Key EU Tax Developments in 2024

Key Tax Developments in the EU and Global Tax Landscape in 2024

As 2024 draws to a close, the tax landscape within the EU and globally has seen transformative changes aimed at enhancing tax transparency, combatting avoidance, and modernizing fiscal policies. This article reviews the most significant tax developments, legislative proposals, and policy initiatives that shaped the year while providing a glimpse of expected trends in 2025.

1. EU Minimum Tax Directive (Pillar Two)

The EU Minimum Tax Directive (2022/2523) formally came into force on December 23, 2022, requiring EU Member States to implement the rules by December 31, 2023. Key provisions include the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR). Despite initial delays, most Member States have adopted legislation incorporating these rules, ensuring global minimum tax compliance across multinational enterprises (MNEs).

Notable Updates:

• Cyprus, Poland, Portugal, and Spain faced legal action from the European Commission for failing to meet transposition deadlines.

• Some nations, including Poland and Portugal, opted for retroactive applications from January 2024.

• The OECD released further guidance clarifying Safe Harbours and administrative rules, reinforcing compliance across jurisdictions.

2. Exchange of Top-Up Tax Information Returns (DAC9)

The European Commission introduced DAC9, extending the Directive on Administrative Cooperation (DAC) to facilitate the exchange of Top-Up tax returns under Pillar Two. This mechanism aims to streamline tax compliance by enabling central filings by ultimate parent entities (UPEs).

Expected Outcomes:

• Centralized tax reporting reduces administrative burdens for MNEs.

• Implementation deadlines are set for December 31, 2025, with initial filings expected in mid-2026.

3. Implementation of Pillar One (Profit Reallocation)

The OECD's Pillar One framework seeks to reallocate profits of large MNEs to market jurisdictions. While the Multilateral Convention (MLC) is still pending ratification, several EU nations, including Ireland and the Netherlands, have begun aligning domestic tax rules accordingly.

Key Features:

• Application to MNEs with global revenues exceeding EUR 20 billion.

• Reallocation of 25% of residual profits above a 10% profit margin to market jurisdictions.

4. Anti-Tax Avoidance Initiatives

4.1 Proposal to Prevent Misuse of Shell Entities (Unshell)

The "Unshell" proposal targets entities lacking substantial economic activities. Despite intense negotiations, a final agreement has yet to be reached, with continued discussions expected in 2025.

4.2 ATAD Evaluation

The European Commission initiated a review of the Anti-Tax Avoidance Directive (ATAD), emphasizing better alignment with the EU Minimum Tax Directive. Recommendations included expanding interest limitation rules and enhancing anti-hybrid provisions.

5. Business Tax Harmonization

5.1 Business in Europe: Framework for Income Taxation (BEFIT)

The BEFIT proposal aims to standardize corporate taxation across the EU by introducing a unified tax base calculation. While Member States expressed concerns over sovereignty and administrative complexity, discussions are expected to continue.

5.2 Transfer Pricing Directive

Efforts to harmonize transfer pricing rules across the EU encountered resistance, prompting consideration of a non-binding Transfer Pricing Platform as an alternative.

6. Modernizing Tax Administration and Reporting

6.1 Faster and Safer Excess Refund (FASTER)

Adopted in December 2024, the FASTER Directive aims to simplify withholding tax refund processes through automated digital certificates and fast-track procedures. Implementation is scheduled for January 1, 2030.

6.2 Public Country-by-Country Reporting (CbCR)

By late 2024, most EU Member States had transposed CbCR legislation, requiring MNEs to disclose tax-related information publicly. Early adopters like Romania and Sweden have already implemented these rules, reinforcing transparency.

7. Expanding Tax Reporting Obligations

7.1 Reporting Obligations for Platform Operators (DAC7)

DAC7 mandates digital platform operators to report income generated by sellers on their platforms. While transposition faced initial delays, all EU countries are now fully compliant.

7.2 Reporting on Crypto-Assets and Beyond (DAC8)

The adoption of DAC8 extended reporting obligations to crypto-asset service providers, covering transactions across digital platforms. Compliance with OECD’s Crypto-Asset Reporting Framework (CARF) ensures tax transparency in the digital economy.

8. Looking Ahead to 2025

Several initiatives remain in progress, including advancing the BEFIT framework, finalizing the Unshell Directive, and implementing the Multilateral Competent Authority Agreement for Pillar One. With ongoing negotiations and expected updates, businesses must stay vigilant to remain compliant and strategically plan for the future.

These tax developments reflect the EU's commitment to fostering tax transparency, ensuring fair taxation, and combating tax avoidance. By adapting to these evolving regulations, businesses can safeguard compliance and seize opportunities for sustainable growth.

How We Can Help

At Gauci Magri & Associates, we offer expert corporate tax advisory services tailored to property businesses in Malta. From tax planning and compliance to filing and refund claims, our experienced team ensures that your business maximizes tax efficiency while staying fully compliant.

Contact us today at admin@gaucimagri.com to learn how we can help with your corporation tax obligations in Malta’s property market.

Stefan Gauci Scicluna Director at Gauci Magri & Associates