Issue 2026, no 1

EU Gateway newsletter

16/02/26

From the OECD’s new Side‑by‑Side package for Pillar Two to the European Commission’s upcoming proposal on the 28th regime for innovative companies, this EU Gateway issue captures the policy and legislative developments shaping the EU tax landscape at the start of 2026. The month also marks the beginning of the Cyprus Presidency of the Council of the EU, with a clear focus on tax simplification, competitiveness and cleaning up the EU’s direct‑tax acquis. In parallel, Cyprus has enacted a broad domestic reform, including raising its corporate income tax rate to 15%, bringing its headline rate into alignment with global minimum‑tax trends.

Across the EU, national reforms are accelerating. Bulgaria’s adoption of the euro on 1 January 2026 marks a momentum in the deepening of the monetary union—leaving only six EU Member States outside the eurozone. Meanwhile, Italy has implemented a far‑reaching corporate tax reform, reshaping capital‑gain taxation, participation‑exemption thresholds and rules for the financial sector, signalling a substantial shift in its corporate‑tax framework.

At the same time, Pillar Two remains a central focus for legislators, policy makers and companies. The OECD’s SbS package provides selective relief but also introduces new imbalances, with U.S.-parented groups benefiting from a “Qualified SbS regime” while EU‑parented groups must continue applying the full GloBE architecture. The resulting asymmetry has important competitiveness implications and will require careful monitoring as jurisdictions update their domestic rules. Voices in literature now also advocate changing domestic or EU P2 rules to be more in line with the U.S. system.

For businesses, this environment demands continuous attention. Whether you are working towards first‑year Pillar Two filings, adjusting systems to new reporting requirements or evaluating national reforms for your organisation, this EU Gateway newsletter keeps you informed.

Get the essentials in the two‑minute summary below, or dive into the full updates to understand what is driving tax and regulatory developments across Europe.

Jeroen Peters, Maurits Vedder & Vassilis Dafnomilis

EU Gateway newsletter in two minutes

OECD’s SbS Package: the Inclusive Framework confirmed the U.S. as the only jurisdiction with a Qualified Side‑by‑Side regime, switching off the IIR and UTPR for U.S.-parented groups and creating a new competitive asymmetry. EU groups remain fully in scope of GloBE but gain relief from the permanent Simplified ETR Safe Harbour and the extended transitional CbCR Safe Harbour. EU Member States will need to update domestic legislation to implement the package.

Public CbCR regime in the EU: it enters into full effect—first reports due end‑2026. EU and non‑EU MNEs with EU presence must prepare for publication of detailed tax and financial data covering FY2025. Beyond compliance, public CbCR introduces strategic communication challenges and reputational risks, as noted in recent academic commentary.

Cyprus assumes EU Council Presidency: expect progress on DAC reform, harmful tax practices and—most importantly—the omnibus package to streamline core EU direct tax directives. The programme notably omits BEFIT, suggesting it will not be prioritised.

28th regime proposal expected on 18 March 2026: the Commission will propose a new EU corporate form (S.EU) or harmonised rules for innovative firms. Tax elements appear limited— potentially only stock‑option deferral. We question whether a targeted start‑up tax framework would have been useful within the 28th regime.

CBAM enters its final phase: from 1 January 2026, importers must obtain authorised CBAM declarant status as a condition for importing CBAM‑covered goods into the EU.

EU–Mercosur deal signed but delayed: despite substantial trade benefits, the European Parliament’s referral of the agreements to the EU Court of Justice could delay entry into force by up to two years.

Foreign Subsidies Regulation: the Commission issued detailed guidelines on the application of the FSR, clarifying procedures for foreign‑subsidies investigations and notification requirements.

Bulgaria joins the eurozone: Bulgaria became the 21st euro‑area member on 1 January 2026, prompting widespread legislative currency updates. Expansion of the eurozone beyond this point seems unlikely in the near term due to political dynamics in remaining non‑euro Member States.

Italy adopts extensive corporate tax reform: Measures include the end of capital‑gain instalment taxation, new PEX thresholds, IRAP adjustments for the financial sector, and a substitute‑tax mechanism for releasing tax‑suspended reserves.

