a balance sheet tax because recoverable input VAT offsets output VAT rather than flowing through the profit and loss (P&L) statement. The new law still affects earnings because non-creditable VAT can become an immediate cost or increase the tax basis of assets, resulting in higher future depreciation or amortization.

1. New Long-Term Asset Input VAT Rules

The new law introduces a long-term asset input VAT adjustment regime. Where a general VAT taxpayer acquires a long-term asset used for both taxable and non-creditable purposes, assets with an original value of up to RMB 5 million may generally qualify for a full input VAT deduction, while assets valued above RMB 5 million may require annual adjustments over the mixed-use period.

The practical implication is that input VAT on large mixed-use assets may no longer be economically neutral. Any clawback can increase the asset’s cost and flow through as depreciation or result in an annual P&L expense, depending on how the irrecoverable amount is recorded.

2. Annual Input VAT True-Up Requirements

The VAT Law and its Implementation Regulation also formalize the annual input VAT reconciliation process. Where input VAT for exempt or non-creditable activities cannot be separately allocated, taxpayers must estimate the non-deductible portion based on the relevant revenue ratio and true up the amount during the January filing period of the following year.

That true-up can create P&L volatility through the additional disallowance or release of previously denied credits. Financial institutions, real estate operators, and businesses with significant exempt income or mixed activities should be especially aware of these requirements.

3. Interest-Related Input VAT Remains Blocked, but Is Now Considering “temporary”

VAT on interest expense and certain financing-related costs remains non-deductible, but the regulations now describe this restriction as temporary and subject to periodic review.

For now, financing-related VAT remains a source of tax leakage and an additional borrowing cost. If China later relaxes the restriction, costs historically treated as irrecoverable may become recoverable prospectively, reducing the impact on the P&L statement.

A&M TAS Says:

The new VAT Law does not change VAT’s fundamental role as an indirect tax, but it creates additional ways for VAT to affect earnings. Companies should reassess how irrecoverable VAT is identified, measured, and tracked across fixed assets, revenue mix, financing costs, forecasts, and financial reporting. The key takeaway is simple: VAT should not be viewed solely as a compliance issue if it can affect asset costs, depreciation, margins, or current and deferred tax assumptions.

Featured Experts

Yvette Chan 

Alan Pang

Aska Li 

Hong Kong’s 2026-27 Budget reflects stronger fiscal conditions and a renewed focus on using tax policy to support economic development, innovation, and financial market activity.

For tax accounting teams, the key consideration is not the budget announcement itself; it is whether the expected changes affect effective tax rate (ETR) forecasts, deferred taxes, uncertain tax positions, Pillar Two exposure, or disclosure planning.

Global Minimum Tax and Hong Kong Minimum Top-Up Tax

The Government reaffirmed its commitment to implementing the Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) Pillar Two global minimum tax, including a Hong Kong minimum top up tax, with implementation expected in 2027 28. The measures are projected to generate approximately HK$15 billion in additional annual tax revenue.

A&M TAS Says:

Although implementation remains prospective, companies should begin incorporating Pillar Two in their forecasting processes. Key areas of focus include group ETRs, interactions with existing Hong Kong incentives, data ownership, and compliance readiness.

Stamp Duty Relief for Intra-Group Transfers

The Budget proposes relaxing the criteria for intra-group stamp duty relief under Section 45 of the Stamp Duty Ordinance by expanding the definition of associated bodies corporate and lowering the ownership threshold from 90% to 75%. The changes are intended to apply retrospectively to instruments executed on or after February 25, 2026.

A&M TAS Says:

Groups planning internal restructurings should reassess stamp duty exposures, previously recognized liabilities, and any non-income tax UTP implications arising from the expanded relief.

Asset and Wealth Management Tax Enhancements

Proposed refinements to Hong Kong’s fund tax concession regimes will extend coverage to funds-of-one and treat digital assets, precious metals, and specified commodities as qualifying investments. Implementation is expected beginning with the 2025-26 year of assessment.

