EU Gateway newsletter in two minutes
As the implementation of DAC9 approaches, eight EU Member States are spearheading efforts to simplify Pillar Two compliance by enabling centralized TTIR (Top-Up tax information return, the EU Global Information Return) filing and facilitating cross-border data sharing among EU Member States. The EU Gateway highlights that this initiative is especially advantageous for non-EU headquartered groups with extensive operations within the EU, as they can benefit significantly from these streamlined processes. In addition, the European Commission's ongoing study on a unified EU Tax Identification Number holds promise for further easing cross-border tax management; the EU Gateway underscores its potential to reduce administrative burdens and enhance taxpayer identification across the region.
On the domestic front, the Dutch Supreme Court has confirmed that the fraus legis doctrine, which denies tax benefits that violate the law’s intent, may still apply to base erosion transactions even when the conditions of a specific anti-base erosion rule are not met. Meanwhile, France’s digital services tax has been upheld by its Constitutional Court, reinforcing its applicability and potentially serving as a precedent for similar digital services taxes across the EU amidst ongoing geopolitical tensions with the US. Finally, the Belgian Constitutional Court's ruling annulling aspects of the Belgian Cayman tax regime should not go unnoticed.
Moreover, a diverse set of Pillar Two registration rules is emerging across the EU, adding layers of complexity for multinational corporations. In tandem with these evolving regulatory landscapes, significant domestic tax law developments are taking place. The EU Gateway highlights that Malta has introduced a 15% final tax regime as an alternative to its full imputation system, and Poland is planning to raise its CIT rate for banks from 19% to 30% by 2026. Meanwhile, Slovakia is advancing with comprehensive tax reforms that encompass new progressive income taxes for individual, sector-specific levies, and a new tax on mining activities.
The EU Gateway also highlights and welcomes advancements with CBAM simplifications for small importers, resulting in reduced compliance costs and clearer procedures. These changes enable businesses to better assess their exposure and strategically plan in advance of the 2026 CBAM definitive phase.
EU highlights
Domestic Highlights
Dutch Supreme Court clarifies fraus legis applicability despite successful rebuttal under article 10a CITA
On 5 September 2025, the Dutch Supreme Court delivered a significant judgment on interest deduction in acquisition structures. The novelty is that where in a transaction a Specific Anti-Abuse Rule does not apply because of invoking a business reasons rebuttal, the Dutch General Anti-Abuse Rule, fraus legis, can still apply for reasons of acting in conflict with the object and purpose of the corporate income tax act as a whole.
But let's start from the beginning: Article 10a CITA is an anti-tax base erosion rule. It generally prevents interest deduction on loans from related entities used for transactions like acquiring shareholdings unless the taxpayer proves either sufficient taxation on the part of the recipient of the interest or that the legal transaction and the loan raised for it are based on business reasons (business reasons rebuttal). The article aims to prevent creating an interest deductions without a link to creating taxable income (anti-base erosion). The rule is actually the codification of fraus legis cases of the ‘90s. You may remember this article as it was under review by the CJEU in the X BV case (C-585/22 - see EUDTG newsalert of 4 October 2024).
Previous case law indicated that fraus legis could apply even if Article 10a CITA does not apply, for instance when the lender is unrelated to the taxpayer, but the Dutch tax base is still eroded. It was, however, unclear whether fraus legis could also apply if Article 10a CITA prima facie applies but the rebuttal possibility of Article 10a(3) CITA is successfully invoked. The Dutch Supreme Court has now confirmed and clarified this. See our PwC tax news article ‘Supreme Court clarifies: fraus legis and interest deduction’ for more information.
EU Gateway observation
The judgment concludes a long-running procedure on interest deduction in acquisition financing. The Court rules that even when a targeted anti-abuse rule does not apply because of the presence of business reasons, it can still be caught in the net of fraus legis. The ruling resulted in quite some raised eyebrows as the Court did not go out of its way to clarify what factors were decisive in arriving at that conclusion. It rather seemed to have been a ‘smell test’. And boy, did it smell. Soon the Dutch Supreme Court is expected to rule on a case that has similarities with this case, but also a number of important and distinct differences. Hopefully the Supreme Court will clarify its views in this ruling.
