The following article highlights key provision considerations, current issues in corporate tax, and updates for companies preparing income tax provisions for 2024. Read more about global tax law changes, updates from the Financial Accounting Standards Board, and other considerations for 2024 below. For prior quarters of tax law changes, see our releases from the first, second and third quarters.
New year - new tax legislation? With the presidential inauguration only a few weeks away, 2025 brings the promise of being an interesting year with respect to tax policy. The Trump administration’s tax package may address any of several corporate tax issues, including providing a solution to Pillar Two for US domiciled companies, addressing a number of items on the corporate tax wish list, such as interest limitations, bonus depreciation and expensing of research and experimental expenditures, and a potential corporate tax rate reduction. Regardless of what 2025 brings in terms of tax law changes, companies should not reflect those changes in calendar year-end 2024 provisions, given ASC 740 requires a company to reflect changes in tax law in the period of enactment.
To learn more about potential tax law changes under the Trump administration, register for our webcast on Jan. 15, 2025: Navigating Trump tariffs and tax changes in 2025.
While there were few significant changes in tax law enacted during 2024, based on the phase-out included as part of the Tax Cuts and Jobs Act in 2017, the applicable percentage for bonus depreciation for assets placed in service during 2024, is 60%. That threshold further falls to 40% for assets placed in service during 2025.
In the fall of 2024, the IRS and Treasury published several hundred pages of proposed regulations addressing the Corporate Alternative Minimum Tax (CAMT). The comment period on the proposed regulations ran through the end of the calendar year and the IRS released several technical corrections to the proposed regulations just before the holiday. The CAMT imposes a 15% minimum tax on the adjusted financial statement income of applicable corporations. The regulations propose making permanent the simplified safe harbor for determining whether a corporation is an applicable corporation. The regulations also lay out rules for determining a partner’s distributive share of partnership income and expand on other adjustments to arrive at adjusted financial statement income. Read more in RSM’s article: Treasury issues long-anticipated proposed regulations on CAMT.
The Financial Accounting Standards Board (FASB) issued two accounting standards updates (ASUs) during the fourth quarter of 2024, bringing the total number of ASUs in 2024 to four. The fourth quarter ASUs relate to convertible debt and the disaggregation of income statement expenses. The FASB also has one ongoing project related to government grant accounting that may be of interest to tax departments. The FASB released a proposed ASU in November related to that project. The guidance, once finalized, may be relevant for accounting for tax credits that fall outside of ASC 740. Read more about the proposed standard in: FASB proposes guidance on accounting for government grants.
The focus of most tax departments continues to be on ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, released in December 2023. ASU 2023-09 focuses on income tax disclosures around effective tax rates and cash income taxes paid and is effective for public business entities for annual periods beginning after Dec. 15, 2024 (generally, calendar year 2025), and for all other business entities one year later.
While entities still have a year to comply with the additional disclosure requirements, as entities prepare the current year-end tax provision, even if there is not intent to adopt ASU 2023-09 early or retrospectively, it may be beneficial for corporate tax departments to evaluate the necessary changes to their provision processes and the configuration of any tax provision software concurrently with the preparation of the current year-end. Reviewing processes and configurations now allows for the 2024 year-end provision to serve as a test run of updated processes to ensure those processes are designed to collect the necessary data to comply with the requirements of the ASU. For additional information on the income tax disclosure ASU, read our article: ASC 740: FASB releases ASU 2023-09: Improvements to Income Tax Disclosures.
Read about how technology can help companies comply with the coming disclosure requirements in our article with Bloomberg: Technology Solutions for FASB ASU 2023-09 Compliance.
Read more about state and local tax law changes, including changes in tax rates and apportionment methodologies, in our companion alert: State income tax law changes for the fourth quarter of 2024.
One of the biggest challenges facing multinational enterprise (MNE) groups is working through the legislative changes across the globe to enact the The Organization for Economic Cooperation and Development (OECD)’s Pillar Two framework. Pillar Two aims to enact a global minimum corporate tax rate of 15% of adjusted net income on large international businesses regardless of the locations of the business’ headquarters or jurisdictions in which the business operates. There are several charging mechanisms in the Pillar Two framework to collect any required top-up tax, including the Qualified Domestic Minimum Top Up Tax (QDMTT), the Income Inclusion Rule (IIR) and the Undertaxed payments/profits rule (UTPR). In many tax jurisdictions, QDMTTs and the IIR are generally effective for years beginning on or after Dec. 31, 2023 (commonly this would be calendar year 2024), with the UTPR effective for years beginning on or after Dec. 31, 2024 (commonly this would be calendar year 2025).