A&M TAS Says:

Asset and wealth management groups should evaluate whether the broader concessions affect existing tax positions, deferred tax assumptions, or medium-term ETR forecasts, especially for structures that were previously ineligible for the relief.

Corporate Treasury Centres and Intellectual Property

The Government announced enhanced measures for Corporate Treasury Centres (CTCs), including additional incentives, increased flexibility, and a proposed pre approval mechanism. In parallel, refinements to the intellectual property tax regime are being considered, including deductions for capital expenditures incurred to acquire IP or IP usage rights.

A&M TAS Says:

Enhanced incentives may create temporary differences, affect deferred tax recognition and measurement, and require coordination across tax planning, treasury, IP strategy, and financial reporting functions.

Tax Transparency and Reporting Frameworks

Legislation is expected in 2026 to implement the Crypto-Asset Reporting Framework (CARF) effective January 1, 2027, alongside amendments to the Common Reporting Standard (CRS) effective January 1, 2028.

A&M TAS Says:

These rules are compliance-driven, but they can still affect tax risk assessments, governance, UTP disclosures, and documentation requirements for groups with digital assets or complex cross-border structures.

Featured Epxerts

Chee Weng Lee

Van Lai

Indian tax accounting is governed by the Income-tax Act, 2025, and the Income Computation and Disclosure Standards (ICDS), which establish the framework for taxable income. Financial accounting focuses on financial performance and position, while tax accounting focuses on taxable income and statutory compliance.

Key Recent Developments (Highlights):

Finance Act 2026

The Finance Act, 2026, enacted on March 30, 2026, implements the Union Budget’s tax proposals for fiscal year 2026-27. Several direct tax changes affect current tax, deferred tax, and MAT credit assessments.

Minimum Alternate Tax (MAT)

The MAT regime for companies under the old tax regime was revised to include a lower MAT rate, changes to the character of MAT, the lapse of certain unused MAT credits, and restrictions on the use of credits accumulated through March 31, 2026.

A&M TAS Says:

The MAT changes should be evaluated using the accounting model for alternative minimum taxes, rather than a simple rate change that automatically remeasures all deferred taxes. The lower MAT rate affects current tax when MAT is payable, but deferred taxes generally continue to be measured under the regular tax system unless deferred tax items are expected to reverse when MAT is the applicable basis. The bigger provision issue is MAT credit recoverability: whether new credits are recognizable, whether existing credits remain realizable, and whether credits no longer usable must be derecognized.

1. Current tax expense should reflect MAT when it is the tax actually payable for the period.
2. Deferred tax assets for MAT credits should be recognized only when realization is supportable under the applicable accounting framework, including consideration of expected future regular tax liabilities and any limits on credit utilization.
3. Previously recognized MAT credit assets should be reassessed in light of the new rules, with the derecognition required for amounts that are no longer expected to be utilized.

Retrospective Amendments: The Finance Act 2026 also includes retrospective amendments addressing judicial precedents under which assessments were overturned on technical grounds. Companies that relied on favorable rulings and did not recognize current tax liabilities may need to reassess whether a potential obligation now constitutes a present obligation.

New Income Tax Act 2025 and Income Tax Rules 2026, Effective April 1, 2026

The new Income-tax Act 2025 [PB9.1]and Income-tax Rules 2026 replace the Income-tax Act 1961 and Income-tax Rules 1962, effective April 1, 2026. Because the new law does not include substantive rate changes, existing deferred tax assets and liabilities generally should not require remeasurement solely because of the statutory replacement.

Adoption of Ind AS 117, Effective April 1, 2026, for Insurance Companies

The Insurance Regulatory and Development Authority of India (IRDAI) mandated the adoption of Ind AS 117, which is equivalent to IFRS 17, for insurance companies effective April 1, 2026. Companies may seek a one-year deferral if they apply by April 30, 2026, and submit a board-approved implementation plan. During the transition, insurers must report under both Indian Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) for two years.

The tax framework for insurers has not yet been aligned with IFRS, so the transition may create timing differences between accounting and taxable profits. These differences could materially affect deferred tax positions, particularly in the transition year.

