The ETL GLOBAL Tax Update is a recurring publication that brings together key developments from across Europe, prepared by members of the ETL GLOBAL Tax Working Group. The goal is to offer clear, practical insight into legislative changes that affect international businesses, drawing on the expertise of local tax professionals throughout the network.
In this edition, we take a closer look at recent and upcoming tax measures in Bulgaria, the Czech Republic, Slovakia, Spain and the United Kingdom. The overview is based on contributions from Denitza Vassileva, Ivana Zemanová, Daniel Hurta, Petra Jurišová, Joan Pons, Nuria Aliaga and Jill Springbett, who outline the main legislative changes in their countries, including new income tax rates, VAT adjustments, structural reforms, digital reporting requirements and the implementation of Pillar 2.
🇧🇬 Bulgaria – Denitza Vassileva, Vassilev & Partners Law Firm
Introduction of the Euro Currency in Bulgaria
Bulgaria will officially adopt the euro as national currency on 1st of January, 2026. As of that date, the Bulgarian Lev will be replaced by the Euro as the legal currency and Bulgaria will become part of the Eurozone.
VAT Registration Threshold
One of the significant changes to the Bulgarian Law for Value Added Tax (VAT) in 2024 was the reduction of the VAT registration level. This modification affected a large range of small and medium-sized enterprises that previously operated below the limit of 166,000 BGN (84,874 EUR). The sum taken into consideration is the amount of the turnover for the last 12 months.
The limit of the obligatory VAT registration was lowered from 166,000 BGN (84,874 EUR) to 100,000 BGN (51,130 EUR) from 1st of April 2025 (Art. 96 para. 1 of the Bulgarian Law for VAT).
Implementation of “Pillar 2” (Global Minimum Corporate Tax)
The Council Directive (EU) 2022/2523 of 15th of December 2022 which ensures a global minimum level of taxation (15%) for multinational enterprise groups and large-scale domestic groups in the EU was transposed into Bulgarian Corporate Income Tax Law on 23rd of December 2023 and its arrangements are in force from 1st of January 2024.
It is considered the changes concerns the biggest Bulgarian companies, and big multinational groups as for its application the consolidated revenues of the group need to be more than 750,000,000 EUR at least 2 of the 4 last years, and have a registered legal entity in Bulgaria.
Implementation of SAF-T Reporting
Several national regulations have been amended in the past few years in order to allow the implementation of SAF-T in Bulgaria. The result is one first phase of implementation starting on 1st of January 2026 which applies only to large enterprises, following the law definition.
Cumulatively with that first condition the net sales revenues of the large enterprise need to be 300,000,000 BGN (153,387,564.40 EUR) OR the large enterprise have paid taxes and other charges of more than 3,500,000 BGN (1,789,521.58 EUR). Figures from 2023 are taken into account.
The standard audit file for tax purposes in Bulgaria need to contain information such the identification data of the liable person, data from the accounting records, information from purchase and sales documents, including data of customers and suppliers, payments, information of fixed assets, including stocks, movements and accrued accounting and tax depreciation, information of inventories, nomenclatures for standardizing, technical data on the submitted file and the software, etc.
Three more phases are forecasted until 1st of January 2029 when all the small, medium and large enterprises will be submitted to the use of standard audit file-tax.
🇨🇿 Czech Republic – Ivana Zemanová & Daniel Hurta, KODAP
Pillar 2 Implementation (Global Minimum Tax):
Czech Republic has implemented the EU Minimum Tax Directive (Pillar 2, GloBE) as of January 1, 2024. The national Minimum Tax Act provides for an effective minimum taxation of 15% for large multinational corporate groups (turnover EUR 750 m)
E-invoicing and Digitalization:
As of the current regulations, the Czech Republic has not implemented a widespread mandate for obligatory electronic invoicing (e-invoicing) for business-to-business (B2B) or business-to-consumer (B2C) transactions. However, the public sector is required to be able to receive and process e-invoices, a significant step towards the digitalization of the nation’s financial workflows.
The key distinction in the Czech e-invoicing landscape lies in the direction of the transaction:
While it is not mandatory for companies to send electronic invoices to public authorities, all public contracting authorities have been legally obligated since April 1, 2019, to be able to receive and process them. This obligation stems from the implementation of the EU Directive 2014/55/EU into Czech law through Act No. 134/2016 Coll., on Public Procurement.
This means that if a supplier chooses to issue an electronic invoice to a public entity, that entity must accept it, provided it meets the European standard for electronic invoicing (EN 16931). The national electronic tool, Národní elektronický nástroj (NEN), serves as the central platform for public procurement and the exchange of these documents.
International Tax Transparency and Country-by-Country Reporting:
The Czech Republic has fully implemented international rules on tax transparency and country-by-country reporting (CbCR). This obligation is a key part of the fight against tax evasion and aggressive tax planning by multinational companies.
