A&M Tax Policy Quarterly Outlook: Q4 2025

Introduction

Our Global Tax Policy and Controversy (TPC) Group at A&M Tax is pleased to present the first edition of the A&M Tax Policy Quarterly Outlook (Q4 2025), providing insights for the period from October to December 2025. This quarterly outlook delivers a strategic perspective on tax policy and controversy developments shaping the global tax landscape. Anchored in forward-looking analysis, it summarizes the impact of tax policy changes and implementation trends over the past quarter and highlights anticipated developments and key considerations.

This quarter's edition features two editorials, one examining the renewed momentum for taxing the digitalized economy amid stalled OECD Pillar One negotiations and the growing traction of alternative frameworks such as the Significant Economic Presence (SEP) model and the UN's emerging tax initiatives; and the other on evolving transfer pricing challenges, particularly around royalty payments and business restructurings, which are expected to remain in focus through 2026.

In addition, the publication covers insights and anticipated developments around the recent announcements of the updated OECD Model Tax Convention (MTC) and Pillar Two guidance on the Side-by-Side (SbS) system. The publication also provides a comprehensive overview of key tax policy and controversy updates across regions, offering practical insights into jurisdictional trends and legislative changes.

Editorial

Taxing the Digitalized Economy: Will 2026 (Finally) Bring Some Progress?

Background

The OECD's negotiations on Amount A of Pillar One¹, which aims to reallocate taxing rights to market jurisdictions for the largest and most profitable multinational enterprises (MNEs), have reached an impasse. While foundational principles such as the scope of Covered Groups, segmentation by business lines, and mechanisms to avoid double taxation have been broadly agreed upon, the technical complexity of the rules and divergent political priorities among Inclusive Framework members have stalled progress. The framework's reliance on intricate scoping rules, segmentation thresholds, and multilayered tax certainty mechanisms has made implementation burdensome for both tax administrations and taxpayers. Despite efforts to streamline the model, the sheer volume of unresolved issues has left many jurisdictions hesitant to commit. Reform proposals have emerged to simplify the architecture of Amount A. These include eliminating over-engineered scoping rules, which currently require extensive financial data and adjustments, and harmonizing revenue thresholds and nexus tests to reduce compliance costs and improve consistency across jurisdictions. There is also growing consensus that the rules for segmenting profit by business lines need to be more practical and aligned with how companies report financial results. However, even with these proposals on the table, the political appetite for compromise has been limited. Some countries remain concerned about the impact on their domestic tax bases, while others question whether the benefits of Amount A justify the administrative complexity and potential revenue trade-offs compared to Digital Services Taxes (DSTs). In 2025, Amount A did not achieve any progress. The deadlines for signature and ratification have passed, and while some jurisdictions have expressed continued interest in finalizing the Multilateral Convention (MLC), others have raised reservations or shifted focus to alternative measures such as DSTs. Meanwhile, new tensions and disputes emerged on taxing digitalized models. However, the discussions on finding a solution to the taxation of digitalized businesses have regained momentum. The G7 statement of late June 2025 and the G20 communiqués of July, October and November 2025 have brought back to the table the need to engage in constructive dialogue to find a solution that achieves fairness, simplification, and certainty².

Recent Disputes: Nexus and Profit Attribution

In the absence of a multilateral solution to address the challenges of digitalized economy disputes emerge as jurisdictions try to rely on existing rules, both in terms of assertion of taxing rights, and profit attribution. Recent cases in India illustrate these issues. Notably, the Clifford Chance case involved a dispute over the interpretation of the Permanent Establishment (PE) definition in the context of the Double Tax Agreement (DTA), concluded between Singapore, and India³. Specifically, the question concerned the 90-day requirement of the services PE under the applicable DTA, in a scenario where the taxpayer provided services in India for only 44 days. The Indian Revenue took a view that a PE existed, as the services PE provision does not mention the word "physical presence" of employees for constitution of PE under the relevant Article of DTA. It merely states that the furnishing of services within the contracting state should continue for 90 days or more. As the services were provided on a continuous basis even without the physical presence of employees in India, there would be a PE. In addition, the Indian Revenue considered that, because of rapid digitization, companies can now continue to provide services even without the physical presence of employees in the contracting state. Thus, it considered that the taxpayer had a taxable PE in India in the form of a "virtual service PE of the taxpayer". The High Court of Delhi issued its decision in favor of the taxpayer stressing that the DTA wording expressly requires the furnishing of services within the contracting state through employees or other personnel. The following paragraph of the Commentary to the OECD MTC was particularly persuasive⁴:

"152. Also, the provision only applies to services that are performed in a State by a foreign enterprise. Whether or not the relevant services are furnished to a resident of the State does not matter; what matters is that the services are performed in the State through an individual present in that State."

It further added that, despite the concept of SEP, which was brought into India's domestic tax law in 2018, reflecting a deliberate policy to capture digital or virtual economic participation outside the traditional PE framework, changes to the DTA provisions are still required. In the absence of such changes, it is not possible to change the PE requirements to address virtual or digital services provided from abroad. This is the correct outcome in this case, supported by sound reasoning by the High Court of Delhi, but it also illustrates the tendency of local tax authorities to stretch the interpretation of existing rules as to address the new realities posed by virtual/digitalized transactions. While one of the key aspects of digitalized transactions is certainly the nexus requirement, the other aspect is the profit allocation. A recent landmark ruling by the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) placed the spotlight on the on the taxation of digital business models, ultimately rejecting a transfer pricing adjustment of approximately USD 55 million against Netflix India⁵.The dispute centered on whether Netflix India, a limited-risk distributor (LRD) for the global Netflix streaming service, could instead be recharacterized by the Indian tax authorities as a full-fledged content and technology enterprise conducting business in the Indian market. The Indian Revenue alleged that Netflix India's local activities, including marketing, subscriber acquisition, and the deployment of Open Connect Appliances to reduce streaming latency, demonstrated economic ownership of intangibles, thereby justifying an attribution of residual profits to India. Based on this theory, the Indian Revenue recharacterized the transaction as an implicit license of content and platform technology, allocating 57.12% of Indian subscription revenues to the Indian entity as a blended royalty return. The ITAT rejected this approach considering that, based on an accurate delineation of the transaction, Netflix India remained a routine distributor without any rights to exploit intellectual property or control value-driving risks. Of particular relevance in the decision, is the acknowledgment by the ITAT that the profit allocation by the Indian Revenue, departing from the functions, assets, and risks profile, asset composition, risk insulation, and contractual obligations constituted an arbitrary transfer pricing adjustment without any support on the arm's length principle. Ultimately the ITAT confirmed the characterization of Netflix India as an LRD and the Transactional Net Margin Method (TNMM) as the appropriate method for determining the transfer pricing remuneration.

In the meantime, and apart from litigation, digital taxation also continues to trigger trade tensions. Recently, the US Trade Representative issued a statement where it raised the possibility of the US imposing additional taxes/tariffs against European Union (EU) companies based on the perceived discriminatory taxation of US MNEs in the form of DSTs which are imposed in EU Member States⁶.

Looking Beyond Amount A: SEP Model and the UN Tax Framework

In the wake of stalled consensus around Amount A and the growing resistance to unilateral DSTs, particularly from the United States⁷, countries keep exploring alternative frameworks to tax the digital economy. One such proposal gaining renewed attention is the SEP model, originally advanced by the G24 in 2019⁸. Unlike DSTs, which are often criticized for being discriminatory or trade-distorting, SEP builds on existing international tax norms, specifically the PE concept under Article 5 of the OECD and UN MTCs. SEP redefines nexus by focusing on sustained digital engagement and user participation, allowing countries to assert taxing rights even in the absence of physical presence⁹.