Cyprus raises CIT to 15%: reforms include an expanded residency test, extended loss carry‑forward, updated GAAR, a refined R&D deduction, new WHT rules for low‑tax jurisdictions, and full CIT taxation of interest income.

Other domestic updates: Multiple EU Member States progress DAC8/DAC9, Pillar Two implementation, QDMTT guidance, and targeted tax reforms, including developments in Belgium, Estonia, Finland, Ireland, Luxembourg, the Netherlands, Romania and Slovenia.

Judicial developments: the Dutch Supreme Court ruled the CIT interest rate excessive (should align with interest rate applied to other taxes). In Belgium, the Antwerp Court confirmed that pledged shares count toward participation thresholds for WHT and participation‑exemption purposes.

EU highlights

Relevant for: Multinationals in scope of Pillar 2 regulations

On 5 January 2026, the OECD Inclusive Framework agreed a Side‑by‑Side (SbS) Package that allows certain domestic minimum‑tax systems to operate alongside the Pillar Two rules. The package introduces an SbS Safe Harbour and a UPE Safe Harbour, creates a permanent Simplified ETR Safe Harbour, extends the transitional CbCR Safe Harbour by one year, and adds a targeted substance‑based incentive safe harbour. The system is expected to apply to fiscal years beginning on or after 1 January 2026, with one exception: the Simplified ETR Safe Harbour may be implemented for fiscal years starting on or after 31 December 2025.

A key feature of the agreement is the SbS Safe Harbour. Under this mechanism, the United States is the only jurisdiction recognised as having a “Qualified SbS regime.” As a result, U.S. domestic minimum‑tax rules are deemed sufficiently equivalent to Pillar Two for minimum‑taxation purposes. For U.S.-parented MNE groups, this means that the Income Inclusion Rule (IIR) and the Under‑Taxed Payments Rule (UTPR) are effectively switched off for other jurisdictions, preventing them from levying top‑ups under these mechanics. Qualified Domestic Top‑Up Taxes (QDTTs), however, remain applicable. Subject to local implementation, the SbS elements will be available for fiscal years beginning on or after 1 January 2026.

EU‑parented groups do not benefit from the U.S.-only SbS carve‑out and should continue to assume that the standard GloBE architecture applies across their global footprint. Relief for EU groups will instead come from the permanent Simplified ETR Safe Harbour (expected to apply from 2027, unless adopted earlier), the extended transitional CbCR Safe Harbour, and the targeted substance‑based incentive safe harbour, which aims to preserve qualifying incentives without pushing effective tax rates below 15%. These mechanisms can ease modelling and compliance burdens but still require significant systems work, data preparation, and internal‑control adjustments ahead of first‑year filings.

For more information about the package, you can take a look at this PwC Tax policy alert.

EU Gateway observation: The European Commission has already published a notice acknowledging the SbS Package and confirming that the safe harbours will be applied through Article 32 of the Pillar Two Directive. Although the Commission does not intend to reopen the Directive, the 27 EU Member States will still need to update their national Pillar Two laws.

Zooming out from this development, we observe that the new safe harbours function as welcome pressure-relief valves for in-scope groups. However, it has already been said that the SbS Safe Harbour grants U.S.-parented groups a structural competitive advantage over EU-parented groups by effectively switching off most of Pillar Two’s core mechanics in the case of U.S.-parented groups. This raises broader concerns about the EU’s competitiveness.

This imbalance could widen over time if additional jurisdictions obtain “qualified SbS” status. At the same time, the SbS Package does not materially reduce the compliance burden for MNEs. EU‑parented groups should therefore continue modelling the impact of all available safe harbours while closely tracking legislative developments and compliance calendars across jurisdictions.

It goes without saying that the SbS Safe Harbour is aimed at US multinationals, although technically other jurisdictions may apply for application as well. The big unknows is whether there is something there for China as well. Looking at the combination the UPE Safe Harbour and the Substance-based Tax Incentive Safe Harbour, there may be something in the package for China as well.

