Federal activity this quarter fell into three areas: continued implementation of the One Big Beautiful Bill Act (OBBBA) through Treasury and IRS guidance, court decisions that unsettle established tax positions, and trade and tariff actions that reach the provision indirectly. Each carries recognition, measurement, or disclosure consequences.

Federal Developments: International Tax Guidance

Treasury and the IRS issued guidance addressing several recent tax law changes, most of it implementing the international provisions of the OBBBA, along with updated procedures for certain accounting method changes.

• Controlled-Foreign Corporation Tax-Year Transition and previously-taxed-earnings and profits Foreign Tax Credits: On August 3, 2026, Treasury and the IRS issued proposed regulations on the allocation of foreign income taxes following repeal of the one-month tax year deferral election for certain CFCs and on the foreign tax credit disallowance for certain distributions of previously taxed earnings and profits. Companies should evaluate the effect on foreign tax credit positions and related tax accounting conclusions.
• Section 987 CFC Exemption Election: On August 13, 2026, proposed regulations would permit CFCs to elect out of computing or recognizing most Section 987 foreign currency gain or loss for qualified business units. The rules generally preserve recognition for certain inbound nonrecognition transactions and provide transition rules for pre-election gain or loss.
• Foreign-Derived Deduction Eligible Income Excluded Property Sales Income: On August 20, 2026, proposed regulations defined the scope of income excluded from deduction eligible income when a domestic corporation disposes of intangible property or property of the type subject to depreciation, amortization, or depletion. The exclusion applies to dispositions occurring after June 16, 2025.
• CFC Pro Rata Share Rules: On August 26, 2026, proposed regulations implemented the pro rata share rules for taxable years of foreign corporations beginning after December 31, 2025. Consistent with the OBBBA, inclusion is based on the periods during the CFC's taxable year in which the shareholder owns the stock, is a US shareholder, and the foreign corporation is a CFC, rather than being limited to shareholders owning stock on the CFC's last relevant day.
• Allocation and Apportionment of Deductions: On September 11, 2026, proposed regulations addressed the allocation and apportionment of deductions in determining the foreign tax credit limitation for Section 951A category income and deduction eligible income for Section 250 purposes. The rules may affect a taxpayer's Section 951A foreign tax credit limitation, US source income, and foreign-derived deduction eligible income.

A&M Tax Accounting Services (TAS) Says:

These proposed regulations set out Treasury's interpretation of recent statutory changes, and many include reliance provisions. They do not change enacted law and do not trigger a change-in-tax-law adjustment under ASC 740-10-45-15. Their significance is in judgment and measurement. Where a package supports the position a company has taken, it strengthens the more-likely-than-not analysis; where it contradicts that position, it is evidence that a taxing authority with full knowledge of the facts would challenge it, and the related unrecognized tax benefit should be remeasured.

Three of the packages carry the most exposure. The September 11 allocation and apportionment rules change the Section 904 limitation and, therefore, the realizability of foreign tax credit carryforwards and any related valuation allowance. The Section 987 election eliminates most prospective currency gain and loss on a qualified business unit, but pre-election gain or loss is not extinguished: it is preserved and recognized ratably over 120 months, subject to a de minimis exemption for qualified business units (QBUs) below $50 million in average assets. Because reliance runs to tax years beginning after December 31, 2024, a calendar-year taxpayer may elect on an amended 2025 return, so the deferred balances and the recognition profile should be modeled before the election is made. The FDDEIexclusion applies to dispositions occurring after June 16, 2025, also reaching back into a filed period, so that effect may run through return-to-provision or an uncertain tax position rather than prospectively.

For interim reporting, keep the distinction clean: a revised view of full-year tax flows through the annual effective tax rate under ASC 740-270, while a change in judgment on an uncertain tax position is recorded discretely in the period the judgment changes.

Federal Developments: Accounting Method Change Procedures

On September 4, 2026, the IRS released administrative guidance on automatic accounting method change procedures for research or experimental expenditures and residential construction contracts affected by the OBBBA. The guidance includes transition relief and permits certain previously filed non-automatic Forms 3115, Application for Change in Accounting Method, to be converted to automatic method changes. For further details, see our A&M Tax client alert.

A&M TAS Says:

A method change produces a Section 481(a) adjustment, which shifts the period of recognition without changing the total, so the effects land in cash tax and deferred tax scheduling rather than the effective tax rate: immediate expensing of domestic research or experimental costs accelerates reversal of the deferred tax asset on the remaining capitalized balance and can convert it into a net operating loss, while a change to an exempt residential construction method defers income and builds a deferred tax liability. The conversion relief is the piece most likely to be missed. Consent under the non-automatic procedures is discretionary, so a taxpayer with an unanswered Form 3115 may have left the benefit unrecognized; automatic consent removes that discretion, and the resulting benefit is discrete in the period the company concludes it qualifies. Because the method itself is then highly certain, the uncertain tax position analysis belongs on eligibility rather than on the merits.

Federal Developments: Court Decisions on Tax Positions

Federal courts continued to weigh in on significant tax positions, including the validity of Treasury regulations and the application of statutory and treaty-based rules. The results were mixed, and companies may need to reassess positions affected by the courts' reasoning.

• Tax Treaties and the NIIT: On August 31, 2026, the Federal Circuit issued companion decisions in Estate of Bruyea v. United States and Christensen v. United States, reversing taxpayer-favorable Court of Federal Claims decisions and holding that the US-Canada and US-France treaty foreign tax credit provisions do not permit credits against the net investment income tax (NIIT) where the Code otherwise disallows the credit. Taxpayers that have used, or are considering, treaty-based foreign tax credits to reduce NIIT should consider the implications.
• Invalidated GILTI Rule: On July 2, 2026, the Court of Federal Claims in Keysight Technologies Inc. v. United States invalidated Treasury regulations addressing disparities between fiscal-year and calendar-year taxpayers in computing global intangible low-taxed income. The court agreed that, under the provision as enacted by the Tax Cuts and Jobs Act (TCJA), Keysight was entitled to deduct certain amortization in computing its global intangible low-taxed income (GILTI[AA9.1]) inclusion and that the final regulations disallowing those deductions contradict the statute and exceed Treasury's authority.
• Invalidated DRD Limitation Rule: On July 15, 2026, the Tax Court in Siemens Medical Solutions USA v. Commissioner invalidated the extraordinary distribution regulations limiting the Section 245A 100% dividends received deduction. The dispute followed related-party sales of foreign subsidiaries by Siemens' CFC and a later dividend for which the US consolidated group claimed a full section 245A deduction. The court held that Treasury cannot override unambiguous statutory text to address a gap created by differing effective dates of TCJA international provisions.
• Anti-Abuse Rule Prevails: On August 6, 2026, the Tax Court held in SIH Partners LLLP v. Commissioner that a separate anti-abuse rule under Section 246 applied independently despite the taxpayer's compliance with the regulations. A complex portfolio swap structure triggered the rule, and the court denied the claimed qualified dividend income treatment and related foreign tax credits.

A&M TAS Says:

Courts continued to issue taxpayer-favorable rulings post-Loper Bright, invalidating certain TCJA-related regulations, while taking a harder line in cases involving anti-abuse rules. Taxpayers should assess whether these decisions affect existing positions and related items under ASC 740, including measurement of unrecognized tax benefits.