The SEP model introduces a nexus threshold based on economic activity, such as revenue generated from a jurisdiction, volume of digital content collected, or the size of a local user base. Once nexus is established, profits could be allocated using formulary methods that consider customer location, web traffic, and user data. This approach reflects the reality that digital businesses derive substantial value from user interactions and market engagement, even without boots on the ground. By attributing profits to jurisdictions where economic value is created, SEP aligns more closely with the principle of taxing profits where value is generated, a core tenet of international tax fairness.

Among its key benefits, SEP offers a more equitable distribution of taxing rights, especially for developing countries that host large user bases but currently receive minimal tax revenue from global tech platforms. It also preserves national sovereignty, as countries can implement SEP within their domestic laws and negotiate treaty updates without relying on complex multilateral instruments. Compared to Amount A, SEP is less administratively burdensome, avoids the need for centralized profit reallocation, and allows for dispute resolution through existing Mutual Agreement Procedures (MAP). Countries like Colombia, India, Israel, Italy, and Nigeria have already adopted SEP-like rules, demonstrating its feasibility and appeal ¹⁰. However, SEP is not without challenges. Its reliance on digital metrics and user data makes it highly data-dependent, raising concerns about access, accuracy, and privacy. In the absence of a tax treaty, implementing SEP may also trigger unintended PEs, especially in jurisdictions with broad interpretations of economic presence, leading to compliance burdens for businesses and potential double taxation. The lack of uniform standards across countries could result in fragmented rules, undermining the goal of simplicity, and increasing the risk of disputes. In addition, as countries typically have not yet amended their DTAs to accommodate SEP, tax collection remains a hurdle. In such cases, unilateral measures may be challenged under existing treaty provisions, and enforcement could be limited. One workaround is to negotiate bilateral treaty updates or adopt domestic SEP rules that apply in the absence of a treaty. While this may not guarantee full compliance or revenue collection, it signals intent, and strengthens the negotiating position of source countries. Importantly, SEP does not require a new global treaty, it can be layered onto existing frameworks, making it a pragmatic interim solution. Ultimately, SEP deserves serious consideration as a viable alternative to Amount A, particularly for developing countries seeking greater taxing rights over digital multinationals. This has been acknowledged by the African Tax Administration Forum (ATAF) which in 2025 published the Suggested Approach to Drafting Significant Economic Presence Legislation¹¹. The ATAF approach allows to overcome possible tensions raised by DSTs while ensuring compatibility with the Amount A framework. The ATAF suggests that if Amount A and the MLC are implemented, then the SEP would be switched off for the countries covered by Amount A. Also, recently the G24 urged for the inclusion of the SEP concept in the UN tax framework¹². The most contentious matter however in the SEP context is that, under an SEP-based nexus, applying the arm's length principle to attribute profit becomes speculative. Since no personnel or assets are physically present, allocating profit requires proxies, raising the question of whether transfer pricing is even the right tool in such cases. This is perfectly illustrated in the recent discussions on the proposed draft of the UN Framework Convention Template where Article 4 provides that¹³:

"The States Parties agree that every jurisdiction where a taxpayer conducts business activities, including jurisdictions where value is created, markets are located and revenues are generated, have a right to tax the income generated from such business activities."

Several businesses as well as countries have already raised concerns and public comments on the wording of this provision stressing the need for clarification on the meaning of value creation, the expansion of the allocation criteria and the need for clarity and legal certainty¹⁴.

Still, the SEP model appears to be a viable alternative. Overall, its conceptual simplicity, compatibility with existing tax norms, and demonstrated success in early adopters could make it a promising path forward. But to avoid a patchwork of unilateral rules, multilateral coordination is essential, supported by clear rules, and widely accepted criteria for profit allocation. Also, the European Commission, in September 2025, reaffirmed its commitment (and expectations) to a multilateral solution possibly based on the revival of Amount A discussions and putting aside any plans of submitting a proposal for an EU Digital Tax at this stage¹⁵.