French Digital Services Tax survives constitutional challenge
On 12 September, the French Constitutional Court upheld the digital services tax (DST) implemented since 2019, affirming its constitutionality against various taxpayer criticisms. The French DST targets both resident and non-resident companies with global turnovers above EUR 750 million and French turnover exceeding EUR 25 million, levying a 3% tax on French-source revenue from specific online services. The court dismissed challenges concerning the scope of the tax, arguing the differential treatment aligns with its aim to tax online services deriving value predominantly from user activity, such as targeted advertising. It justified the taxation thresholds as objective measures targeting businesses with significant digital presence in France and globally. In addition, the territoriality rules, which focus on French user localization, uphold the tax's purpose, regardless of the service's value creation outside France. Clarifications on applying the tax for 2019 were provided, allowing calculations based on a 5-month data period for precision. Lastly, the court deemed the 3% tax rate reasonable and compatible with constitutional standards, independent of corporate income tax obligations, given that the basis of the DST is on turnover rather than profit.
EU Gateway observation
With both Pillar One and Pillar Two in the doghouse, DSTs seem to be fair game. The French Constitutional Court reinforces France's authority to impose the DST on major digital platforms benefiting from French users. This development does add to the ongoing tensions with the United States, which views such taxes as discriminatory against American tech giants. In August 2025, Donald Trump criticized these measures and the EU's Digital Markets Act (DMA) and Digital Services Act (DSA) as unfairly targeting U.S. firms while - allegedly - being lenient towards Chinese tech companies. His threats of imposing “substantial” tariffs and export restrictions highlight broader geopolitical tensions in digital regulation and taxation, indicating that unilateral DSTs could continue to provoke international trade disputes. The situation is further complicated as many EU Member States have DSTs (e.g., Austria, Italy, Spain, Poland), and some may introduce them, such as Belgium's in 2027. Perhaps the French judgment may influence the viability of similar DSTs in other EU Member States.
We anticipate that DSTs will be a reality, and thus companies should assess how DSTs and similar taxes impact their group structure. Companies may also consider investigating whether certain DSTs may conflict with other law, regulation, and/or international treaties. In general, the increasing demand for revenue and the political appeal of taxing large foreign-owned tech companies may lead to more DSTs globally, also given the lack of agreement on Pillar One's Amount A. Tax functions need to stay agile in compliance, ensuring effective data extraction and reporting processes. Companies might also need to revisit their transfer pricing and profitability assessments. For more detail, consult PwC's Tax Policy Alert on Digital Services Taxes.
Patchwork of Pillar Two registration rules emerging across Europe
On 2 September 2025, Portugal published Ordinance 290/2025/1, confirming new registration forms and related instructions under the Portuguese Pillar Two regime. The form is designed for constituent entities in Portugal to register under the regime and notify its application to large domestic and multinational groups. The constituent entity registration must be submitted by the last day of the ninth month after the fiscal year-end or, for the first in-scope year, within 12 months after that year ends. For example, for groups having a fiscal year equal to the calendar year, the first filing, covering FY2024, is due by 31 December 2025. Registrations remain valid until group changes occur, requiring a new filing. Non-compliance can lead to fines ranging from EUR 5,000 to EUR 100,000 (plus daily surcharges), while inaccuracies may incur penalties from EUR 500 to EUR 23,500, although early-year exemptions may apply. See here for more information.
Portugal’s move reflects a broader EU trend toward local registration and notification frameworks under Pillar Two. Belgium requires notification within 30 days of the fiscal year start, while Ireland has also launched an online registration portal, requiring in-scope entities to register within 12 months of the first applicable fiscal year, even if no top-up tax is due. Other EU Member States such as Austria, Denmark, France, and Germany have also introduced similar obligations, creating a patchwork of registration requirements across the EU.
EU Gateway observation
This is a perfect example of the EU being composed of 27 EU Member States that cooperate on certain fronts and go at it alone on others. Varying registration requirements across EU Member States increase complexity for multinational groups, and managing compliance across multiple EU Member States should be carefully considered. Registration primarily serves administrative transparency, helping tax authorities identify in-scope entities early, but it does not alter substantive compliance obligations under Pillar Two. We note that the Directive itself does not mandate registration; such obligations are left to the discretion of EU Member States.
Belgian Constitutional Court partially overturns 'Cayman Tax' reform
In a pivotal decision on 18 September 2025, Belgium’s Constitutional Court partially annulled the 2023 “Cayman tax” reform, finding several provisions incompatible with EU law while upholding measures aimed at deterring tax avoidance through offshore structures. In a nutshell, the Belgian Cayman tax regime employs a look-through approach, taxing income from assets that are artificially separated from a Belgian taxpayer’s (“founder’s”) assets through legal constructs abroad at the founder’s level. For clarification, the “Cayman tax” is the informal term used to describe Belgium's look-through tax regime.