Relevant for: EU‑ and non‑EU‑headquartered MNEs with EU presence

As highlighted in previous EU Gateway issues, public Country‑by‑Country Reporting (CbCR) effectively kicks in 2026, when most EU companies will, for the first time, need to publicly disclose key financial information e.g. about the income tax paid in certain jurisdictions and worldwide. As a result, the 2025 financial year will need to be reported by the end of 2026 in most EU Member States; some may even require earlier publication.

Who must publish?

EU‑headquartered MNEs: your ultimate parent entity (UPE) must publish the group’s public CbCR in the EU Member State where it is based, on their website and in their national business register.
Non‑EU‑headquartered MNEs: this is where the compliance burden increases. Middle‑sized or large EU subsidiaries—and in some cases even branches—will be responsible for publishing the group’s public CbCR report on their website and in their national business register. In this case, the Directive does provide simplification measures, but these must be opted into on time.

EU Gateway observation: As noted by dr. Vassilis Dafnomilis, Senior Manager Tax at PwC Netherlands and EU Gateway driver, in his recent article for IBFD's World Tax Journal, MNEs must not only meet the disclosure obligations stemming from public CbCR, but also manage the narrative and reputational impact that comes with unprecedented tax transparency. Dafnomilis identifies three key risks for MNEs arising from the Directive’s application—risks that should be carefully considered when preparing a report aimed at a broad set of stakeholders. These risks underscore that public CbCR is not just a compliance exercise, but a strategic communication challenge.

The reports must also be placed online and must also be made available in a fixed machine-readable format. In the current technological environment, it seems quite likely that with little effort these reports can be read, benchmarked and scrutinized with (almost) the click of a mouse. You might want to have a good look at what your data implies.

Relevant for: companies doing business in the EU

From 1 January to 30 June 2026, Cyprus will hold the Presidency of the Council of the European Union. The Presidency rotates every six months among EU Member States and plays a key agenda‑setting role: it chairs Council meetings, steers legislative negotiations, and works to build compromise between EU Member States. In practice, the Presidency determines which legislative files advance—and how fast.

In the area of taxation, Cyprus plans to focus strongly on simplification, competitiveness, and maintaining the integrity of the single market. The programme outlines the following priorities:

Continuing work on combatting tax evasion, aggressive tax planning, and harmful tax competition. This is a broad, expected commitment that appears in nearly every Presidency programme, though its level of ambition remains to be seen.
Updating the EU list of non‑cooperative tax jurisdictions. As expected...
Launching work on the next recast of the Directive on Administrative Cooperation (DAC), following Council conclusions adopted in March 2025. For simplification...
Opening discussions on the forthcoming omnibus package on direct taxation, aimed at simplifying EU tax rules and reducing compliance burdens for businesses. This is arguably the most important tax item in the programme and could have significant impact if the Commission proposals are ambitious.
Advancing negotiations on the UN Framework Convention on International Tax Cooperation, seeking a balanced outcome aligned with EU values and global consensus. The ambition is general; how far the EU can or will go remains uncertain.

EU Gateway Observation: The omnibus package on direct taxation is likely to be the most consequential task for the Cyprus Presidency. This package should include the Commission’s long‑awaited proposals on tax simplification—an area where progress depends on unanimous agreement among EU Member States. We hope the incoming proposals will receive a constructive, pragmatic reception, enabling genuine simplification rather than incremental adjustments.

It is noteworthy that the Cyprus programme makes no reference to BEFIT. This omission may indicate that the Presidency does not view BEFIT as an immediate priority. Instead, it appears that political attention will first be directed toward decluttering existing tax law, DAC reform, and the new omnibus package. BEFIT could come back on the table...only if time allows.

Relevant for: innovative companies and start-ups

The European Commission is expected to table its proposal for the so‑called “28th regime” on 18 March 2026. But what exactly is this 28th regime? In essence, it would introduce a new EU‑level legal framework designed to support innovative companies. Under the proposal, Member States could either create a new corporate form—the Unified European Company (S.EU)—or incorporate a harmonised set of EU‑wide rules into an existing national company form.