Conclusions

Overall, the developments throughout 2025 indicate a new appetite and momentum to resume discussions on a multilateral approach for taxing the digitalized economy. Therefore, 2026 may bring new developments, either through SEP or a revised Amount A framework. A solution that is simple, easily administrable by businesses and tax administrations and that relies on widely accepted principles would be a welcome and much waited solution for taxation of digitalized businesses.

Transfer Pricing Evolving Methodologies and Unsolved Issues: Some Reflections on What To Expect in 2026?

Background

Transfer pricing remains one of the most complex and contested areas of international taxation. As MNEs restructure, digitize, and decentralize, traditional pricing methods face increasing scrutiny. During 2025, there were certain relevant and landmark cases that dealt with some of the critical areas of contention in transfer pricing. This editorial explores three of such critical areas of contention which will likely remain controversial in 2026: (i) royalty payments and entity characterization, (ii) the application of the TNMM and (iii) emerging priorities with a particular focus on business restructurings.

Royalty Payments and Entity Characterization

As per the OECD Transfer Pricing Guidelines (2022)¹⁶, the characterization of royalty payments in transfer pricing hinges on the economic substance of the transaction and the functional profile of the entities involved. Routine or limited-risk entities, such as low-function distributors or contract manufacturers, are typically remunerated using methods like cost-plus or the TNMM, which yield fixed returns at the lower end or midpoint of the arm's length range. These entities do not bear significant risks, nor do they contribute materially to the development or exploitation of intangible assets. As such, they are not entitled to entrepreneurial profits, which are instead captured by the licensor or principal entity that owns and controls the relevant intangibles.

Overall, tax administrations appear to be increasingly skeptical of royalty payments made by routine entities that result in below median or closer to lower-end of the range or loss-making outcomes. Such arrangements may be challenged on the grounds that they lack economic substance and violate the arm's length principle. The OECD's DEMPE framework (Development, Enhancement, Maintenance, Protection, and Exploitation) further reinforces the need to allocate returns based on actual contributions to intangible value.¹⁷ If a routine entity performs none of the DEMPE functions and does not benefit from the intangible (for example, the 'brand' does not materially derive revenue or the relevant intangible does not provide significant commercial benefit, then royalty payments, especially those that depress its profitability, are unlikely to be accepted. This calls for a more disciplined approach to royalty characterization, ensuring that payments reflect genuine value transfer and not artificial profit shifting.

The OECD Transfer Pricing Guidelines (2022) emphasize that royalty payments should only be made for access to intangible property that provides a clear commercial advantage, such as trademarks, trade names, or proprietary technology that enables the licensee to earn above-market returns. If a licensee is not in a position to generate such super profits, the economic rationale for paying royalties becomes questionable. A routine distributor earning modest margins, for example, is unlikely to benefit from brand-related intangibles in a way that justifies royalty payments. In such cases, the licensor retains the value of the intangible, and the distributor's role is limited to execution rather than value creation.¹⁸

This principle was examined in the landmark Canada v. GlaxoSmithKline Inc. case¹⁹, where the Supreme Court of Canada examined whether the price paid by Glaxo Canada for ranitidine, combined with royalty payments for the Zantac trademark, was reasonable under the arm's length conditions. The Court ultimately ruled that the licensing arrangement had to be considered in its entirety, recognizing that the brand value justified a premium. However, the case also highlighted the need to ensure that royalty payments do not erode the routine entity's margin below arm's length thresholds, especially when the licensee does not derive exceptional market benefits from the intangible.