Below is a summary of the most important points of the judgment:
Definition of "Substantial Economic Activity": The Court struck down the reform's narrow definition of "substantial economic activity" for legal vehicles, defined as the provision of goods or services to a specific market, which had led to a Cayman tax exemption. The Court considered this approach too restrictive under EU law. However, it maintained the exclusion from the exemption for vehicles engaged solely in managing the founder's private wealth.
Exit Taxes and Tax Jurisdiction: Regarding the reform's exit taxes, which tax undistributed profits as if they were received when a taxpayer moved abroad or transferred a legal construction outside Belgium, the Court upheld their application. It annulled, however, the rule taxing profits earned when the founder was not a Belgian resident, as this exceeded Belgium’s tax jurisdiction.
Controlled Foreign Corporation (CFC) Rules and Cayman Tax Exemption: The Court annulled the provision limiting the Cayman tax exemption for income taxed abroad under controlled foreign corporation (CFC) rules to Belgian companies. It ruled that taxpayers should be allowed to demonstrate that income from the legal structure is taxed in the hands of a nonresident company in application of CFC rules similar to the Belgian rules and thus must be exempt from the Cayman tax in Belgium.
Ownership Threshold for Collective Investment Vehicles: The Court struck down the rule applying the Cayman tax to collective investment vehicles with over 50 percent ownership by one person or related persons, finding this threshold disproportionate. As a result, taxpayers will now have the opportunity to demonstrate that such ownership does not serve purely fiscal motives.
Nevertheless, challenges to other aspects of the Cayman tax regime were dismissed, including the presumption that the person listed in the ultimate beneficial owners register is the founder, the denial of capital gains exemptions for founders, the application of the Cayman tax to constructions indirectly held through regularly taxed intermediate entities, and the rules on dividend distributions from former legal constructions.
Other Domestic Developments
Czech Republic
- passes legislation including, amongst others, an increase of the allowance to 150% of R&D expenses (up to a group-wide CZK 50 million limit), and 100% R&D allowance for expenses over that limit.
Denmark
- gazettes Consolidated Minimum Taxation Act, aligning with the June 2024 and January 2025 OECD administrative guidance. It clarifies the interaction between international joint taxation and the minimum tax regime, as well as the treatment of deferred taxes.
Finland
- proposes DAC8 implementing legislation.
Germany
- the federal government approves Location Promotion Act Bill, providing a boost for more private investment and new jobs. Amongst others, companies in the financial market sector will be relieved of unnecessary bureaucracy with the elimination of unnecessary auditing, reporting, and disclosure requirements. See here for more information.
Greece
- maintains existing list of jurisdictions with preferential tax regimes for 2023.
Malta
- introduces Enabling Framework, a new elective tax framework allowing certain entities to opt for a final income tax at the rate of 15% on chargeable income, in lieu of Malta's long-standing full imputation system. Companies can either continue operating under Malta's full imputation system, with its higher headline rate and shareholder refund mechanism, or elect into the 15% final tax regime, accepting the lock-in period of five years and the finality of the tax, while potentially achieving greater international alignment and simplification.
Netherlands
- 2026 Tax Plan brings no changes to the tax rates nor to the cornerstones of the Dutch tax system, such as the broad participation exemption and withholding tax exemptions for payments to treaty countries. As national elections will be held on 29 October 2025, changes may still be made during the coming weeks. Any changes will be monitored on the PwC Netherlands website. See Budget Day webpage for more information.
- Q&A document on Minimum Tax Act 2024.
- Draft Bill Amending the Dutch Minimum Tax Act 2024 introduces some technical changes to the Dutch Minimum Tax Act 2024. The measures also incorporate some supplemental rules from the administrative guidance of the Inclusive Framework on Base Erosion and Profit Shifting IF, insofar as these have not already been included in the Pillar Two implementation process. See our PwC Tax News article 'Pillar Two 2026 Tax Plan' for more information.
Poland
- plans to increase the CIT rate for banks from the current 19% to 30% in 2026, 26% in 2027, and ultimately to 23% by 2028.
- Ministry of Finance launches consultation on draft Pillar Two top-up tax forms for IIR, UTPR, and QDMTT.
- Ministry of Finance launches consultation on the functioning of GAAR.
Portugal
- excludes Hong Kong, Liechtenstein, and Uruguay from the list of tax havens.