There are two main pillars of CbCR in the Czech Republic:
“New” CbCR for tax administrations: Introduced earlier, intended only for tax administration purposes. Public CbCR:
A newer obligation to publish data for the general public, valid from 2025.
Royalty/License Fee Deductibility:
No fundamental changes to the deductibility of royalty and license payments are planned for 2025.
Other tax changes:
Cancellation of the CZK 40 million limit for income from the sale of securities and shares for individuals
The Chamber of Deputies adopted the Senate’s modifying amendment, which fundamentally changes the rules for taxation of income of natural persons from the sale of securities and shares. Specifically, this abolishes the limit of 40 million CZK for their tax exemption, provided that the defined time tests are met and the securities or shares are not part of the taxpayer’s business property (assets). From January 1, 2026, these incomes will be completely exempt from tax regardless of their amount. The limit of 40 million CZK will remain in effect for income from the sale of crypto assets only.
The important fact is that the amendment contains no transitional provisions. This means that income from the sale of securities and shares exceeding CZK 40 million, which individuals will still receive in 2025, will be subject to the existing limitation and taxation according to the current legal regulations. The practical impact of the change will thus only occur for income actually received in 2026.
In addition to the abolition of the limit, the amendment also brings partial modifications in the spheres of employee benefits and the definition of low-emission vehicles. The revised text of the law was forwarded to the president for his signature.
🇸🇰 Slovakia – Petra Jurišová, ETL TRNAVA
Corporate Income Tax Adjustments (from 2025)
Reduced rate of 10% for legal entities with taxable income up to 100,000 EUR (previously 60,000 EUR). Micro entities are up to 100,000 EUR income including natural persons, only difference they stay at reduced rate of 15% not 10%. Standard rate for legal entities remains 21%, while entities with income over 5 million EUR face an increased rate of 24%.
Dividend Taxation Changes
Withholding tax on dividends for individuals reduced back to 7% for profits generated from tax periods starting 1 January 2025. The temporary increase to 10% applies only to dividends for 2024 profits.
VAT Rate Adjustments
From 1 January 2025, Slovakia applied two reduced VAT rates:
- 19% (up from 10%)
- 5% (unchanged)
The scope of goods and services eligible for reduced rates has been revised. Also, base rate was changed from 20% to 23%.
Minimum Corporate Tax Reintroduced
Legal entities with low or no tax liability must pay a minimum corporate income tax, based on revenue thresholds starting at 340 EUR for entities having taxable revenues up to 50,000 EUR. Maximum minimum corporate tax is 3,840 EUR for entities with taxable revenues higher than 500,000 EUR.
Social Insurance Ceiling Raised
The maximum monthly assessment base for health, pension, and other insurance contributions will increase from 7× to 11× the average wage, i.e., from approx. 9,128 EUR to 15,730 EUR.
2026 Consolidation Package Measures
- Freezing salaries for most public sector employees (except teachers and healthcare workers).
- Reducing capital and operational expenditures.
- Merging or eliminating government offices.
- Introducing tax from sugary drinks – tax payable is for drinks which are first time produced in Slovakia or imported.
- Introducing tax from financial transactions – every debit transaction on bank account with some exceptions (e.g. payments to social, health insurance or to tax office) are subject to financial transaction tax which is 0,4 % with maximum of 40 EUR per one transaction. Cash withdrawals are subject to 0,8 % tax without limit. Card payments are taxed once a year – 2 EUR per card used in a year.
- Increase in health insurance contributions by 1 percentage point for employees, self-employed persons, and voluntary payers.
- Introduction of greater income tax progressivity – rates up to 35 % for monthly income
🇪🇸 Spain – Joan Pons and Nuria Aliaga, Allyon ETL
Pillar 2 Implementation
Spain approved Law 7/2024 of December 2024, which implements a top-up tax for large multinational and domestic groups in Spain, which will be effective retroactively for fiscal year (“FY”) 2024, and which is set up under the basis of the following:
- National top-up tax: Calculated on the ultimate parent entity’s accounting standard, with the aim of completing the taxation of Spanish entities of multinational or domestic groups, in line with the OECD development on this.
- Primary top-up tax: Inclusion rule, applicable when the ultimate parent entity is located in Spain.
- Secondary top-up tax: Rule on under-taxed payments, applicable to Spanish subsidiaries of foreign groups with tax rates below 15%.
Large multinational enterprise groups and large-scale domestic groups with presence in Spain and annual revenues of at least 750 m EUR in at least two of the last four FY, will be subject to the top-up tax rules. The Law includes the Transitional Safe harbour based on simplified calculation using CbCR data and the individual financial statements with only minimal adjustments.