Federal Developments: Trade and Tariffs

Trade and tariff activity stayed heavy throughout the quarter. New global Section 301 tariffs replaced expiring Section 122 tariffs and were promptly challenged in the US Court of International Trade. Additional country-specific actions were announced, including measures affecting imports from Canada, which escalated trade tensions between the United States and Canada through further retaliatory measures.

A&M TAS Says:

Tariffs are not income taxes and generally fall outside ASC 740, but the economic consequences can be significant, and they flow into pre-tax earnings, forecasts, and valuation allowance assessments. Keep supply chain, customs, and cross-border planning on the monitoring list.

Federal Developments: Section 162(m) Expansion Under ARPA and OBBBA

Section 162(m) caps a publicly held corporation's deduction for compensation paid to a "covered employee" at $1 million per year. Under current law (post-TCJA), covered employees are the principal executive officer and principal financial officer, the next three highest-compensated executive officers, and anyone who was a covered employee in any year after 2016 under the "once covered, always covered" rule. Two changes expand that population.

OBBBA: Controlled Group Aggregation - Effective for Tax Years Beginning After December 31, 2025

OBBBA applies the $1 million limit to a publicly held corporation and all members of its controlled group. In practice, compensation paid to a covered employee by any commonly controlled entity, not just the SEC-reporting affiliated group, now counts toward the cap, with the disallowed deduction allocated across the group under a new statutory allocation rule.

ARPA: The "ARPA Five" - Effective for Tax Years Beginning After December 31, 2026

American Rescue Plan Act of 2021 (ARPA[AA12.1]) adds the five highest-paid employees for the taxable year to the covered employee definition. Two features set this group apart from the existing categories:

• Not Limited to Officers: The expanded definition captures the next five highest-compensated employees, whether or not they are officers.
• No Perpetual Coverage: Unlike the traditional categories, the ARPA Five are covered employees only for years in which they fall in that group. The determination is made annually rather than locked in for life.

A&M TAS Says:

Both changes are enacted and should already be reflected in quarterly reporting. The harder part is assembling the data to support them before year-end:

1. Remeasure Deferred Tax Assets: Equity awards and nonqualified deferred compensation that generate future deductions (unvested RSUs and deferred compensation balances) need to be tested for whether the deduction survives once the recipient becomes a covered employee under the broadened controlled-group rule (now) or the ARPA Five (2027). A deferred tax asset (DTA) tied to a deduction that becomes permanently limited may need to be written down in the current period even though the cash tax impact is prospective.
2. Build the Data Pipeline for the ARPA Five: Start tracking compensation on the deduction-based test rather than the SEC proxy definition so the top-five determination is ready before 2027.
3. Re-Map the Controlled Group: Re-run legal entity and ownership charts under the Section 414(b), (c), (m), and (o) controlled-group definitions, rather than the Section 1504 affiliated-group definition, where the exposure is material.
4. Assess Uncertain Tax Positions: Where the interaction of OBBBA and the ARPA proposed regulations leaves genuine ambiguity (for example, in allocating a disallowed deduction across a controlled group with mixed public and private members), document the technical position and evaluate whether an ASC 740-10 reserve is warranted.

State and Local

State and Local Responses to the OBBBA

As covered in prior issues, corporate income and franchise tax regimes in many jurisdictions are affected by federal tax law changes because states conform to the internal revenue code (IRC) either by incorporating it in whole or in part or by using federal taxable income as the starting point. States that incorporate the IRC generally either conform as of a specific date (fixed-date conformity) or follow the version in effect for the current tax year (rolling conformity). Others conform only to specific provisions (selective conformity).

Most legislatures wrapped up their 2026 sessions during the third quarter. States are still grappling with conformity questions, but the action has shifted from legislation to agency guidance, and we expect that to hold for the rest of the year. Elections this fall will reshape the political landscape in many states, with knock-on effects for tax policy at every level. For fuller coverage of the underlying enactments, see the third quarter 2025, fourth quarter 2025, first quarter 2026, and second quarter 2026 issues of this newsletter.

• Connecticut: The Department of Revenue Services issued a bulletin on July 2, 2026, outlining the impact of recent legislation on conformity to IRC §§ 174 and 174A for corporation business tax purposes. See TSSB 2026-2, here. Companies filing in Connecticut should read this closely; it covers filing and amending 2025 returns, as well as 2026 and forward.
• District of Columbia: The District's recent budget again includes OBBBA conformity legislation. See B26-0724. The legislation would decouple D.C. from IRC §§ 174A, 163(j), and 168(n), effective January 1, 2025. As emergency legislation, it expires November 11, 2026; permanent legislation has been sent to Congress for its 30-in-session day review.
• Florida: The Department of Revenue issued an informational publication on July 7, 2026, addressing adoption of the 2026 IRC. See TIP 26C01-01, here. Some taxpayers may need to amend previously filed returns, with penalty relief potentially available.
• Minnesota: The Department of Revenue issued a 2026 legislative bulletin on conformity on September 10, 2026, covering all tax types. For corporations, the relevant sections address general IRC conformity, amortization of R&E expenditures, net CFC tested income (NCTI), and Subpart F. See here.
• New York City: The Department of Finance issued supplemental 2025 business tax form instructions on September 9, 2026, addressing the City's decoupling from IRC §§ 168(n), 179, 174A, and 163(j). See Finance Memorandum 26-2, here.
• North Carolina: The Department of Revenue issued FAQs on recent law changes on September 11, 2026, available here.
• Oklahoma: The legislature approved an updated Okla. Admin. Code § 710:50-17-51(8), effective July 11, 2026. The rule adds references to NCTI (formerly GILTI) and provides that foreign income included under IRC § 951A remains dividend income allocable to the taxpayer's corporate domicile.
• Pennsylvania: Two developments:
  • Conformity Chart: The Department of Revenue published an updated OBBBA conformity chart, here, showing federal treatment alongside Pennsylvania personal and corporate income tax treatment.
  • IRC § 163(j) Guidance: The Department issued post-OBBBA guidance on interest expense on September 10, 2026, effective for tax years beginning on or after January 1, 2025. Because of the separate-company nature of this updated guidance, companies may need to revisit their computations in this area going forward. Separately, Act 45 of 2025 fixes Pennsylvania's conformity to Section 163(j) as in effect December 31, 2024, decoupling the Commonwealth from the OBBBA EBITDA method. See Corporate Tax Bulletin 2026-01, here.
• Philadelphia: Pennsylvania's 2026-2027 budget, enacted by Act 21 of 2026 in mid-July, sets out the effect of the OBBBA on the Business Income and Receipts Tax (BIRT). For tax periods beginning after December 31, 2024, filers using the federal income tax method rather than the books and records method must account for the following city-level decoupling provisions:
  • Domestic R&E expenditures deductible under IRC § 174A must be capitalized and amortized over 60 months for BIRT purposes.
  • Federal deductions of amounts previously capitalized in 2022 through 2024, taken in 2025 or 2026, continue to be amortized over the remaining useful life for BIRT purposes.
  • Foreign R&E costs are amortized over 60 months rather than the 180-month federal period.
  • Philadelphia does not conform to the qualified production property provisions in IRC § 168(n).
  • IRC § 163(j) limitations are calculated net of amortization and depreciation deductions.
  • Philadelphia continues to decouple from IRC § 168(k) bonus depreciation, but has not decoupled from the increased IRC § 179 expensing allowed federally.
• Rhode Island: The Division of Taxation issued a plain-language summary of 2026 legislative changes on July 22, 2026, available here.