On 20 January 2026, the European Parliament adopted a (non‑binding) resolution containing recommendations for the Commission’s proposal. Although the Commission is not obliged to follow these recommendations, if it chooses not to, the Parliament retains the right to amend the proposal at a later stage.

The Parliament broadly welcomes the initiative, but also urges the Commission to:

Assess the benefits of a coherent framework, including possible taxation elements, that could add value for start-ups and scale-ups.
Introduce a single Union company identifier to combat fraud, money laundering, and tax evasion.
Prevent companies involved in infringements—such as fraud or tax evasion—from opting into the 28th regime.
Ensure that harmonised rules remain without prejudice to Member States’ fiscal policies, while still allowing employees to benefit from more favourable treatment of progressive stock options.
Conduct and publish a comprehensive and transparent impact assessment, with particular focus on fiscal and legal implications.

EU Gateway observation: it is unclear whether the forthcoming proposal will include any tax components—either directly (e.g., specific tax treatment) or indirectly (e.g. stock options). Our expectation is that the tax scope will be very limited or entirely absent, as the initiative is formally a company law proposal. This view is supported by reports from Tax Notes. According to their report, Benjamin Angel, the Commission’s Director for Direct Taxation, has indicated that the 28th regime will address only one tax element: the deferral of taxation for stock options. The Commission does not intend to include additional tax measures because it already has its Business in Europe: Framework for Income Taxation (BEFIT) proposal—an optional EU-wide corporate tax framework for companies with annual turnover below €750 million. As Angel put it:

“This is the very definition of a 28th regime.”

One may wonder, however, whether relying solely on BEFIT is optimal at this stage. Could it have been useful for the Commission to first explore a more targeted tax framework for start-ups—within the 28th regime—before advancing a comprehensive corporate tax system like BEFIT? After all, the 28th regime could have offered a controlled setting for observing how EU Member States approach such tax matters in practice.

Just wondering….

CBAM Enters Its Final Phase on 1 January 2026: The Carbon Border Adjustment Mechanism (CBAM) entered its full implementation phase on 1 January 2026. From this date onward, importers established in an EU Member State—or their indirect customs representatives—must apply for authorised CBAM declarant status via a dedicated CBAM register. This authorisation becomes a condition for importing CBAM‑covered goods into the EU customs territory.
EU and Mercosur Sign a Partnership Agreement and Interim Trade Agreement: The EU and Mercosur have signed: the EU–Mercosur Partnership Agreement (EMPA), and an Interim Trade Agreement (iTA). According to the Commission, the agreement is expected to deliver substantial new commercial opportunities, including: A projected 39% increase in EU annual exports to Mercosur (Argentina, Brazil, Paraguay, Uruguay), amounting to approximately €49 billion; Removal of tariffs on EU exports—including agri‑food, industrial products, cars, machinery, and pharmaceuticals—saving EU businesses an estimated €4 billion in duties per year; Faster, safer, and more predictable investment conditions, especially for key supply chains and critical raw materials.

However, the political process has taken a turn: on 21 January 2026, the European Parliament voted to refer both agreements (EMPA and the iTA signed in Asunción) to the EU’s Court of Justice. This referral could delay the deal by up to two years—and in a worst‑case scenario, may even derail the agreement altogether. Technically, the Commission together with the EU Member States could move to provisional application of the agreements, although this seems unlikely at the moment given previous commitment to refrain from doing so.

European Commission Publishes Foreign Subsidies Regulation Guidelines – see PwC Tax Policy alert for more information.

Domestic Highlights

Bulgaria joins the euro area as of 1 January 2026 – who is next?

Relevant for: companies and individuals operating or investing in Bulgaria

Bulgaria joined the euro area on 1 January 2026, becoming the 21st EU Member State to adopt the euro. The conversion rate is fixed at BGN 1.95583 = EUR 1. As part of the transition, legislation was adopted to replace references to the Bulgarian lev with the euro and to update all exchange‑rate‑related provisions. Corresponding technical amendments were made throughout the Corporate Income Tax Act (CITA) to ensure correct currency conversion and tax‑base calculations following the changeover.