Additionally, the regulatory development has been approved by Royal Decree 252/2025 of 1 April, which essentially (i) lays down the rules for the information return, (ii) governs the treatment of tax credits, and (iii) develops the penalty regime.
Regarding compliance obligations, FY 2024 benefits from an extended filing period compared to subsequent years. The deadline to notify the Spanish Tax Authorities that a group falls within the scope of the Pillar 2 rules—and must therefore provide detailed information—is 18 months, meaning the notification must be submitted by 30 June 2026.
On 29 October, the Spanish Tax Authorities approved the official Complementary Tax forms (Forms 240, 241 and 242), which govern communication, information and self-assessment obligations. To determine whether these obligations apply, the following points must be assessed:
- Identification of the Ultimate Parent Entity (UPE).
- Confirmation that the UPE is required to prepare consolidated financial statements.
- Verification that consolidated revenues exceeded 750 million EUR in at least two fiscal years between 2020 and 2023.
If these conditions are met, the UPE must file the GloBE Information Return in its jurisdiction and pay the corresponding top-up tax. Spanish entities within the group must file form 240 to notify the Spanish Tax Authorities. Alternatively, a single Spanish entity may file the notification on behalf of all Spanish group entities, provided that each of them is duly identified.
The Complementary Tax also applies fully to Spanish subsidiaries of foreign-headed groups, which must review all calculations, data and methodologies provided at group level to ensure compliance with Spanish requirements.
The obligation to file Form 231 (country-by-country reporting) remains in force and is increasingly relevant, as the information reported in this form serves as the basis for applying the Pillar 2 safe harbours intended to reduce administrative burdens during the initial implementation years.
International Tax Treaties
During FY 2025, Spain has completed the internal procedure for applying the multilateral convention (MLI) with Azerbaijan.
Country-by-Country Reporting
Spain implemented EU Directive 2021/2101 via Law 28/2022 (Public CbCR). This report applies to EU groups and standalone companies with revenues > 750 m EUR. First Spanish Public CbCR must be published with the Statutory Annual Accounts within 6 months after year-end. For calendar-year filers, first publication is June 2026 (FY 2025).
This report is different that the CbCR (applicable in Spain since 2016 via Form 231). The principal difference between the two reports lies in the level of disclosure of the information supplied, since the information supplied in form 231 is not made public (although the Spanish Tax Authorities publish annual statistics based on the CbCR). By contrast, the data contained in the Public CbCR under Law 28/2022 are publicly accessible.
E-invoicing
In Spain, rollout of the Veri*Factu e-invoicing system has been postponed and will be phased in Corporate Income Tax taxpayers must comply by 1 January 2026; all other businesses and the selfemployed by 1 July 2026. The regulation aims to standardize and streamline the invoicing process for businesses and, as part of the digitalization of billing, requires either compliant invoicing software or a system that submits billing records to the Spanish Tax Authorities.
A case-by-case assessment is required to determine whether it is more convenient to opt for the SII or for Veri*Factu.
Spanish Tax Authorities Annual Tax Control Plan for FY 2025
Highlights:
- Transfer pricing, restructuring, hybrid asymmetry and controlled foreign corporation regime (tax transparency) are a priority tax audit areas for multinational group according to the Spanish Tax Authorities Annual Tax Control Plan.
- Broader use of Artificial intelligence upgraded staff training, and new digital tools.
- Scrutiny of Shell Companies used for personal expenses/assets.
- Non-residents: tighter enforcement of withholding on income of artists/athletes and property income.
Other tax changes
- Limitation on the deductibility of financial expenses. For the purpose of this limitation, incomes, expenses or profits that are not included in the Corporate Income Tax base will not form part of operating profit—i.e., permanent book-to-tax adjustments such as fines, penalties, surcharges, donations and gifts, etc., and exempt dividends under the participation exemption, net of management expenses.
- Free depreciation for investments using renewable energy. The free depreciation regime is extended through 2025 for investments in installations for self-consumption of electricity, as well as own-use thermal installations, provided they use energy from renewable sources and replace installations powered by non-renewable fossil fuels.
- Capitalisation reserve. The incentive is strengthened. The general reduction rises from 15% to 20% of the increase in equity. This percentage may be higher, up to 30%, provided that the taxpayer’s average total headcount in the tax period has increased compared with the average total headcount in the immediately preceding tax period and that this increase is maintained for three years from the end of the tax period to which the reduction relates. In addition, the maximum limit of the capitalisation reserve reduction, which is based on the taxable base, is increased from 10% to 20% being 25% for those taxpayers whose net turnover is less than 1 m EUR during the 12 months prior to the date on which the tax period to which this reduction relates begins (micro-companies).
- Tax consolidation. 50% limitation on the utilisation of Net Operating Losses by groups which applies the consolidation tax regime until FY 2025 included.