A&M TAS Says:

A state or local law change hits the current provision in the period the change becomes effective and the deferred provision in the period of enactment. That means adjusting for new rates or rules applied to taxable income generated after the effective date. Management should confirm that systems and processes capture these changes promptly and that disclosures clearly explain the effect on current-period tax expense and overall positions. The third-quarter guidance should help refine calculations, though open questions remain in several jurisdictions.

Other State and Local Developments

• California:
  • Unitary Decisions at the Office of Tax Appeals (OTA): Unitary determinations are usually hard-fought and heavily fact-dependent. Two recent decisions are worth noting for their taxpayer-favorable results; in each, the three unities test was not met. See Watts, California Office of Tax Appeals 2026-OTA-423 (February 28, 2025, petition for rehearing denied, 2026-OTA-423, July 14, 2026), and Western Distributing Company, California Office of Tax Appeals, 2026-OTA-467P (June 18, 2026, released September 2026).
  • Alternative Apportionment: The OTA denied a company's request to use the three-factor formula available to agricultural businesses, finding that less than 50% of its receipts were agricultural. The OTA looked only at the taxpayer's activities, not those of its customers, and also considered legislative history. See Yorick, Inc. et al., California Office of Tax Appeals,2026-OTA-456 (July 14, 2026).
• Massachusetts:
  • Manufacturing: The Appeals Court affirmed the Appellate Tax Board in finding that Skechers, an out-of-state company, was engaged in manufacturing and therefore required to use a single sales factor. The taxpayer had argued that its activities were closer to design and marketing than to shoe manufacturing. Massachusetts has consistently read manufacturing broadly, and with the shift to single sales factor for all companies in 2025, this category of dispute should thin out. See Skechers USA, Inc. v. Commissioner of Revenue, No. 25-P-928 (July 30, 2026).
  • Constitutionality: The Appellate Tax Board rejected application of the Finnigan rule for determining sales factor numerators within a combined group, as applied to members without a taxable presence in Massachusetts, resting its decision on the Supremacy Clause. The decision raises constitutional questions worth following both in the Commonwealth and nationally. See Smithfield Packaged Meats Corp. & Combined Affiliates v. Commissioner of Revenue, Docket No. C344811 (July 22, 2026).
• Michigan: Following the 2024 decision in Nationwide Agribusiness Insurance Company v. Department of Treasury, Mich. App. (2024) (Docket No. 364790), the Department of Treasury released guidance in August explaining how computations resulting from the holding should be handled, including for 2025 and 2026 filings. See Calculating Premiums Tax and Retaliatory Tax Liability for a Unitary Business Group of Insurers, August 11, 2026, here.
• Nebraska: On July 13, a district court decision was released in a 2017 matter involving IRC § 965. The court rejected the state's proposed apportionment method for the repatriated earnings at issue and also found the taxpayer's method inadequate, remanding the case to the lower court. See Apple Inc. v. Nebraska Department of Revenue (No. CI 24-4186).
• New Hampshire:
  • Hologic: On August 26, 2026, the state's highest court overturned a lower court decision that had allowed a capital loss carryback to offset a capital gain generated by another member of the taxpayer's water's edge combined group. See Hologic, Inc., and Subsidiaries v. Commissioner, New Hampshire Department of Revenue Administration (Case No. 2025-0240; 2026 N.H. 32).
  • 2026 Legislation: The Department of Revenue Administration published its annual session-in-review summary on September 4, 2026. See TIR 2026-003, here. Among other items, the filing threshold for the business enterprise tax rises to $400,000 effective January 1, 2027, with potential rate decreases tied to a specified surplus. The research and development credit per applicant doubles to $100,000 effective January 1, 2027, and the annual aggregate cap rises from $7 million to $10 million effective January 1, 2028.
• North Carolina: Governor Josh Stein signed Senate Bill 445 into law on August 11, 2026. The legislation signals a shift away from agency deference in tax matters toward de novo review in the state's courts and administrative tribunals, following the US Supreme Court's decision ending Chevron deference. See Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024).
• Tennessee: The Department of Revenue updated its franchise and excise tax manual to clarify the treatment of certain NOL matters in identified conversion, merger, and reorganization scenarios. The updated manual is available here.
• Wisconsin:
  • Sourcing: A state circuit court determined that certain software sales must be sourced to Wisconsin because the end users were not licensees of the out-of-state taxpayer. The facts involved a database management software creator contracting with a Wisconsin third-party applications developer. The court examined the agreements and applied Wisconsin sourcing law, looking to the situs of the purchase, which was the billing location. See Case No. 2025CV4117, Wis. Cir. Ct. (August 19, 2026).
  • Common Sales Factor Errors: The Department of Revenue outlined common sales factor errors in July's Wisconsin Tax Bulletin, available here. These range from general inclusion and exclusion errors to common audit adjustments for multistate financial institutions, broker-dealers, investment advisors, investment companies, and underwriters.

A&M TAS Says:

State taxing authorities remain aggressive in auditing companies and pursuing disputed items through both administrative channels and the courts. Companies should monitor developments continuously in states where they have significant activity and revisit unrecognized tax benefits when a decision cuts against a position they hold.

Tax Accounting and Reporting

IFRS 18

International Financial Reporting Standards (IFRS) 18 Presentation and Disclosure in Financial Statements replaces International Accounting Standards (IAS 1) and becomes effective for annual reporting periods beginning on or after January 1, 2027, with full retrospective application and 2026 comparative information required. The objective of the standard is to improve the consistency and comparability of financial reporting through a revised statement of profit or loss structure, defined operating, investing, and financing categories, enhanced aggregation and disaggregation requirements, and new disclosure requirements for Management-defined Performance Measures (MPMs).

Tax Reporting Considerations

Income tax accounting continues to be governed by IAS 12, and most organizations will not see significant changes to the underlying provisioning process. The new work sits with Management-defined Performance Measures. Many listed groups communicate performance using adjusted operating profit, underlying profit, core earnings, adjusted EBIT, or normalized earnings. IFRS 18 requires enhanced disclosures reconciling these measures to IFRS results, and companies may also need to disclose the tax effects attributable to individual reconciling items. That creates new requirements for tax reporting, governance, and supporting documentation.

A&M TAS Says:

Most organizations will find the requirements themselves straightforward. The difficulty is operationalizing the disclosures across the group. The priority is a consistent methodology for allocating tax effects to management adjustments and non-GAAP measures, including the treatment of tax rates, deferred taxes, and other attributes. Organizations also need to assess whether existing reporting packages, systems, and processes can carry the additional data. Much of the effort will land at the business unit level, where templates, submission requirements, and local processes may need to be rebuilt. The 2026 comparative requirement makes this urgent: methodologies and data collection need to be in place well before the 2027 effective date. Group Finance will typically lead, but tax functions are central to designing the methodology, supporting business unit adoption, and building a reporting framework that can be sustained.

Key Takeaway

For Group Tax Heads and CFOs, IFRS 18 is a reporting redesign project. Tax reporting processes need to support the disclosure, governance, and data requirements attached to management-defined performance measures, and the 2026 comparative period leaves limited time to build them.

