Corporate Tax Reforms and Incentives
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Portugal: Draft Budget 2025 proposes reducing standard corporate tax rate from 21% to 20%, and SME rate on first €50,000 from 17% to 16%. Introduces 200% deduction for salary increases (up from 150%) if average wage rises by 4.7%.
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France: Draft Finance Bill 2025 introduces temporary surtax on large companies (€1B+ turnover) at 20.6%/41.2% for first year, 10.3%/20.6% for second year. New 8% share buyback tax for large companies.
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Denmark: Legislative program includes increasing R&D expense deduction to 114% in 2026, 116% in 2027, and 120% from 2028.
Personal Income Tax Adjustments
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Portugal: Revises personal income tax brackets, with rates ranging from 13% to 48%. Extends youth tax exemption to age 35 for up to 10 years, with exemption percentages of 100%, 75%, 50%, and 25% in different periods.
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France: Introduces exceptional contribution ensuring 20% minimum tax rate for households with income over €250,000 (single) or €500,000 (couple) for 2024-2026.
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Guernsey: Increases individual standard income tax rate from 20% to 22% for two years. Raises Personal Income Tax Allowance by £1,100 to £15,000.
VAT and Indirect Tax Developments
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Montenegro: Introduces new 15% reduced VAT rate, revises 7% rate scope, and abolishes VAT zero rate for certain supplies. Effective January 1, 2025.
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Monaco: Adjusts VAT exemption thresholds: €85,000 for goods/accommodation (down from €91,900), €37,500 for most services (up from €36,800), €50,000 for intellectual services (up from €47,700). Effective January 1, 2025.
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Slovak Republic: Introduces tax on sweetened non-alcoholic beverages at €0.15-€0.30 per liter for ready-to-drink, €1.05 per liter for concentrates. Effective January 1, 2025.
International Tax Compliance and Transparency
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Poland: Approves “Cash PIT” scheme allowing cash basis accounting for entrepreneurs with revenue under PLN 1 million. Effective January 1, 2025.
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France: Implements new reporting obligations for crypto-asset service providers per EU DAC8 directive. Effective January 1, 2026.
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Denmark: Plans to implement EU small business scheme for cross-border supplies and new crypto-asset reporting (DAC8).
Pillar 2 and Digital Economy Taxation
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France: Amends Pillar 2 rules to align with latest OECD guidance, adjusts QDMTT to ensure qualification.
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Denmark: Plans to amend Minimum Taxation Act per OECD guidelines and modify transfer pricing rules for Amount B of Pillar 1.
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Italy: Draft Budget 2025 proposes eliminating thresholds for 3% Digital Services Tax, potentially applying to all in-scope service providers.
Insights:
This week’s developments reveal a complex interplay between domestic fiscal priorities and global tax harmonization efforts. The trend of reducing headline corporate tax rates, as seen in Portugal, is juxtaposed against targeted increases for large multinationals, exemplified by France’s temporary surtax. This dichotomy suggests a nuanced approach to competitiveness, balancing the need to attract broad-based investment while ensuring larger entities contribute their “fair share.”
The evolution of personal income tax structures, particularly Portugal’s extended youth exemptions and Guernsey’s temporary rate hike, reflects an increasing use of tax policy as a tool for demographic and social engineering. These measures may signal a shift towards more dynamic, demographically-targeted tax systems in response to aging populations and changing workforce dynamics.
VAT and indirect tax adjustments, such as Montenegro’s new reduced rate and Slovakia’s sweetened beverage tax, highlight the ongoing refinement of consumption taxes to address both revenue needs and public health concerns. This trend towards more granular, purpose-driven indirect taxation may reshape consumer behaviors and industry landscapes.