A&M TAS Says:

Ind AS 117 should improve transparency, but it also changes the timing and measurement of insurance results. Insurers should phase implementation carefully, with a specific focus on transition-year deferred taxes, current tax treatment under local law, and whether systems can support both accounting and tax reporting during the dual-reporting period.

Featured Experts

Tejas Mehta

Gagan Malik

Foreign Royalty Withholding Tax

A notable development in Q2 2026 is the Irish High Court’s decision in Revenue Commissioners v. Accenture Global Solutions Limited, which addresses the interaction between foreign tax credit relief and the deductibility of expenses related to royalty income.

The Court overturned the earlier Tax Appeals Commission determination and held that foreign royalty withholding tax (FWHT) is not deductible as a trading expense under Section 81 of the Taxes Consolidation Act 1997 (TCA 1997) where a statutory foreign tax credit regime applies. This remains the case even where the credit is unusable in practice (for example, where the taxpayer is in a loss-making position).

The taxpayer, an Irish-resident company engaged in cross-border IP licensing, incurred FWHT on royalty income received from foreign jurisdictions but could not utilize the associated foreign tax credits due to sustained tax losses. It sought to deduct the FWHT as a trading expense; however, the Court rejected this approach, confirming that the double taxation relief provisions in Schedule 24 operate as a comprehensive and exclusive regime for relieving foreign taxes. 

A&M TAS Says:

The decision may affect current tax and tax accounting judgments for groups with Irish IP holding or licensing structures. If foreign royalty withholding tax is not deductible and credit capacity is unavailable, the result may be a permanent tax leakage rather than a timing difference. Companies should reassess expected credit utilization, valuation allowances or deferred tax asset conclusions, forecasted ETRs, and disclosures in loss or low-credit-capacity scenarios.

Featured Experts

David Smyth 

Gavin Brady 

Italy’s Q2 developments shifted the focus from new legislation to implementation, interpretive guidance, and accounting-tax alignment. The key tax accounting implications include ETR forecasting, temporary differences, and disclosure readiness.

Tax Accounting and Reporting

From Policy to Execution: ETR and Sector-Specific Measures

A 2%Imposta Regionale sulle Attività Produttive (IRAP) rate increase for companies in specified Classificazione delle Attività Economiche (ATECO[ sectors for FY 2026-2027 creates an immediate forecasting issue. Companies in affected sectors should update their ETR models and interim reporting assumptions rather than waiting for the annual close.

• Tax accounting is increasingly influenced by targeted, sector-driven interventions.
• Requiring real-time updates to ETR calculations, forecasts, and interim reporting assumptions.

Temporary Differences: Incentives and Accounting–Tax Misalignment

Implementation rules for the new hyper-depreciation regime enhance tax depreciation for qualifying investments, accelerating tax deductions relative to book depreciation while increasing the need for asset-level tax basis tracking.

Developments related to decommissioning and restoration provisions also highlight the continuing misalignment between accounting and tax rules, creating new or broader temporary differences and greater judgment around recoverability and timing.

Recognition and Classification: Why Characterization Matters

Q2 guidance also reinforces that tax outcomes depend on characterization, not just legal form. This affects public contributions, incentives, capital gains, and real estate transactions in which the tax treatment depends on their linkage to taxable income or whether real rights are retained.

Disclosure and Transparency: Public CbCR as a Structural Shift

Public country-by-country reporting (CbCR) is now operational in Italy for MNE groups with consolidated revenues above €750 million for two consecutive years. It requires public reporting of revenues, profit before tax, income tax paid and accrued, and employee metrics by jurisdiction.

A&M TAS Says

Italy’s Q2 theme is execution discipline. Sector-specific IRAP increases and incentive regimes require timely ETR updates; hyper-depreciation and accounting-tax misalignment require stronger deferred tax asset/deferred tax liability (DTA/DTL) tracking; and public CbCR raises the bar for consistency across tax accounting, compliance, and external reporting. The focus is less on new legislative changes and more on ensuring that data, documentation, and forecasts remain aligned.