Entities preparing financial statements for a multinational enterprise (MNE) group with €750 million or more in consolidated revenue may be subject to the Pillar Two rules. Under the rules, the €750 million threshold must be met in at least two of the last four years immediately preceding the tested year. An MNE group is any group that includes at least one entity or permanent establishment that is not located in the jurisdiction of the UPE.
As of Dec. 31, 2024, 36 countries have enacted part or all of the Pillar Two framework into laws that are effective for 2024. As noted above, the QDMTT and IIR rules are now generally effective, however it is important to note that only legislation enacted as of the balance sheet date is applicable for an income tax provision under Generally Accepted Accounting Principles (GAAP). The FASB indicated during 2023 that taxes under Pillar Two would be viewed as similar to an alternative minimum tax as discussed in Topic 740, Income Taxes. Under ASC 740, deferred taxes would not be recognized or adjusted for the future effects of the minimum taxes. Ultimately, companies need to evaluate the laws that have been enacted and reflect any effects on the income tax provision in the period in which the legislation is enacted.
The below updates on global tax matters include several notes about Pillar Two and efforts to enact the framework into law.
Australia passed legislation to implement the OECD’s Pillar Two regime to apply for years commencing on or after Jan. 1, 2024. All three legislative instruments to implement Pillar Two in Australia received royal assent on Dec. 10, 2024. The rules will impact multinational groups with annual global revenue of at least €750 million for the Dec. 31, 2024 year end. Companies should consider the potential application of the Australian Domestic Minimum Tax, and whether they would otherwise qualify for the transitional safe harbours. Read more from RSM Australia in: Australia implements OECD GloBE rules: Key implications for multinational enterprises.
Australia also enacted the Country-by-Country (CbCR) reporting regime, applicable to periods commencing on or after July 1, 2024. A Short Form Local File is required to be filed by Australian taxpayers, detailing global Organisational Structure, Business and Strategy, Business Restructures, Transfer of Intangibles and Key Competitors in an xml schema. Affected taxpayers should be aware of the significantly increased reporting detail required, the validation obligations of the new reporting format and expect increased scrutiny from the Australian Taxation Office.
Taxpayers should be aware of the following applicable timeframes:
Illustrative Year End |
First Reporting Year End |
Reporting Deadline |
30 June |
30 June 2025 |
30 June 2026 |
31 December |
31 Dec. 2025 |
31 Dec. 2026 |
31 March |
31 March 2026 |
31 March 2027 |
Read more about important CbCR reporting considerations for Australian taxpayers in:
In other news, read more about proposed tax incentives in Australia for critical minerals and hydrogen production in: Understanding the future made in Australia Bill 2024: Tax incentives for critical minerals and hydrogen production.
Law No. 15,079, originating from Bill No. 3,817/2024, was approved on Dec. 27, 2024. The law marks a significant step towards aligning the national tax system with the proposals of the OECD Pillar Two framework. Although Brazil formally claims to be adopting the Pillar Two rules in its entirety, in fact, at this moment the Executive Branch has only introduced rules relating to the Qualified Domestic Minimum Top-up Tax (QDMTT).
The French Parliament failed to advance the Finance Bill for 2025, resulting in a no-confidence motion resulting in the resignation of the French Prime Minister. The French President of the Republic has considered that the Finance Bill under discussion has become obsolete due to the no-confidence motion, an interpretation supported by the Presidents of both Assemblies who suspended their proceedings until further notice. Therefore, from a constitutional law perspective a special finance law has been enacted by the French Parliament on Dec. 18, 2024 to extend existing tax laws and provide for government expenditures as a stopgap measure until a new French government is appointed in 2025.
The Italian Supreme Court (Corte Suprema di Cassazione) ruled that the OECD Transfer Pricing Guidelines are not legal sources but technical tools to support the application of transfer pricing rules. Taxpayers and tax authorities are responsible for selecting the most appropriate method to determine the arm's length value of intra-group transactions, without being bound by the OECD Guidelines' recommended hierarchy of methods.
With the publication of the Legislative Decree No. 128/2024 on the Official Gazette No. 214 of Sept. 12, 2024, Italy has enacted the Country-by-Country Reporting (CbCR) directive. The decree mandates multinational enterprises (MNEs) headquartered in Italy or operating in Italy through a branch or subsidiary with total consolidated revenue exceeding €750 million in each of the past two consecutive financial years to publicly disclose specific income tax information. A penalty in the range between €10,000 and €50,000 applies in the case of omitted or late submission of the required reports. The penalty is reduced by 50% if the late submission is within 60 days. The penalty may be doubled in the case of incomplete or unfaithful data submission. The provisions apply to financial years starting on or after June 22, 2024. The decree entered into force on Sept. 27, 2024.