- Corporate Income Tax rate reduction for micro and small companies. A phased reduction applies in 2025–2028: (i) For micro-companies (net turnover < 1 m EUR), the former flat 23% rate is replaced by a graduated scale of 17%–20%, depending on the taxable base; (ii) small companies (net turnover < 10 m EUR) see their rate reduced from 25% to 20%. Standard rate remains 25%.
- Donations Tax credit. The general deduction rate for this concept increases from 35% to 40%. In addition, the deduction for recurring donations rises from 40% to 50%, and the qualifying period is reduced from four to three years, during which the donor must make donations to the same entity in an amount equal to or greater than that of the immediately preceding tax year in order to access the 10-percentage-point uplift in the deduction rate. The limit on the deduction base is also increased, from 10% to 15% of the taxable base for the period.
Other interest matters
Remarkable Binding ruling of FY 2025:
- Impairment of receivables from a Mexican subsidiary is only deductible once the bankruptcy phase of the subsidiary’s insolvency proceedings has formally opened, regardless of when it is recorded for accounting purposes, given the related-party status. (V0651-25).
- Spanish Tax Authorities are once again taking a position on whether corporate restructurings have valid economic reasons. We recommend submitting a prior binding ruling verify those reasons and ensure tax certainty (V1581-25, submitted by Allyon).
Remarkable National Court ruling of FY 2025:
- Cash pooling. The Court rejects asymmetric interest rates depending on whether the Spanish subsidiary makes deposits or receives funds as loans, and stresses that the cashpool leader’s remuneration must be commensurate with its mere cash-centralisation functions. (Spanish Supreme Court, 15 July 2025).
- Management support fees charged by a parent company. The deductibility, for Non Resident Income Tax purposes, of management-support fees charged by a parent company to its Spanish subsidiary is conditional on the charges not being a mere budgetary estimate, and on the expense being evidenced and linked to benefits for the Spanish subsidiary. Undetailed lump-sum invoices are not accepted. (National Court, 8 May 2025).
- Research & Development Tax credit (R&D&I). Claiming an R&D&I deduction from prior years requires amending the self-assessment first, except where the self-assessment relates to periods before 24 June 2022. (Central Economic-Administrative Court “TEAC”, 17 July 2025).
- Non-Deductibility of Subordinated Debt Interest in Intragroup Financing Structures: Interest expenses arising from subordinated debt are not deductible where the financing ultimately benefits other group entities – including non-resident subsidiaries – and is not linked to the business activity of the Spanish entity. This highlights the need for accurate allocation of financing costs, proper intragroup documentation and a robust transfer pricing framework for intragroup financing. (TEAC, 24 October 2025).
- TEAC’s position on Substance Requirements in Intragroup Investment Structures: TEAC have developed a new interpretative approach under which entities lacking real functions, own resources or economic substance – when used within fund structures to acquire Spanish targets – are not permitted to deduct financial or transaction-related expenses where such costs ultimately benefit the foreign investor. The analysis underscores the importance of genuine substance, the effective performance of functions by interposed entities, and the need for clear alignment between deductible expenses and the economic activity of the Spanish taxpayer.
🇬🇧 UK – Jill Springbett, mgr
Abolition of the non-dom regime:
A key change from April 2025 was the abolition of the personal tax regime for non-domiciled individuals, replacing it with a residence-based system. The new system provides a four-year window for new residents before their worldwide income and gains are taxed.
Possibly more importantly, once an individual has been tax resident in the UK for more than 10 years, all their assets worldwide are potentially subject to UK inheritance tax (IHT) at 40% after a modest nil rate band. Even after they have ceased to be resident there is a ‘tail’ of up to 10 years, during which they are still subject to IHT.
This seems to have prompted some wealthy individuals to leave the UK.
Changes to IHT
Reforms have been announced to several reliefs, including changes to Agricultural Property Relief and Business Property Relief from April 2026, removing 100% exemption for all farm and business value passed on death. There is still relief but it is generally at a lower rate – only the first million GBP gets 100% exemption.
From April 2027, unused pension funds and death benefits from a pension will be brought into an individual’s estate for IHT purposes.
National Insurance Contributions (NICs) increase: The government increased the main rate of employer’s NICs from 13.8% to 15% starting in April 2025. At the same time, the threshold at which employers start paying NICs was lowered, which has been blamed for a number of businesses struggling.
Capital Gains Tax (CGT) rises: In October 2024, the government increased the main rates of CGT on asset disposals (excluding residential property and carried interest). The lower rate increased from 10% to 18%, and the higher rate rose from 20% to 24%. Carried interest gains are taxed at up to 32%.
Corporation Tax road map
A roadmap for corporate tax was published, confirming the main rate is capped at 25% for the Parliament. It also set out plans to adopt international rules on multinational profits (Pillar 2) and to repeal the Offshore Receipts in respect of Intangible Property (ORIP) rules.