Featured Experts

Emilio Martinez

Leanne Scott

Trent Tedesco 

Centralized Payment and Transitional Safe Harbor Alignment for Pillar II

The Brazilian Federal Revenue Service (RFB) published Normative Instruction (IN) No. 2,329/2026, amending IN No. 2,228/2024, which regulates the Additional Social Contribution on Net Profits (CSLL), Brazil's Qualified Domestic Minimum Top-up Tax enacted under Law No. 15,079/2024.

The amendments address two operational points of different natures. The first is a domestic collection mechanism. The rules confirm that a multinational group may attribute the collection of the Additional CSLL to a single Constituent Entity, with the election made through the payment itself, under a specific identification for centralized payment.

The second amendment aligns Brazilian rules with the latest OECD Administrative Guidance on mismatches between a jurisdiction's fiscal year and the fiscal year covered by the Country-by-Country Report. Where the two differ, a group may elect to use the CbCR whose fiscal year either ends within or begins within the jurisdiction's fiscal year. The election is irrevocable and applies to all fiscal years under the Transitional CbCR Safe Harbor. The OECD has addressed this issue since its December 2023 guidance on the Transitional CbCR Safe Harbor and returned to it in the September 2026 package. Brazil is importing an internationally agreed solution into domestic law, consistent with IN No. 2,228/2024, which reproduces the OECD GloBE methodology.

The IN also confirms that Constituent Entities must supply the information needed to compute the Additional CSLL through an ancillary obligation to be established by a separate RFB act, still pending, and that all elections under IN No. 2,228/2024 are to be reported through that filing. This builds on the compliance track opened by IN No. 2,319/2026, which linked the Additional CSLL to DCTFWeb and set filing and payment deadlines. The guidance does not change the computation of the Brazilian top-up tax; it is a flexibility and alignment measure aimed at legal certainty and closer convergence with the OECD model rules.

A&M TAS Says:

The Additional CSLL framework has moved into implementation. Groups should assess whether their Pillar II processes can support centralized payment, the irrevocable CbCR fiscal-period election, and the coming ancillary filing. Groups with fiscal-period mismatches warrant particular attention, since the two criteria can point to different twelve-month periods and therefore produce different outcomes under the De Minimis, Simplified effective tax rate, and Routine Profits tests. Both criteria should be modeled before the election is made because it cannot be revisited. Data, governance, and controls should be ready before the ancillary obligation is published.

Featured Experts

Rodrigo Kurayama 

Kleiton Nakumo 

Luiz Andolfato

Bill C-31 (Budget 2025 Implementation Act, No. 2)

Bill C-31, Budget 2025 Implementation Act, No. 2, remained before Parliament during the third quarter of 2026 and had not received Royal Assent as of the writing of this document. The Bill includes a broad package of amendments to the Income Tax Act, the Global Minimum Tax Act and related legislation, including measures relating to manufacturing building expenses, foreign affiliates, domestic minimum top-up taxes, and Pillar II implementation.

A&M TAS Says:

For purposes of ASC 740, changes in Canadian federal tax legislation are generally recognized upon enactment, which occurs upon Royal Assent. Because Bill C-31 had not received Royal Assent as of the writing of this document, the proposed measures should not yet be reflected in the measurement of current or deferred taxes under US GAAP.

For IAS 12 purposes, the business income tax and Global Minimum Tax Act measures in Bill C-31 should be considered substantively enacted for financial reporting purposes following the federal government’s attainment of a majority position in the House of Commons on May 6, 2026. Generally speaking, once a bill has been through first reading with a majority government in place, it should be considered substantively enacted. Accordingly, IFRS reporters should reflect the impact of those measures in current and deferred taxes beginning in the period of substantive enactment.

July 2026 Draft Legislation on Various Tax Measures

In July 2026, the Department of Finance released draft legislative proposals for consultation covering several income tax measures, including:

• Simplified Transfer Pricing Documentation: Introduction of an elective, simplified transfer pricing filing option for qualifying taxpayers meeting specified revenue and transaction thresholds.
• Hybrid Mismatch Amendments: Technical amendments to Canada's hybrid mismatch rules intended to refine the application of the existing regime and further align the legislation with OECD recommendations.
• Accelerated Capital Cost Allowance for Liquefied Natural Gas (LNG) Projects: Additional accelerated depreciation measures for qualifying liquefied natural gas facilities, including enhanced treatment for certain LNG liquefaction equipment. Subsequent September proposals would increase the proposed July incentive for qualifying Class 47 LNG liquefaction equipment to a 100% first-year deduction under the Productivity Mega Deduction regime. See details below.
• CCUS and Clean Economy Credit Amendments: Proposed changes affecting certain carbon capture, utilization, and storage incentives, including expanded eligibility for enhanced oil recovery projects.
• Expanded Taxable Canadian Property Rules: Broader look-through provisions that may increase the circumstances in which shares, partnership interests, and trust interests are treated as taxable Canadian property.

A&M TAS Says:

The consultation period for the July 2026 draft legislative proposals closed on September 4, and the government has not yet announced when revised legislation will be released. As the proposals remain in draft form, they should not be reflected in current or deferred tax measurements until the relevant enactment or substantive enactment threshold is met.

September 2026 Productivity Mega Deduction

On September 15, 2026, the Government of Canada proposed a new Productivity Mega Deduction. Key features include:

• 100% first-year deduction for most depreciable property acquired on or after September 15, 2026.
• Immediate deduction for Canadian development expenses (CDE) incurred on or after September 15, 2026.
• Enhanced LNG incentives, including a 100% first-year deduction for qualifying Class 47 LNG liquefaction equipment.
• Used property may qualify, subject to ownership and rollover restrictions.
• Certain assets remain excluded, including most Class 1 and Class 3 buildings, Class 14 and 14.1 intangibles, Class 51 property, and certain Class 10 and 10.1 vehicles.

A&M TAS Says:

The Productivity Mega Deduction measures remain proposals only and should not constitute enacted or substantively enacted legislation. No further legislative milestones or implementation timelines have been announced by the Government of Canada. Accordingly, the proposals should not currently be reflected in the measurement of current or deferred taxes under either ASC 740 or IAS 12.

Featured Experts

Zach Campbell

Tara McCann 

Enhanced Offshore Trust Reporting Regime

China further tightened its tax transparency framework with Ministry of Finance and State Taxation Administration Public Notice [2026] No. 21 and State Taxation Administration Public Notice [2026] No. 15, which establish reporting requirements for offshore trust arrangements. As these obligations formalize, tax authorities gain far better visibility into offshore structures, asset and distribution flows, and the consistency between reported tax positions and underlying facts.

The reach extends well beyond newly established structures. Offshore trusts are typically set up for succession planning, wealth preservation, or asset protection, and may have been in place for years or decades. Taxpayers will need to revisit historical arrangements, documentation, and prior reporting positions, which, in turn, puts weight on information about settlors, beneficiaries, distributions, and underlying investment structures. For long-standing arrangements, the practical difficulty is reconstructing historical events and maintaining a clear audit trail.

Greater visibility also raises the prospect of additional inquiries and reviews. Historical positions involving significant judgment, interpretive questions, or complex offshore trust arrangements warrant reassessment to confirm that they remain adequately supported in a more transparent environment.