Japan Enacts 2026 Tax Reform Package: Side-by-Side Safe Harbor and Expanded Pillar Two Relief

Japan enacted its 2026 tax reform package, which was approved by the Diet on March 31, 2026, and became effective January 1, 2026. The package implements the OECD/G20 side-by-side framework and related Pillar Two measures, including an exemption mechanism that may deem Income Inclusion Rule (IIR) and Undertaxed Profits Rule (UTPR) top-up tax to be zero where the ultimate parent entity is in a qualifying jurisdiction.

The reform also introduces UPE-level UTPR relief, allows certain tax incentives to be reflected in adjusted covered taxes within limits, extends the transitional CbCR safe harbor to fiscal years beginning on or before December 31, 2027, and incorporates elements of the OECD Administrative Guidance into domestic law.

Practical Considerations for Multinational Groups

The relief is useful, but it is conditional. Groups must assess eligibility on a jurisdiction by jurisdiction basis, manage overlaps among safe harbors, document support for relief positions, and maintain reliable data even where top-up tax is reduced or eliminated.

A&M TAS Says:

Japan’s safe harbor and relief measures may reduce current top-up tax exposure, but they do not eliminate the provision work. Companies still need to assess eligibility, refine uncertain tax position analysis where relief depends on evolving OECD guidance, model ETR scenarios where eligibility is uncertain, and ensure consistency across tax filings, Pillar Two calculations, and financial reporting. The limited extension of the transitional relief should be used to improve data quality, governance, and documentation before full Global Anti-Base Erosion (GloBE) calculations become unavoidable.

Featured Experts

Ichiro Suto 

Yoshiaki Uno

Samuel Costa 

CUFIN and Deferred Tax on Dividends: NIF D-4 vs. ASC 740-30

Dividend distributions in Mexican-U.S. corporate structures can result in different deferred tax outcomes under Mexican NIF D-4 and U.S. GAAP ASC 740-30.

The key difference is not whether temporary differences exist, but rather a deferred tax liability is recognized on undistributed earnings.

How It Works: CUFIN vs. Indefinite Reinvestment

Under Mexico’s Income Tax Law, dividends paid from the Net Tax Profit Account (CUFIN) generally are not subject to an additional 10% dividend tax.

Under NIF D-4, entities may not record a deferred tax liability if future distributions are expected to be covered by sufficient CUFIN. Under ASC 740-30, the indefinite reversal exception applies only when an entity can demonstrate both the intent and the ability to reinvest earnings indefinitely. Without such support, a deferred tax liability is required.

Practical Implications for Dual-Reporting Entities

• CUFIN management: Monitor CUFIN balances because an insufficient CUFIN balance or distributions from pre-2014 earnings, may trigger the 10% dividend tax.
• Dual reporting: Mexican subsidiaries of U.S.-listed groups should reconcile NIF D-4 and ASC 740-30 outcomes and keep disclosures consistent across reporting regimes.
• Change in intent: Under ASC 740-30, a plan to repatriate earnings because of restructuring, liquidity needs, or ownership changes may require immediate deferred tax recognition and affect the ETR.

Featured Experts

Alfredo Garcia 

Juan Alberto Morales 

Ernesto Zuniga 

Earnings Stripping and Real Estate Investment

The Dutch Ministry of the Interior is examining the impact of the earnings stripping rule (ESR) on real estate investment, particularly as foreign investment in residential real estate has declined.

The Dutch ESR limits net interest deductibility to the higher of 24.5% of tax EBITDA or €1 million, with excess interest generally carried forward.

The Dutch rules are more restrictive than the EU ATAD baseline because the Netherlands did not adopt the group ratio escape and applies lower thresholds. As interest rates remain elevated, more taxpayers, including real estate investors, social housing corporations, and other leveraged businesses, are challenging or reassessing the rules.

Dutch Supreme Court on Abuse of Law in Financing Structures

The Dutch Supreme Court addressed interest deductibility in a cross-border financing structure involving a Luxembourg lender, a Dutch borrower, a Luxembourg participation acquisition, and a taxable bond portfolio.

