January 12, 2025

TAX POLICY BREW FOR January W1 2025

TAX POLICY BREW FOR January W1 2025

Global Minimum Tax Landscape Formation

  • Qatar/Oman: Both implement 15% QDMTT from January 2025 for MNE groups exceeding €750M revenue threshold.

  • North Macedonia: Approves QDMTT with 18-month initial reporting window, 15-month thereafter.

  • Luxembourg: Issues detailed regulations on functional currencies and tax credits for Pillar 2, mandating parent entity’s currency for calculations.

Strategic Rate Adjustments

  • Portugal: Reduces corporate rates (standard: 21% to 20%, SME: 17% to 16%), enhances wage increase deduction to 200% subject to 4.7% average increase. 

  • Romania: Increases dividend tax to 10%, reduces micro-enterprise threshold to €250K (2025) then €100K (2026), reintroduces 1% construction tax.

  • Pakistan: Revises bank taxation: Rate increasing to 44% (2025), decreasing to 42% by 2027, eliminates ADR-based additional tax.

Energy and Luxury Taxation Evolution

  • Spain: Introduces 1.2% temporary energy levy on 2024 turnover, exempting companies below €1B revenue, with green investment reductions.

  • Chile: Implements 2% luxury tax on specified assets including helicopters, aircraft, yachts, and premium automobiles.

  • Georgia: Raises gambling income tax to 20% with dividend withholding exemption on related profits.

VAT System Modernization

  • China: Adopts new VAT law effective 2026, clarifying place of supply rules and non-resident agent appointments.

  • Taiwan: Proposes VAT registration threshold increase to TWD 600,000 for non-resident electronic service providers.

Research and Innovation Incentives

  • Portugal: Launches IFICI regime offering 20% tax rate for 10 years to qualifying researchers and innovators, requires registration by March 15, 2025.

Insights:

The start of 2025 marks a critical phase in global tax reform as Middle Eastern financial hubs like Qatar and Oman align with Pillar 2, while Luxembourg’s detailed implementation guidelines showcase the increasing technical sophistication required for compliance.

A new paradigm in corporate taxation is emerging, exemplified by Portugal’s dual approach of rate reduction coupled with behavioral incentives, suggesting a shift from simple rate competition to more nuanced policy instruments.

The contrasting approaches to sectoral taxation – Spain’s temporary energy levy versus Chile’s permanent luxury tax – highlight the evolving debate between crisis response measures and structural tax reforms.