EU Gateway observation: With Bulgaria joining the euro, only six EU Member States remain outside the currency union: Sweden, Poland, the Czech Republic, Hungary, Romania and Denmark, with the last one being legally recognised opt‑out from adopting the single currency. The natural question is: who is next in line?

Although public support for the euro is high in several of these remaining countries - Hungary in particular - political dynamics are likely to delay further enlargement of the currency bloc. In that regard, we read that in a number of capitals, eurosceptic parties in governing coalitions or parliaments continue to block progress on convergence steps, making additional accessions unlikely in the near future. Poland is a clear example. According to recent remarks by Finance Minister Andrzej Domański in the Financial Times, Warsaw sees no urgency in adopting the euro. The Polish government argues that the country’s economy is performing robustly under the current monetary framework and does not require the single currency to sustain its growth trajectory.

Bulgaria’s move therefore highlights a widening contrast within the EU: while some EU Member States deepen monetary integration, others remain firmly on the sidelines by choice.

Italy introduces broad corporate tax reform under the 2026 Budget Law

Relevant for: companies, financial intermediaries, insurance undertakings, and other entities subject to IRES and/or IRAP in Italy

Italy’s 2026 Budget Law, effective from 1 January 2026, introduces a wide range of corporate tax changes. We have identified the following measures as the most relevant for this contribution. Given the breadth of the reform package and the fact that the changes extend well beyond the measures highlighted below, you are encouraged to consult the full newsletter of PwC Italy for a complete overview of all amendments and their potential impact. In addition, you can consult the newsletter about regarding tax incentives and grants provided through Italy’s 2026 Budget Law.

Key Measures:

Elimination of instalment taxation for capital gains: Capital gains on fixed assets, capital assets, and non‑PEX participations must now be fully included in taxable income in the year of realisation. Gains arising from the transfer of a business or business branch may still be spread over up to five years, provided the assets have been held for at least three years.
Substitute tax for releasing tax‑suspended reserves: Companies may recognise revaluation surpluses, reserves, and tax‑suspended funds through a 10% substitute tax (covering corporate income tax, 24% IRES, and regional production tax, 3.9% IRAP). The substitute tax is payable in four equal instalments, starting with the tax return for the fiscal year in progress on 31 December 2025.
New minimum participation thresholds for dividend exemption and capital gains exemption (PEX): To access the 95% dividend exemption, companies must now hold either: a direct shareholding of at least 5%, or a tax value of at least EUR 500,000. The same thresholds apply to the 1.20% WHT for non‑resident recipients, and they now also form part of the PEX eligibility criteria, in addition to existing requirements (12‑month holding period, fixed‑asset classification, non‑privileged jurisdiction test, and commercial activity test). These changes apply to distributions and capital gains from 1 January 2026.
IRAP – 95% dividend exclusion for the financial sector: Following the ECJ judgment Banca Mediolanum (C‑92/24), dividends distributed by EU/EEA companies to resident banks, financial intermediaries, and insurance companies are 95% excluded from the IRAP taxable base. This applies where the recipient holds a direct participation of at least 10% for an uninterrupted period of at least one year. For earlier years, taxpayers may request refunds of excess IRAP paid, provided the 48‑month limitation period has not expired.
Temporary IRAP rate increase for the financial sector: for the tax year in progress on 31 December 2025 and the two following years: financial intermediaries: 6.65% (previously 4.65%), insurance companies: 7.9% (previously 5.9%). A EUR 90,000 tax credit is available to offset the difference between the increased liability and the liability that would have arisen under the previous rates.

EU Gateway observation: The amendments to the IRAP regime for the financial sector as a result of the Banca Mediolanum SpA judgment (see here for the EUDTG newsalert) highlight potential implications for other EU Member States. These countries may also impose additional regional, trade, or sector-specific taxes alongside corporate income taxes, resulting in dividends from EU subsidiaries being subject to dual inclusion in separate tax bases.