The Court confirmed that the abuse-of-law doctrine can apply where taxable profits are paired with artificially created interest expense that erodes the Dutch tax base. A structure may be considered abusive even if individual steps have a business rationale where those steps are unnecessary to achieve that rationale and are primarily tax-driven.

Proposed Fund for Joint Account Changes Delayed

Proposed changes to the Dutch fund for joint account (FGR) rules are not expected to take effect until January 1, 2028.

The Ministry of Finance continues to consider whether tax transparency should be elective through an opt-out or opt-in model. Accordingly, fund classification remains an area to monitor rather than an immediate recognition event.

A&M TAS Says:

The Dutch developments may affect provision judgments even without an immediate legislative change. Companies should refresh interest limitation forecasts, assess deferred tax assets related to disallowed interest carryforwards, and revisit valuation allowance conclusions if financing costs or projected taxable income have changed.

The Supreme Court decision also puts pressure on financing structures that rely on interest deductions but have weak commercial substance. Those positions should be revisited to assess uncertain tax position treatment, documentation, and disclosures. The FGR proposals remain premature for recognition; however, fund and investment structures should monitor classification changes that could affect current tax, deferred taxes, and outside basis conclusions once enacted or substantively enacted.

Featured Experts

Nick Crama

Oscar Traast 

Andreea Butnaru 

Canary Islands Investment Reserve: Stricter Accounting and Compliance Requirements

The Canary Islands Investment Reserve (RIC) allows taxpayers to reduce the taxable base by allocating undistributed profits to a reserve, provided the reserve is properly recorded, invested, and maintained for the required period.

Recent case law adopts a stricter view. In a February 19, 2026, decision, the Central Economic-Administrative Court (TEAC) held that failing to show the RIC on the balance sheet during the maintenance period is equivalent to early disposal and triggers recapture. The Court distinguished formal accounting defects, which may result in penalties, from material failures, such as omission or early disposal, which can forfeit the incentive.

The Spanish Supreme Court reached a similarly strict conclusion on April 6, 2026, holding that an absorbing entity in a merger may not rely on pre-merger investments made by the absorbed entity to satisfy its own RIC. The Court required a direct link between the entity recording the reserve and the entity making the qualifying investment, despite accounting retroactivity and concept of universal succession.

A&M TAS Says:

These rulings make the RIC more stringent. Companies should ensure that the reserve is properly recorded, maintained, and linked to qualifying investments, especially in restructurings, to avoid recapture of the tax benefit.

Spanish Supreme Court Reaffirms Cash Pooling Transfer Pricing Approach

In an April 22, 2026, judgment, the Spanish Supreme Court reaffirmed that cash pooling arrangements should be analyzed from a group-wide economic perspective.

The Court endorsed symmetrical interest rates for debit and credit positions and the use of the group credit rating rather than each participant’s standalone rating. It also focused on the pool leader’s limited coordination role, rejecting comparisons to ordinary third-party banking arrangements.

The decision reinforces a substance-over-form approach aligned with OECD transfer pricing principles for integrated treasury systems.

A&M TAS Says:

Cash pooling policies should be supported by a group-wide economic analysis. Companies should confirm that pricing reflects the group credit profile, the integrated treasury function, and the pool leader’s actual role and risk profile.

Featured Experts

Ángel Calleja 

Patricia Alonso de la Fuente

Jesús González 

Laura Fernández Parrado 

Switzerland has effectively cleared the way for extending the tax loss carryforward period from seven to ten years. Parliament approved the Federal Act on the Extension of the Loss Carryforward Period on December 19, 2025, and the optional referendum period expired without a referendum on April 17, 2026. The Federal Council must still set the effective date, currently expected no later than January 1, 2028.

The extension applies to losses arising from the 2020 tax period onward for direct federal, cantonal, and communal taxes. Earlier losses remain subject to the seven-year limit. The measure should help companies affected by COVID-19, start-ups, and businesses with longer investment or ramp-up cycles.

The reform also extends the recapture period for foreign permanent establishment losses that were previously offset against Swiss profits. For losses arising from 2020 onward, the recapture period increases from seven to ten years, extending the period for monitoring foreign branch profitability and potential Swiss tax reversals.