Also, in the PepsiCo v. Commissioner of Taxation case²⁰ in Australia, the Federal Court scrutinized payments made under exclusive bottling agreements. Although the agreements did not explicitly stipulate royalty payments, the Court found that a portion of the payments constituted "embedded royalties" for the use of PepsiCo's trademarks and IP. The ruling emphasized that even implied rights to use intangibles must be economically justified. If the bottler - Schweppes Australia was not earning super profits attributable to the brand, then the royalty component should be limited accordingly.²¹ Subsequently, the High Court of Australia found in favor of PepsiCo, considering that there were no embedded royalties for which Australian royalty withholding taxes were due²². The High Court, in its decision, emphasized that the correct test to characterize consideration as a "royalty" lies in assessing whether a payment is truly paid "as consideration for" the grant of IP rights, rather than for a commercial arrangement as a whole. Despite the decision being favorable to PepsiCo, the majority judgment emphasized the singularity of the facts of the case, notably that the transactions were concluded between non-related parties and based on longstanding commercial agreements. Therefore, in related party transactions conducted without formal agreements over extended periods, controversy may still arise. Overall and irrespective of the outcome, this case underscores the importance of aligning royalty characterization with the actual benefit derived by the licensee.

Another landmark dispute is Coca‑Cola Co. v. Commissioner (U.S. Tax Court, 2020). The Court reallocated more than USD 9 billion of income from foreign bottling affiliates to the U.S. parent after finding their longstanding profit‑ split formula (10-50-50) understated the arm's‑length royalty for Coca‑Cola's trademarks and secret formulas. The decision underscores that legal ownership plus control of intangibles entitles the owner to residual returns, and outdated intercompany pricing will be challenged when it no longer reflects DEMPE reality²³. Meanwhile, Coca-Cola appealed against this decision in August 2025 contending that the IRS's actions are arbitrary and capricious and questioning the adoption of the Comparable Profits Method (CPM) (which corresponds to the OECD TNMM) followed by the IRS²⁴. The appeal may try to leverage on the 3M decision where the US Court of Appeals reversed a decision in favor of 3M rejecting the IRS reallocation of unpaid royalties that Brazilian law prevented 3M Brasil from paying to the US entity. At the time, Brazilian law capped the amount a subsidiary could pay in royalties to a non-Brazilian controlling company like 3M. The IRS reallocated nearly $23.7 million in extra royalty income to reflect what, in its view, 3M should have received from its Brazilian subsidiary. Despite theagreement by both sides that this would be the amount that would reflect the compensation of that an unrelated entity would have paid to use 3M's intellectual property, the dispute was whether the IRS can reallocate unpaid royalties that Brazilian law prevented 3M Brazil from paying. Fundamentally the 8^th Circuit of the US Court of Appeals limited the possibility to reallocate profits under IRC Sec. 482, considering that the statute does not permit the attribution of income that the taxpayer could not legally receive²⁵. Other US cases involving IP disputes in the context of valuation in cross-border transfers refer to Airbnb and Meta case where decisions on the Appeals may land in 2026.

The challenges surrounding royalty payments are truly a worldwide problem. Also, in late September 2025 the Portuguese Supreme Court admitted an exceptional appeal to a controversy involving royalty payments by two Portuguese entities to their Swiss related party²⁶. While this decision is not on the merits but merely admits an exceptional review of the case (with a decision likely coming in the near future), - the facts illustrate the issues surrounding economic substance of the transaction and the functional profile of the entities involved. The Portuguese tax authorities considered that the royalty payments made from the use of the two trademarks were not ALP compliant. For the tax authorities, despite the Swiss entity was the legal ownership of those brands much of the DEMPE functions were undertaken by the Portuguese entity. The tax authorities decided to apply the Profit Split Method (based on the absence of any comparables in the market), ultimately concluding that the royalty amount to be paid for the use of those trademarks should be 0. The question at stake is then whether, despite significant DEMPE functions performed by the Portuguese entities, it is possible, rather than reducing the amount of the royalty payments, simply considering that there should be no royalties to be paid at all, despite the argument by the Portuguese entities that those trademarks are vital for their economic activity.