A&M TAS Says:

The reporting change does not alter any tax computation, but it changes the likelihood of detection and examination, which is what matters for measurement. Where a historical offshore trust position was taken on the assumption that it was unlikely to be examined, that assumption no longer holds, and the position should be re-evaluated under ASC 740-10 or IFRS Interpretations Committee (IFRIC) 23. Start by inventorying the affected structures and locating the supporting records. These disputes are generally won or lost on documentation.

Featured Experts

Yvette Chan 

Aska Li 

TOLA 2026 Amendments for REITs and InvITs (Business Trusts)

The Taxation and Other Laws (Amendment) Act, 2026 (TOLA), effective retrospectively from April 1, 2026, exempts eligible dividend distributions made by Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) to unitholders, regardless of whether the underlying Special Purpose Vehicle has opted for the concessional corporate tax regime. Previously, the investor-level exemption was denied where the SPV had elected the concessional regime, producing an unintended tax burden on unitholders arising from an election made by the SPV. At the same time, the surcharge applicable to certain SPVs opting for the concessional regime increases, which may change the applicable effective tax rate.

A&M TAS Says:

Investors should reassess deferred tax assets and liabilities tied to expected future REIT and InvIT distributions, since covered distributions are now exempt. Deferred tax balances recognized on the assumption that such distributions would be taxable may need remeasurement or derecognition, and post-tax returns on these investments may improve. SPVs are unlikely to see direct deferred tax consequences from the amendment alone, but balances may need remeasurement where an SPV elects, or intends to elect, the concessional regime, or where the revised surcharge changes the applicable effective tax rate.

Featured Experts

Tejas Mehta

Gagan Malik

Dividend Withholding Tax and Partnership Structures

The Irish Revenue Commissioners updated its Dividend Withholding Tax (DWT) guidance to confirm when distributions may be paid by Irish companies to Irish and certain non-resident partnerships without deduction of DWT. The revised guidance applies where the partnership is fiscally transparent and all underlying partners would themselves qualify for a DWT exemption on a direct receipt. Revenue also confirmed that it may look through multiple partnership vehicles within an investment structure, provided each partnership meets the specified transparency, commercial purpose, and documentation requirements. The update prevents DWT arising solely because an investment is held through a partnership where the ultimate investors would have been exempt in any event, which should reduce withholding leakage, improve cash flow, and reduce the administrative burden of refund claims.

A&M TAS Says:

• Investment fund, private equity, and asset management structures should review whether DWT exemptions can now be applied at source.
• Groups should confirm that investor documentation and exemption declarations are in place and maintained.
• Tax departments should assess the effect on withholding tax provisions and effective tax rate calculations, and the reduced need for refund claims.

Section 110 Companies and Foreign Tax Credit Relief

Revenue updated its guidance on Section 110 companies with a new section addressing Ireland's foreign tax credit regime under Schedule 24 Tax Consolidation Act (TCA) 1997. The guidance considers the treatment of foreign taxes suffered by qualifying Section 110 companies and clarifies the interaction between foreign tax credits and the calculation of taxable profits. The key point concerns foreign tax that exceeds the Irish corporation tax attributable to the same income: relief is available through the statutory foreign tax credit regime and is generally limited to the Irish tax arising on the relevant foreign-source income, so any excess cannot be relieved through the credit mechanism.

Revenue's view is that the statutory foreign tax credit regime in Schedule 24 is the appropriate mechanism for relieving foreign taxes suffered by Section 110 companies. Schedule 24 provides relief by way of credit, a reduction in income, or a combination of the two, but because relief is measured by reference to the Irish tax attributable to the relevant foreign-source income, a company retaining only a nominal margin may obtain limited relief in practice. The update is not a legislative change, but it clarifies Revenue's interpretation of the existing rules and the expected treatment within Section 110 structures. That matters most for securitization vehicles and structured finance arrangements generating significant foreign-source income subject to overseas withholding taxes.

A&M TAS Says:

• Foreign withholding taxes become a permanent cost where they exceed the Irish corporation tax on the relevant income.
• Groups should review existing models to confirm that foreign tax leakage is reflected in projected cash tax and effective tax rate calculations.
• The availability and measurement of deferred tax assets relating to foreign tax credits may need reassessment where future utilization is uncertain.
• Existing Section 110 structures earning material foreign-source income from withholding jurisdictions should be reviewed.

Personal Savings and Investment Account (SIA)

The Tánaiste and Minister for Finance, Simon Harris, announced further details on a new Personal Savings and Investment Account (SIA), expected to launch in the first half of 2027. The SIA is designed to widen participation in investing among Irish tax residents through a simplified, tax-efficient framework. Individuals aged 18 and above will be able to invest in listed shares, listed bonds, investment funds, and other qualifying instruments.

Expected features include no minimum contribution, no lock-in period, provider-operated tax administration, and an exemption from Ireland's eight-year deemed disposal regime for investment funds and ETFs. Complex derivatives and crypto-assets are excluded. Several design points remain open until Budget 2027 in October, including the annual contribution limit, the tax-free threshold, the rate applicable to returns above it, and the rules governing providers and account transfers.

A&M TAS Says:

The SIA is a meaningful step toward broader retail participation in long-term savings, and the anticipated exemption from the deemed disposal regime removes a long-standing barrier to investing in funds and ETFs. Take-up will depend on the contribution limit, the tax-free threshold, and the range of qualifying investments, all of which are expected to be settled in Budget 2027.

Featured Experts

David Smyth 

Gavin Brady 

Italy's third-quarter developments were characterized less by new tax legislation and more by measures affecting tax basis tracking, deferred tax accounting, and tax governance. On August 11, 2026, the fourth corrective decree to the 2023 tax reform - Legislative Decree No. 148 of August 7, 2026 (the "Omnibus" decree) - was published in the Official Gazette, entering into force on August 12, with several retroactive effective dates. It follows the publication of the new Income Tax Code (Legislative Decree No. 117/2026, applicable from January 1, 2027) and the new Code on tax compliance and assessment (Legislative Decree No. 141/2026). The quarter was marked by the operational implementation of the new hyper-depreciation regime, evolving guidance on the tax treatment of derivative instruments, and the continued expansion of digital tax controls. For IAS 12 and ASC 740 purposes, these developments increase the importance of monitoring temporary differences, maintaining robust tax basis records, and supporting tax positions through consistent documentation.

The Omnibus Corrective Decree: Direct Income Tax Accounting Impacts

Three features of Legislative Decree No. 148/2026 are relevant to income tax accounting. First, it introduces three optional regimes for multinational groups, reflecting the most recent OECD administrative guidance on the global minimum tax, which may affect Pillar II current tax measurement and disclosure. Second, it extends the ‘reinforced derivation’ principle (including alignment of the treatment of share-based payment plans across Organismo Italiano di Contabilità (OIC) and IAS/IFRS adopters) and introduces an elective one-off realignment of divergences arising from pre-2024 reorganizations, an election with immediate deferred tax consequences where exercised. Third, and often overlooked, Article 22 provides that, for multi-year negative income items, the assessment period runs from the tax return for the year in which the first installment is deducted, which changes the horizon over which such positions remain open and, therefore, the assessment of uncertain tax positions. On the indirect tax side, the two-year window for exercising the right to deduct VAT has been restored. The certification deadline under the Tax Control Framework for applicants to the cooperative compliance regime in 2024 and 2025 has been extended to December 31, 2026.