The reform extends only the carryforward period. Switzerland still does not permit loss carrybacks, and the basic mechanics of the loss regime otherwise remain unchanged.

A&M TAS Says:

The longer Swiss loss carryforward period may support deferred tax asset recognition and valuation allowance conclusions for losses from 2020 onward, but it does not establish realizability by itself. Companies still need supportable forecasts, jurisdiction-specific profitability, and an analysis of the character of available losses.

The extension of the foreign permanent establishment recapture period also matters. Groups that used foreign branch losses against Swiss taxable income should update their monitoring periods and assess whether projected foreign permanent establishment (PE) profits could trigger Swiss taxable income. Because the effective date is still pending, disclosures may be appropriate if the reform could materially affect DTAs, valuation allowances, or ETR forecasts once confirmed.

Featured Experts

Kersten A. Honold  

David Brusa 

Pascal Schmuckli 

Sandro Schacher 

Thailand’s Pillar Two framework has moved from legislation to implementation. Although Q2 2026 did not bring significant changes to TAS 12 or IAS 12, it heightened the focus on international tax transparency and information exchange under the OECD global minimum tax framework.

For multi-national enterprise groups operating in Thailand, the focus is shifting from understanding the rules to preparing for compliance, reporting, governance, and documentation.

Thailand Joins the GloBE Information Exchange Framework

On June 16, 2026, the Cabinet approved Thailand’s participation in the OECD GloBE Information Exchange Framework, including the GloBE Multilateral Competent Authority Agreement.

The first exchange of GloBE Information Returns with partner jurisdictions is expected by December 2027.

Pillar Two Implications for Thai Financial Reporting Standards

Pillar Two primarily affects Thai entities that are part of in-scope MNE groups, including Thai subsidiaries of foreign groups and Thai-parented groups with cross-border operations. The financial reporting implications are most significant for entities applying full Thai Financial Reporting Standards (TFRS), including listed companies and other publicly accountable entities.

The practical impact generally begins in FY 2025, aligned with Thailand’s Top-up Tax Emergency Decree for accounting periods beginning on or after January 1, 2025.

Because TFRS is substantially converged with IFRS, no additional Thailand-specific Pillar Two accounting or measurement requirements have been introduced beyond the IFRS/IAS 12 amendments.

A&M TAS Says:

Once exchange begins, the Thai Revenue Department will receive GloBE information about Thai constituent entities from foreign tax authorities and share information on Thai-parented groups with partner jurisdictions. Thai entities should prepare now for an increased audit scrutiny by testing data readiness, governance, documentation, and controls supporting Pillar Two positions.

The accounting framework has not materially changed, but the compliance environment continues to evolve. Companies should assess whether Pillar Two developments affect disclosures, reporting processes, and future accounting positions.

Featured Experts

Korneeka Koonachoak

Amornphan Oopachodsuwan

Key Updates to Vietnam VAT Rules

On May 5, 2026, Vietnam issued Decree No. 144/2026/ND-CP, which became effective on June 20, 2026, amending VAT guidance under Decree No. 181/2025/ND-CP. 

Key changes include:

• Confirms the VAT exemption for sales of certificates of deposit;
• Adds certain insurance services to the VAT exemption list;
• Provides revenue rules for input VAT allocation for banks, securities companies, and insurance businesses;
• Expands the revenue base used for input VAT allocation to include certain transactions that are not subject to VAT declaration and payment; and
• Allows input VAT claims before deferred-payment due dates, with subsequent adjustments if non-cash payment evidence is not available.
• Businesses should review VAT recovery calculations, input VAT allocation methods, and accounting policies related to VAT receivables and indirect tax compliance.

A&M TAS Says

Vietnam continued to refine VAT and tax administration in Q2 2026. The VAT changes affect non-taxable transactions, input VAT allocation, and recovery for deferred-payment purchases.

These changes are mostly administrative, but they can still affect VAT recoverability, input VAT allocation, tax-related balance sheet accounts, payroll controls, and compliance calendars.

Featured Experts

Anh Ngoc

Thuy Nguyen