Cyprus increases CIT from 12.5% to 15% and introduces broad tax reform package

Relevant for: companies and individuals resident in Cyprus or doing business in Cyprus

Cyprus has enacted a wide‑ranging tax reform package, primarily effective from 1 January 2026, introducing significant changes across six core tax laws. We have identified the following measures as the most relevant for this contribution. Given the breadth of the reform package and the fact that the changes extend well beyond the measures highlighted below, you are encouraged to consult the full newsletter of PwC Cyprus for a complete overview of all amendments and their potential impact.

Key Measures:

Corporate Income Tax increase: The CIT rate rises from 12.5% to 15% starting from the 2026 tax year.
Expansion of corporate tax residence: Companies incorporated under the Cyprus Companies Law are now treated as Cyprus tax residents, regardless of whether another jurisdiction considers them tax residents (subject to treaty tie‑breaker rules). Companies transferring their registered office or legal seat to Cyprus are also treated as incorporated in Cyprus.
Extension of tax‑loss carry‑forward: The period for carrying forward tax losses is extended from five to seven years.
Extension of the super deduction for R&D for years 2025-2030: An additional 20% deduction applies to qualifying R&D expenses for tax years 2025–2030, including capitalised costs eligible for capital allowances. The deduction can be claimed fully or partially at the taxpayer’s discretion. Expenses relating to assets benefiting from the IP nexus regime are excluded.
GAAR amendment: The General Anti‑Abuse Rule now explicitly covers arrangements giving rise to income tax for both companies and individuals.
Clarification on group relief: Taxable income must first be offset against the company’s own carried‑forward losses before applying group relief.
Foreign PE exemption limitation: The exemption for foreign permanent establishment profits does not apply when the PE is situated in a jurisdiction included on the national blacklist.
Taxation of interest income: Interest income earned by Cyprus tax‑resident companies is no longer subject to SDC (17% on a gross basis) and will be taxed exclusively under CIT at 15%.
Withholding tax rate adjustment: Withholding tax on dividends paid to low‑taxed jurisdictions is reduced to 5%, while the rate remains 17% for dividends paid to blacklisted jurisdictions.

EU Gateway contribution: The reform introduces several amendments that reinforce clarity, modernise existing rules, and address long‑standing technical gaps. The increase of the CIT rate to 15% is in line with earlier government declarations and consistent with global minimum tax trends. The expansion of the corporate tax residency test builds on the incorporation test introduced in 2022, complementing the traditional management‑and‑control approach. Extending the loss carry‑forward period to 7 years aligns the rules more closely with commercial reality, while updates to the R&D super‑deduction regime clarify its interaction with the Cyprus IP regime. Moving interest income of companies exclusively into the CIT system further enhances clarity and certainty for corporate taxpayers.

At the same time, extending the GAAR to personal income strengthens the framework’s ability to address abusive practices, given that the original rule – stemming from the Anti-Tax Avoidance Directive - targeted companies only. Limiting the foreign PE exemption to exclude blacklisted jurisdictions adds another integrity safeguard and is also in line with what other EU Member States do.

Germany updates its position on the use of the OECD Model Commentary in DTA interpretation: dynamic or static interpretation or both?

Relevant for: companies and individuals relying on Germany’s treaty network; groups involved in cross‑border structuring; tax controversy and litigation.

Germany’s Federal Ministry of Finance has issued a new circular revising its approach to the use of the OECD Model Tax Convention and its Commentary when interpreting double taxation agreements (DTAs). The update follows the Supreme Tax Court decision of 5 December 2023, which reaffirmed that treaty interpretation must follow Article 31 VCLT, emphasising good‑faith interpretation in light of the wording, context and purpose of the treaty.

Under the revised MoF position, where a DTA provision is identical or comparable to the OECD Model, the OECD Commentary in force at the time of application constitutes rebuttable evidence of member‑state practice. Although non‑binding, the Commentary may be used to the extent it clarifies or specifies the meaning of a provision compared to earlier versions. Conversely, where the treaty text diverges from the OECD Model, the Commentary cannot be relied upon. The circular further clarifies that domestic administrative guidance or published case law takes precedence where it points to a different interpretation. The previous MoF circular of 19 April 2023 is now superseded.

