2026

The column reviews recent developments in U.S. international tax, including the IRS’s unsuccessful petition for rehearing in the 3M blocked-income case and litigation developments in YA Global concerning effectively connected income. It also analyzes new tax proposals tied to the One Big Beautiful Bill Act and commentary from practitioners on recent IRS notices addressing foreign tax credit timing, subpart F allocations, and sourcing of borrow fees. The discussion highlights ongoing disputes over section 482, international income attribution, and regulatory guidance affecting multinational taxpayers.

The U.K. Court of Appeal held that Muller UK and its related corporate members could not deduct amortization of intellectual property and goodwill transferred into a limited liability partnership. The court concluded that the relevant parties were related for purposes of the Corporation Tax Act 2009, so the transfer did not qualify for the favorable intangible asset regime. The decision reinforces the limits on obtaining corporate tax deductions for intragroup transfers of intangible assets where there is no real change in ownership.

HM Revenue & Customs reported that transfer pricing yield and diverted profits tax receipts reached nearly £3.4 billion and £94 million, respectively, in the 2024–2025 fiscal year. The statistics highlight HMRC’s continued reliance on transfer pricing enforcement, APAs, MAP procedures, and the Profit Diversion Compliance Facility to address multinational profit shifting. The report also notes that the U.K. plans to repeal the diverted profits tax and replace it with the Unassessed Transfer Pricing Profits regime beginning in 2026.

Guernsey announced that territorial corporate tax will no longer be considered as part of its ongoing tax reform review, following industry feedback that emphasized the importance of stability and predictability. The decision reflects the island’s effort to preserve confidence in its tax framework as it seeks to maintain its position as an international finance center. The development highlights how smaller financial jurisdictions are balancing tax reform pressures with competitiveness and the need for policy certainty.

A draft opinion from the European Parliament proposes linking the EU’s 2028–2034 customs and taxation program to the implementation of the OECD/G20 BEPS framework. The report calls for program funding to prioritize coordinated enforcement of the inclusive framework rules, improved tax cooperation, and digital tools to combat cross-border tax fraud and inefficiencies in withholding taxes. Lawmakers also urged stronger transparency and oversight mechanisms to ensure the €6.2 billion program effectively supports EU tax policy objectives.

The Dutch state secretary of finance warned that major legal, administrative, and political obstacles could prevent implementation of a global minimum wealth tax on ultrawealthy individuals. In a letter to parliament, the official highlighted difficulties in obtaining reliable cross-border asset data and noted the absence of international consensus on economist Gabriel Zucman’s proposed 2% “top-up” wealth tax. The comments underscore growing skepticism within governments about the feasibility of coordinating a global wealth tax regime similar to the OECD’s BEPS project.

Herzfeld argues that international tax policy debates remain focused on the digital economy even as artificial intelligence is reshaping how businesses generate profits. The rise of AI challenges core tax concepts such as permanent establishment, nexus, and the transfer pricing framework built around DEMPE functions and human value creation. She suggests that massive investments by U.S. tech companies in AI infrastructure and the growing role of proprietary data may require policymakers to rethink how taxing rights and profits are allocated globally.