Tax Accounting and Reporting Hyper-Depreciation: Temporary Differences Move Into Execution Phase

The most significant income tax accounting development in Q3 was the operational rollout of Italy’s new hyper-depreciation regime. The incentive provides enhanced tax depreciation deductions through a progressive uplift mechanism, while financial statement depreciation continues to follow ordinary accounting rules.

As a result, qualifying investments may generate significant book-tax differences and accelerated tax deductions, requiring enhanced monitoring of tax bases and deferred tax balances. The regime also introduces extensive procedural requirements, including mandatory notifications, technical certifications, and asset-level tracking obligations, which may influence the timing of benefit utilization and related tax accounting considerations.

Derivatives: Focus on Tax Classification and Measurement

Q3 guidance and case law highlighted the importance of correctly assessing the tax treatment of derivative instruments. A recent Revenue Agency ruling confirmed the deductibility, for IRES purposes, of certain negative fair value adjustments on commodity derivatives, subject to a case-by-case assessment of the relevant facts and circumstances. In parallel, the Italian Supreme Court clarified the Imposta Regionale sulle Attività Produttive treatment of negative differentials arising from swap contracts, reinforcing the importance of properly evaluating the tax treatment of derivative-related items. These developments highlight the need for a careful analysis of the tax classification of financial instruments and their related tax effects.

Digital Tax Controls and Data Governance

Italy continued to expand its digital tax control framework during Q3. New measures broaden the use of electronic invoicing data by both the Italian tax authorities and customs authorities, supporting risk analysis, compliance monitoring, and tax collection activities through the increased use of integrated digital information. 

These developments are accompanied by a continued focus on automated controls and preventive compliance initiatives, reinforcing the importance of maintaining accurate, consistent, and well-supported tax information across reporting and compliance processes.

Tax Governance and Deferred Tax Sustainability

Several Q3 developments reinforced the importance of tax governance and tax basis discipline. The implementation of new investment incentives, combined with expanded tax authority access to digitally integrated information, increases the need for coordination among tax, finance, accounting, and compliance functions.

For multinational groups reporting under IAS 12 and ASC 740, accurate tax basis records, asset-level documentation, and supportable tax positions are becoming increasingly important in sustaining deferred tax balances and supporting tax reporting processes.

A&M TAS Says:

Italy's Q3 theme is tax basis discipline and documentation readiness. The implementation of hyper-depreciation incentives introduces new differences that require enhanced monitoring of tax bases and deferred taxes, while evolving guidance on financial instruments and expanded digital tax controls reinforce the need for consistent documentation and strong tax governance. The Omnibus decree deserves a dedicated review of Pillar II elections, the realignment option, and the new assessment timing rule for multi-year items. As tax authorities gain broader access to transactional data, companies should focus on maintaining supportable tax positions and ensuring alignment between tax reporting, compliance, and underlying records.

Deferred Employee Profit Sharing (PTU): Why NIF D-3 Recognizes It and ASC 740 Does Not

Mexican companies must distribute a portion of their annual profit to employees under the Participación de los Trabajadores en las Utilidades (PTU) regime, generally 10% of a base similar to taxable income. Because that base closely resembles taxable income, PTU behaves like a tax economically, yet the two frameworks classify and measure it very differently: NIF D-3 requires recognition of deferred PTU using the asset-and-liability method set out in NIF D-4, while ASC 740 excludes it from its scope entirely.

The Mechanism: Temporary Difference vs. Operating Expense

Under NIF D-3, PTU follows the same deferred-tax mechanics as income tax. Timing differences between the accounting carrying amount of assets and liabilities and their PTU base give rise to deferred PTU, recognized under the asset-and-liability method prescribed by NIF D-4. A deferred PTU asset or liability is booked, and any deferred PTU asset is tested for recoverability, mirroring deferred income tax, even though PTU is ultimately presented as an operating labor expense.

Under ASC 740, the logic is different. The standard applies only to taxes based on income. PTU is not considered an income tax under US GAAP; it is a statutory profit-sharing obligation treated as a compensation or operating expense under ASC 710 and ASC 450. As a result, no deferred PTU is recognized, there is no temporary-difference model for it, and the expense is accrued when the obligation becomes probable and can be reasonably estimated.

Comparative Table

Dutch Budget Day 2026: Proposed Tax Measures and Financial Reporting Considerations

On Budget Day, September 15, 2026, the Dutch minority government presented a number of tax proposals as part of the 2027 Tax Plan. These measures remain subject to the legislative process and will take effect only once approved by Parliament. Below, we have outlined the potential financial reporting implications of the proposed changes affecting Dutch corporate income tax and the Minimum Tax Act. Our observations are based on the application of International Financial Reporting Standards (IFRS).

Increase in the Energy Investment Allowance (EIA)

The government proposes increasing the Energy Investment Allowance (EIA) from 40% to 45.5%. The EIA provides an additional tax deduction for qualifying investments in new energy-efficient assets, provided the applicable procedural requirements are satisfied, including timely electronic notification and receipt of approval from the competent authority. 

A&M TAS Says: 

From a financial reporting perspective, the increased deduction would generally result in a reduction in current tax expense. As the EIA represents an additional profit deduction and does not alter the tax basis of the underlying asset, the proposal would typically not affect deferred tax balances.

Foreign Exchange Results on Hedging Instruments and the Participation Exemption

Under the current rules, foreign exchange (FX) gains and losses on instruments used to hedge exchange rate exposure relating to a qualifying participation may fall within the Dutch participation exemption, provided a prior ruling has been obtained from the Dutch tax authorities. Under the proposed amendments, this treatment would continue to be available, upon request, for unexpected or non-priced-in FX movements. However, it would no longer apply to FX results that are regarded as priced into the investment, that is, currency effects that are considered foreseeable based on the relative strength or weakness of the relevant currencies.

A&M TAS Says: 

Following enactment, entities should reassess the tax treatment of affected hedging instruments. If participation exemption treatment is no longer available, FX gains and losses would generally cease to constitute permanent differences, potentially affecting the effective tax rate compared with prior periods. Further, deferred recognition of unrealized FX results may give rise to deferred tax assets and liabilities. Where uncertainty exists regarding the classification of currency effects, the requirements of IFRIC 23 on uncertain tax positions may also become relevant.

Removal of the Interest Limitation Rules for Housing Corporations

From 2028 onward, Dutch housing corporations would be excluded from the Anti-Tax Avoidance Directive (ATAD) earnings stripping rules. As a result, net interest expenses would become fully deductible, subject only to any other applicable restrictions. Existing interest carryforwards originating from financial years beginning before January 1, 2028, will remain subject to the current regime.

A&M TAS Says: 

For accounting purposes, entities should evaluate whether deferred tax assets related to previously disallowed interest expenses become recognizable once the legislation is enacted. This assessment should consider the likelihood of sufficient future taxable profits, including the expected reversal of deferred tax liabilities. In addition, the proposed amendment may reduce future current tax expense by increasing the availability of interest deductions from 2028 onward.

Proposed Amendments to the Dutch Minimum Tax Act 2024

The Dutch 2027 Tax Plan includes several proposed amendments to the Pillar II framework, including an extension of the Transitional CbCR Safe Harbor, the introduction of new Side-by-Side (SbS) and Simplified Effective Tax Rate (SETR) safe harbors, and additional guidance affecting the application of the Dutch Minimum Tax Act 2024, with certain measures applying retroactively.