For more information, you can take a look at the newsalert from PwC Germany.

EU Gateway observation: Germany’s updated guidance reinforces a hybrid approach: neither fully “dynamic” nor fully “static”, but conditional dynamic interpretation within the limits of treaty wording and the VCLT. The Commentary may inform interpretation - but only where the treaty provision mirrors the OECD Model and only where later Commentary versions genuinely clarify earlier understandings. This approach seems to mirror the approach taken by the Dutch Supreme Court in 2022 when the Court held that only limited meaning should be given to later OECD Commentary where it goes beyond clarification and instead introduces new concepts or reinterpretations. In such cases, later Commentary cannot override the original intent of the treaty partners.

Other Domestic Developments

Belgium

Government submits Bill to implement DAC8 rules.

Cyprus

repeals stamp duty on certain documents from 1 January 2026.

Estonia

publishes draft DAC8 legislation.

Finland

gazettes DAC9 legislation.
tax authorities publish guidance on application of Global Minimum Tax and calculation of domestic top-up tax.

Ireland

implements DAC8 and DAC9.
confirms pro rata approach for UTPR allocation in mergers: in circumstances where an entity is merged with an entity that is not located in Ireland and is dissolved by operation of law partially during a fiscal year, the computed number of FTEs and tangible assets should be reduced pro rata for the length of the period up to the date of the merger relative to the length of the fiscal year.

Italy

Ministry of Economy and Finance issues DAC8 implementing rules.

Luxembourg

approves revised carried interest regime – see here for more information.

The Netherlands

plans to submit a legislative proposal on Pillar Two's 'Side-by-Side' by the summer of 2026.
Dutch list of low tax jurisdictions 2026: Barbados removed – see here for more information.

Romania

Government has adopted an Emergency Ordinance which includes, among other measures, a reduction of the minimum turnover tax from 1% to 0.5%. Additionally, the IMCA will be eliminated starting with the fiscal year 2027, or a modified fiscal year beginning in 2027. See here for more information.

Slovenia

signs Multilateral competent authority agreement on the exchange of GloBE information – 26 countries signatories (Status as of 2 February 2026).

Supreme Court rules tax interest rate for CIT is too high: The Supreme Court has held that the tax interest rate for corporate income tax (CIT) is excessive. In the case at hand, the tax interest amounted to 8 percent but in subsequent years increased to as much as 10 percent. The Supreme Court indicated that the tax interest for CIT must be set at the same rate as applies to other taxes, such as personal income tax (which is currently 5%). See here for more information.

Pledged shares and the participation exemption - Antwerp Court confirms the common‑sense approach applied by the ruling commission: The Court confirmed the approach traditionally followed by the Belgian Ruling Commission regarding the treatment of pledged shares for purposes of the participation exemption and withholding tax (WHT) relief. The case concerned a standard financing structure involving a 100% share pledge without any transfer of legal ownership. A tax inspector had denied the WHT exemption, arguing - based on a strict reading of the law- that pledged shares could not be taken into account when assessing whether the minimum participation threshold was met. The Court of Appeal disagreed with the inspector’s position. Referring explicitly to established ruling practice and to the Preparatory Works, the Court held that shares pledged without transfer of legal ownership remain eligible for determining whether the shareholder satisfies the minimum participation test. See here for more information.

Tax Treaty Developments

Estonia approves treaty with Andorra

EU Gateway development for an industry

The European Commission’s upcoming proposal on the 28th regime will mark an important development for innovative companies and start‑ups operating in the EU.

Please take a look at the EU highlights contribution featured in this newsletter.

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Disclaimer

© 2026 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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Contact us

Jeroen Peters

Tax Partner, PwC Netherlands

Tel: +31 (0)62 003 57 34

Maurits Vedder

Director, PwC Netherlands

Tel: +31 (0)61 243 49 34

Vassilis Dafnomilis

Senior Manager Tax, PwC Netherlands

Tel: +31 (0)61 399 87 29

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