The Italian Tax Authorities, in tax ruling no. 174 of Aug. 21, 2024, clarified that the "National Documentation" (Country File) for transfer pricing must be prepared and submitted in Italian. This is one of the two optional reports that are to be prepared on an annual basis to benefit from the transfer pricing penalty protection (Art. 26 of Law Decree no. 78/2010). The second optional report is the so-called Master file, which illustrates all intercompany transactions and pricing methods on the group. While the National Documentation must be in Italian due to its domestic focus, the attachments to it and the Master File can be submitted in English.
Italy published in the gazette the Ministerial Decree establishing that the statutory interest rate will be 2% on a yearly basis effective from Jan. 1, 2025. The rate was previously 2.5%.
The Italian legislative reform of corporate income tax (IRPEF and IRES), under Article 15(1)(b) of the legislative decree, modifies the rules for carrying forward tax losses in mergers, as provided in Article 172(7) of the Italian Income Tax Code (TUIR). These changes align with the fiscal reform principles outlined in Law 111/2023 and introduce several adjustments. Key changes includes:
The changes will apply starting from the fiscal year in effect at the decree’s entry into force, with transitional measures for pre-reform losses. Losses incurred before the reform’s effective date are treated as non-validated and subject to the new limitations, even if incurred by group entities.
On Dec. 17, 2024, the Dutch Senate officially approved the Dutch Tax Plan 2025, which was signed by the King and published on Dec. 23, 2024. Please find below a brief summary of the most important corporate income tax (“CIT”) items from the Dutch Tax Plan 2025 that will be implemented on Jan. 1, 2025:
The earning-stripping measure limits the interest a Dutch company can deduct when determining profit if the net interest exceeds 20% of the gross operating result or more than €1 million. From 2025, this percentage will be increased from 20% to 24.5%. Effectively, this could result in a less strict interest deduction limitation.
Per 2025, a new foreign entity classification regime will be introduced in the Netherlands. This regime provides a framework of rules to assess whether foreign entities are (non-)transparent for corporate tax purposes. In summary, US groups with a Dutch subsidiary should verify whether the under-tier and upper-tier structure of their Dutch subsidiary are impacted differently with these new classification rules. Among other potential impacts, this could result in a higher/lower withholding tax burden pertaining to the upper-tier structure and more or less participation exemption in relation to the under-tier structure.
Certain rules within Dutch corporate tax (e.g., the Dutch participation exemption regime and Dutch 10a interest deduction rule) require a subject-to-tax test to sometimes be met in order to provide a tax benefit. These subject-to-tax tests will be updated to also include certain Pillar Two top-up taxation. For a US group this means that if a Pillar Two top-up tax is levied, they will satisfy certain subject-to-tax tests allowing for such tax benefits.
Waivers of debts owed by Dutch companies are in principle taxable income unless the waiver exemption applies. Due to an unforeseen concurrence, the FY 2022 new loss compensation rules resulted in a partial waiver exemption in some cases. This will be repaired in 2025 so that there will be full waiver exemption when the conditions are met. US companies that have loaned funds to Dutch companies and are considering waiving those debts should assess whether the waiver could lead to taxable income.
Read more about these items in: The Netherlands | 2024 Year- end update and actions.
Spain has enacted legislation to implement the OECD's Pillar Two framework, aligning with the EU Directive and OECD guidelines. Published as Law 7/2024 in the Official State Gazette on Dec. 21, 2024, this legislation introduces measures for multinational and domestic groups with annual revenues exceeding €750 million in at least two of the last four fiscal years.
Key measures of Spain’s legislation include:
Spanish entities must file returns and pay within 25 calendar days after a 15-month period from the fiscal year's end (18 months for the first year).
The Chancellor of the Exchequer delivered her Autumn Budget on Oct. 30, 2024, with the associated Finance Bill published a week later. The Finance Bill is expected to be enacted early in 2025.
The measures announced do not make sweeping changes to the United Kingdom (UK)’s corporate tax regime. The most significant development in this area is the inclusion of provisions in the Finance Bill to implement the undertaxed profits rule of the Pillar Two framework. This rule will apply to accounting periods beginning on or after Dec. 31, 2024, coming into force one year later than the UK’s income inclusion rule and domestic minimum top-up tax.
The Corporate Tax Roadmap published alongside the Budget sets out the government’s plans for UK corporate tax over the next five years and includes the following commitments for that period:
The measure that will likely have the largest economic impact on businesses relates to employer social security contributions (National Insurance contributions (NICs)). Effective April 6, 2025, the rate of employer NICs will increase from 13.8% to 15% and the annual wage threshold per employee, above which employer NICs are payable, will fall from £9,100 to £5,000. This follows a previous announcement that, effective April 1, 2025, the UK national minimum wage will increase from £11.44 to £12.21 per hour.
Read more analysis from RSM UK regarding the Autumn Budget 2024.
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