Slovakia
- parliament considers governmental tax reform draft bill to consolidate public finances. The proposal mainly covers a new progressive income tax system for individuals, increased social and health insurance contributions, an increased VAT rate for foods with high sugar and salt content, VAT changes concerning business vehicles not wholly used for business purposes, higher minimum corporate tax for high taxable revenue companies (for companies with taxable revenues in the tax period exceeding EUR 5 million from the current amount of EUR 3,840 to EUR 11,520), and increased sector-specific taxes (especially for businesses in the gambling sector, from the current 27% to 30%, and the collective investment sector from the current 4.356% to 15% for entities in the field of collective investment). Further, it introduces a new tax on the mining of gravel, sand, stone, and gravel sand, and a new specific income tax on bank fees linked to card deposits for gambling. In addition, it increases non-life insurance premium tax.
- proposes DAC8 & DAC9 implementing legislation.
Judicial Developments
Belgian Court of First Instance upholds domestic definition of beneficial ownership over EU Directive's Definition
The Brussels Court of First Instance ruled that Belgium's interpretation of "beneficial ownership" for the withholding tax exemption is governed by domestic law, not the EU Interest and Royalties Directive (EU IRD). The Court found that the term "entitled person" under Belgian law specifically refers to the legal owner of interest income, regardless of who might be the economic beneficiary. Consequently, the Luxembourg joint venture receiving interest payments from a Belgian company qualified for the withholding tax exemption. The Court emphasized that domestic law interpretation does not need to align with EU Directives if such alignment conflicts with the principles of legal certainty and non-retroactivity and is considered contra legem. Additionally, the Court dismissed the tax administration's claim that Belgian implementation should comply with the Directive's definition as interpreted by the CJEU in the Danish Beneficial Ownership cases in an economic manner, concluding that the withholding tax exemption applies legally, not economically. Finally, the Court applied the Belgian GAAR, determining no abuse of law occurred in the case at hand.
EU Gateway observation
We note that the Belgian tax authorities have decided to appeal the decision. From our perspective, we observe that although Belgium arguably misapplied the EU IRD concerning the definition of the beneficial owner, the Belgian judges were not permitted to carry out an EU-conform interpretation because it would be contra legem. The Court also noted that Article 6 of the Anti-Tax Avoidance Directive (ATAD)—a provision that all EU Member States must apply in corporate taxation, including also purely domestic situations and withholding taxes—has been adequately transposed into national law by the Belgian GAAR. The Court concluded that no tax avoidance motive existed because both the taxpayer and the company receiving the interest exercise an economic activity and have sufficient substance. The fact that the interest recipient may not be considered the “ultimate beneficial owner" as referred to in EU IRD was considered irrelevant to determining whether there is abuse in the case at hand.
We note that there were also a number of Dutch Supreme Court cases that dealt with the interpretation of the anti-abuse clauses concerning Dutch dividend withholding taxes. The Dutch Supreme Court deviated from the interpretation put forward by the legislator at the time of introduction and sought alignment with the CJEU Nordcurrent judgment (C-228/24) (see the EUDTG newsletter of 2 June 2015 on this judgment).
Tax Treaty Developments
Liechtenstein approves tax treaty with Estonia
Portugal and the UK sign a new tax treaty
EU Gateway development for an industry
The European Parliament has adopted significant simplifications to the EU’s Carbon Border Adjustment Mechanism (CBAM), aiming to reduce complexity for small and medium-sized enterprises and occasional importers. These changes are part of the “Omnibus I” simplification package presented on 26 February 2025, which aims to simplify existing legislation in the fields of sustainability and investment.
For importers of CBAM-covered goods – such as cement, aluminium, fertilisers, iron and steel, hydrogen and electricity – the revised rules bring substantial relief. Under the framework, companies importing less than 50 tonnes of CBAM-covered goods annually will be exempt from reporting and compliance obligations, a change expected to exclude 90% of importers while still covering 99% of total CO₂ emissions from key sectors like steel, aluminium, cement, and fertilisers. For EU businesses, these changes mean lower compliance costs and clearer procedures, allowing them to better assess their exposure and plan strategically as the 2026 CBAM definitive phase approaches. The text still has to be officially endorsed by Council of the EU. It will enter into force three days after publication in the EU Official Journal.
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© 2025 PricewaterhouseCoopers B.V. (KvK 34180289). All rights reserved. This content is for general information purposes only, does not constitute professional advice and should therefore not be used as a substitute for consultation with professional advisors. PricewaterhouseCoopers Belastingadviseurs N.V. does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
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