A&M TAS Says: 

Once enacted, multinational groups should reassess the impact of these Pillar II developments on current tax accounting, safe harbor eligibility, qualifying domestic minimum top-up-tax (QDMTT) exposures, Pillar II disclosures, and potential Return-to-Provision (RTP) adjustments following the filing of GloBE Information Returns. Particular attention may be required for interactions between the various safe harbors, uncertain tax positions under IFRIC 23, and the accounting consequences of deferred tax-related Pillar II adjustments.

EU Tax Omnibus: Proposed Changes and Impact for the Netherlands

On June 24, 2026, the European Commission published its ‘Omnibus Directive’ proposal revising six direct tax directives, including several relaxations of the Anti-Tax Avoidance Directive (ATAD) interest deduction limitation (implemented in the Netherlands as the earnings stripping rule). Key changes include a €3 million de minimis threshold as of 2032 (currently €1 million in the Netherlands), a 30% EBITDA deduction percentage (currently 24.5% in the Netherlands), a mandatory group exception, full deduction for third-party loans financing a company's own activities, full deduction where EBITDA declines by more than 50%, and mandatory carryforward of unused capacity. Further, the Commission proposes to abolish the imported hybrid mismatch rules, a technical part of the ATAD2 interest deduction restrictions. It is also proposed to raise the affiliation threshold from 25% to 50% and to extend the general anti-abuse provision to withholding taxes and Pillar II.

A&M TAS Says:

Adoption of the Omnibus Directive requires unanimity in the Council. The proposal, if adopted as currently proposed, would require the Netherlands to make several changes to its existing legislation. In its BNC-fiche of August 28, 2026, the Dutch government expressed support for the proposal's objectives but reservations about the ATAD relaxations. The outcome of negotiations depends on the position of EU member states, and it is possible that the Directive will be adopted in a substantially amended form. It is also conceivable that the Directive could prove politically unfeasible. For now, the Council, EU Parliament, and Commission have indicated that they aim to reach an agreement in the fourth quarter of 2027.

Ministry of Finance Updates ATAD2 Guidance

The Dutch State Secretary of Finance published an updated decree on the application of the Dutch anti-hybrid mismatch rules (ATAD2). While no major policy changes were introduced, the Decree contains several clarifications and additional examples providing further guidance on the practical application of the Dutch hybrid mismatch rules. These include the interaction with the former US GILTI and current NCTI regimes, the treatment of capitalized acquisition costs, hybrid and disregarded permanent establishments, and cost-plus structures. The decree also includes examples aimed at preventing unintended double taxation outcomes and confirms that the Dutch hybrid mismatch rules should be interpreted in light of their underlying purpose, namely, preventing hybrid mismatch outcomes without leading to disproportionate results.

A&M TAS Says:

The Decree provides welcome guidance in several relevant areas. In addition, the Decree confirms that the Dutch Ministry of Finance continues to interpret the rules in light of their underlying purpose while seeking to avoid disproportionate results and unintended double taxation outcomes. In practice, taxpayers that are currently facing limitations under the Dutch hybrid mismatch rules may wish to review their current analysis in light of the updated guidance and examples in the Decree.

Featured Experts

Nick Crama

Oscar Traast 

Andreea Butnaru 

New Pronouncements From the Directorate-General for Taxes (DGT) on the Application of the Participation Exemption Based on the Underlying Accounting Treatment

Both rulings below concern the application of the participation exemption under Article 21 of the Corporate Income Tax Law (CIT Law) to dividends and capital gains. In both cases, the DGT emphasizes that the tax treatment cannot be analyzed independently of the accounting treatment of the transaction. Instead, the tax consequences depend on how and when the relevant income is recognized for accounting purposes. To reach its conclusions, the DGT relies on the accounting criteria established by the accounting regulator (ICAC) to determine the timing and nature of the accounting recognition, and then assesses whether the resulting accounting income qualifies for the exemption.

Ruling V0866-26 addresses whether a dividend distributed by a subsidiary, charged to reserves and used to offset a loan owed by its parent, can benefit from the participation exemption. The DGT states that it is important to analyze the economic substance, and not just the legal form, of the transfer of assets, and concludes that, provided the loan is a genuine financing arrangement, the debt cancellation must be accounted for as a dividend paid in kind, generating income for the parent that qualifies for the exemption. The offsetting is merely the form of payment, not a separate transaction.

Ruling V5183-26 examines whether the participation exemption applies to a gain from transferring shares to a related party under a resolutory condition, carried out shortly before a capital increase that would otherwise dilute the seller's stake below the 5% threshold. The DGT concludes that, as the requirements for the participation exemption (i.e., a minimum 5% shareholding held for more than one year) must be assessed on the date the shares are transferred (i.e., as of the accounting derecognition date), the transfer is deemed to take place when the purchaser substantially assumes the risks and rewards attached to the shares. Accordingly, the exemption may be secured prior to the dilution, provided that the resolutory condition serves solely as a payment guarantee and does not prevent the transfer from being regarded as effective from the outset of the transaction, when the purchaser has already assumed the substantial risks and rewards associated with the shares.

Further Guidance From the DGT on the CIT Treatment of Tax Refunds Relating to Prior Years

The DGT has recently ruled (V1146-26) on the CIT treatment of amounts received in the current tax period as a refund of improper payments made under other taxes in prior years, following the annulment of assessments corresponding to both statute-barred and non-statute-barred periods.

The DGT concluded that, in line with the general principle that the CIT taxable base starts from the accounting result, the refund should be recognized as income in the year in which the right to receive it becomes enforceable. Referring to the accounting criteria, the DGT noted that recognizing a receivable from the tax authorities does not generally require restating prior years' accounts. Consequently, as the CIT Law does not contain a specific timing rule for these situations, the corresponding income must be included in the CIT taxable base for the year in which the refund right arises, regardless of whether the original tax payments relate to prescribed or non-prescribed years.

A&M TAS Says:

These rulings serve as a useful reminder that, for CIT purposes, the accounting characterization of a transaction is not merely a formal requirement but a key factor that directly determines the applicable tax treatment. Taxpayers should ensure that the accounting implications are properly assessed and documented from the outset, particularly regarding the economic substance of each transaction, as this may have a direct impact on the timing and availability of tax relief.

Featured Experts

Ángel Calleja 

Patricia Alonso de la Fuente

Jesús González 

Claudia Fraga Bugallo 

Laura Fernández Parrado 

A judgment by the Swiss Federal Supreme Court (9C_296/2025) provides important guidance on the recognition of warranty provisions for Swiss tax purposes where potential warranty exposures consist of numerous individual defect risks. The Swiss Federal Supreme Court indicated that individual risks with a probability of less than approximately 20-25% would generally not warrant the recognition of a provision on a standalone basis. Nevertheless, for complex projects involving a large number of potential defects, the court held that the analysis cannot stop at the level of the individual risk. Rather, the aggregate probability that one or more warranty risks will materialize must first be assessed. Only if this overall assessment supports the existence of a sufficiently probable future outflow does the question arise as to the appropriate measurement of the provision. The decision therefore acknowledges that a portfolio of individually low-probability warranty risks may collectively support a warranty provision that is commercially justified and, in principle, tax-recognizable.

A&M TAS Says: 

Although the court decision does not explicitly state which probability threshold needs to be reached to justify tax deductibility, it mentions that the probability may be lower than under the IFRS more-likely-than-not threshold, as this threshold is not compatible with the prudence principle under the Swiss Code of Obligations. Swiss taxpayers recording warranty provisions should document their calculation process, especially when grouping multiple smaller but related risks.

Featured Experts

Pascal Schmuckli 

Sandro Schacher 

Thailand Issues Royal Decree Prescribing Certain Additional Entities Not Treated as Constituent Entities

On August 19, 2026, Thailand issued a Royal Decree prescribing certain additional entities not treated as constituent entities, namely, pension service entities established and operated primarily to support qualifying pension funds and retirement benefit arrangements, applicable to accounting periods beginning on or after January 1, 2025.

A&M TAS Says: 

Qualified pension service entities are excluded from the constituent entity population entirely. Taxpayers should review the full text of the Royal Decree when determining constituent entities and assessing their Pillar II compliance obligations.

Featured Experts

Korneeka Koonachoak

Amornphan Oopachodsuwan

UK Corporation Tax: Key Updates From L-Day 2026 and What's Next

On July 13, 2026, the UK government published its annual package of draft Finance Bill clauses, consultations, and policy papers, known as Legislation Day, or "L-Day." Alongside the foreign PE exemption reform covered below, the package included a number of other measures relevant to corporate taxpayers:

• Interest Withholding Tax Simplification: A consultation on modernizing how UK payers obtain treaty relief from withholding tax on interest paid overseas, aimed at streamlining currently slow Double Taxation Treaty Passport Scheme (DTTP)-style claims and clearance processes.
• Pillar II: Side-by-Side Package and Technical Amendments: Draft legislation incorporating the OECD's Side-by-Side package into the UK's Multinational Top-up Tax and Domestic Top-up Tax rules, alongside anti-avoidance amendments restricting movement between transitional and full GloBE calculations.
• Predevelopment Costs and Capital Allowances: A consultation on the tax treatment of early-stage project costs, following the Supreme Court's decision in Orsted West of Duddon Sands (Gunfleet Sands) and His Majesty’s Revenue and Customs (HMRC's) updated Capital Allowances Manual guidance.
• Correction of Errors Modernization: Draft legislation introducing a statutory duty to correct known inaccuracies in returns, together with a new HMRC power to issue "Customer Correction Notices."
• UK Re-Domiciliation Regime: Confirmation that the new regime allowing overseas companies to re-domicile to the UK will be inward-only, with tax legislation to follow once the legal framework is finalized.

Several of these consultations remain open, and the government's response, together with the updated Finance Bill 2026-27, is expected to follow the Autumn Budget on October 28, 2026. Groups should treat the period between now and Budget Day as the window to assess exposure and, where relevant, respond to consultation.

One of the more consequential proposals in the package, with a direct and near-term tax accounting impact, is the shift in the foreign PE exemption from elective to mandatory.

Mandatory Foreign PE Exemption

The UK government has confirmed that the current elective exemption for profits and losses of foreign permanent establishments (PEs) of UK resident companies is being replaced with a mandatory exemption. The change applies to accounting periods beginning on or after January 1, 2027, with an earlier start date of September 1, 2026, for oil and gas activities.

Under the existing regime, a UK resident company can elect into the PE exemption, meaning foreign PE profits and losses are kept outside the UK corporation tax net only where that election has been made. In practice, this asymmetry has allowed UK companies to obtain UK tax relief for losses incurred in a foreign PE, while subsequent profits from that PE are often not brought back into full UK charge, either because no election was made or because the group's position shifted once the PE became profitable.

The new rules remove that choice. Once the mandatory exemption applies, foreign PE profits and losses will fall outside UK corporation tax as a matter of law.

Where a DTA has been recognized on the basis that unrelieved foreign PE losses will be available for UK relief against future UK-taxable profits (including anticipated future PE profits under the current elective basis), that recognition needs to be revisited. If the exemption becomes mandatory, the underlying assumption supporting the DTA would no longer hold.

A derecognition or write-down of a previously recognized DTA will affect the current period's ETR and may warrant disclosure as a significant estimate or judgment, particularly where the amounts are material.

A&M TAS Says:

The shift from an elective to a mandatory foreign PE exemption is a legislative change with a direct and potentially material tax accounting consequence for any group carrying a deferred tax asset in respect of foreign PE losses. The key task now is to identify affected entities and quantify any DTA at risk of derecognition. Note that no derecognition or remeasurement is required until the legislation is substantively enacted. On current timetables, this is not expected before early 2027 at the earliest, though no parliamentary dates have yet been set. In the meantime, groups with material exposure should consider whether forward-looking disclosure is warranted ahead of enactment. A&M can help groups map their foreign PE positions, track the legislation's progress against reporting dates, and prepare the technical analysis and disclosure needed to support year-end and interim reporting through the transition.

Featured Experts

Tom Lobb

Effective July 1, 2026, Vietnam introduced Circular 95/2026/TT-BTC, which provides updated guidance on the application of Vietnam's double taxation agreements (DTAs), Mutual Agreement Procedures (MAPs), and Advance Pricing Agreements (APAs). The Circular replaces the previous DTA and APA guidance and introduces a number of changes relevant to cross-border transactions, treaty benefits, dispute resolution, and transfer pricing certainty.

One of the key developments is the expanded guidance on permanent establishments (PEs). In particular, an e-commerce or digital platform through which a foreign enterprise conducts all or part of its business activities in Vietnam may constitute a PE of that foreign enterprise in Vietnam. The Circular also reinforces that tax treaties are intended not only to eliminate double taxation but also to prevent double non-taxation.

This expanded PE concept is particularly relevant for multinational groups operating through digital, e-commerce, or other remote business models. Such groups may need to revisit their existing arrangements to assess whether their activities could create a taxable presence in Vietnam.

The Circular may also have broader implications for existing treaty positions. The additional guidance on beneficial ownership, treaty entitlement, cross-border payments, exchange of information, and anti-abuse principles could result in greater scrutiny of structures and withholding tax positions relying on treaty relief. Companies should therefore consider whether their existing documentation and supporting evidence remain sufficient to support the treaty benefits claimed.

Circular 95 also provides a more comprehensive framework for MAP and APA administration. For MAP, the Circular sets out clearer procedures for resolving disputes arising from the application of tax treaties. For APAs, it introduces a number of practical enhancements, including expanded application periods, the use of commercial databases for comparability analyses, and delegation of APA administration to the Tax Department. These changes may provide taxpayers with additional tools to manage transfer pricing uncertainty and cross-border tax disputes.

A&M TAS Says:

Circular 95 reflects Vietnam’s continued move toward international tax administration practices, with an increasing focus on cross-border transactions and treaty compliance. The expanded PE guidance could increase tax exposure for certain digital and foreign business models, while the enhanced MAP and APA frameworks may provide taxpayers with more practical options for achieving greater tax certainty.

Companies with cross-border operations should consider reviewing their existing PE and treaty positions, supporting documentation, and transfer pricing arrangements, while also assessing whether MAP or APA mechanisms could help manage potential disputes or uncertainty. These developments should also be considered as part of year-end tax provision and uncertain tax position assessments.

Featured Experts

Anh Ngoc

Thuy Nguyen