In another recent decision concerning Netflix Entertainment Services India LLP²⁷ vs. Deputy Commissioner of Income Tax (Mumbai), the Indian Tax Tribunal examined whether the Indian entity's role was limited to that of a distributor of the Netflix platform/subscription or in effect a principal service provider of the Netflix content and platform in India. The Revenue authorities contended that Netflix India functioned as the primary commercial operator of the platform in India, collecting subscription fees exclusively from local users. Based on this premise, the tax authorities alleged that the entity's payments to its Associated Enterprises (AEs) should be recharacterized as royalties for the use of licensed content and technology rather than routine distribution fees, asserting that the 'limited-risk distributor' classification was a deliberate structuring device used to minimize local tax exposure. Using the RoyaltyStat database, the tax officer identified comparable agreements and derived an ad-hoc royalty rate of 57.12% of revenue.

After a detailed evaluation of the functional profile, the Tribunal rejected this approach observing that Netflix India's operations were confined to routine activities such as marketing, subscriber acquisition, and customer support, while all critical DEMPE functions relating to content and technology were exercised and controlled by the foreign affiliates. The Indian entity neither owned nor economically exploited the underlying content or platform technology, and mere presence of hosting or caching infrastructure was held to not confer any value creation status by itself or justify entrepreneurial-level returns. The Tribunal specifically ruled that attributing 43% of subscription revenue to an entity that neither develops nor controls the relevant intangibles was inconsistent with the FAR profile. Unless an entity controls, develops, or exploits the underlying intangible assets, its remuneration cannot exceed a routine distributor's return.

Accordingly, the Tribunal treated the grant of access to digital content as functionally similar to distribution, not as a license/transfer of copyright and rejected the recharacterization of Netflix India as an entrepreneurial provider of content and technology. The ruling reinforces that royalty attribution must be grounded in actual DEMPE contributions and demonstrable control over, or exploitation of, intangibles. Mere contractual access to global content or technology, without corresponding control or economic ownership, cannot justify non-routine remuneration, and compensation must remain aligned with the entity's limited-risk functional profile.

The controversy surrounding these issues appears to call for the need for further guidance on this topic. The OECD's Working Party No. 6, which leads the development of international guidance on transfer pricing and profit attribution, typically builds revision to the OECD Transfer Pricing Guidelines based on insights from recent case law, taxpayer experience, and feedback from multilateral forums. Therefore, it would not be surprising if additional clarification would be considered to address the issue of royalty payments in the context of limited risk and routine entities. This may include how tax administrations should evaluate royalty payments that result in below-range or loss-making outcomes for low-function entities.

While formal consensus is often difficult to achieve, particularly given divergent views on method selection and functional characterization, there is broad recognition that existing practice lacks coherence and administrability. A forthcoming OECD guidance on this could serve as a meaningful step toward curbing inappropriate royalty deductions and improving consistency in royalty treatment across jurisdictions.

From a dispute-prevention perspective, any royalty must be tied to the group's DEMPE functions and a demonstrable benefit to the payer. Where a limited risk distributor is charged a royalty, taxpayers should evidence value creation beyond routine returns. Many MNEs now seek Advance Pricing Agreements (APAs) to obtain certainty, and they routinely update intercompany agreements to ensure the terms mirror economic reality. Above all, contemporaneous documentation must articulate how the royalty satisfies the arm's length principle and delivers genuine commercial value and tangible benefits.

TNMM: Transactional vs. Combined Approach

Another critical issue within the transfer pricing landscape refers to the circumstances under which the TNMM should be applied on a transactional basis versus a whole-of-entity basis. This inquiry reflects growing concern among tax administrations about the granularity and precision of transfer pricing analysis, particularly in cases where aggregated TNMM applications may obscure the arm's length nature of individual transactions. Nonetheless, the TNMM has long been considered a method of last resort, typically used when reliable data for traditional methods such as the Comparable Uncontrolled Price (CUP) or Resale Price Method (RPM) is unavailable. Applying TNMM on a whole-of-entity basis has become common practice, especially for routine entities, because it offers a pragmatic solution when transaction-level comparables are scarce.

The push toward transactional TNMM raises significant practical challenges. Most notably, reliable data for benchmarking individual transactions is often unavailable, especially in industries with bundled services, integrated supply chains, or centralized procurement. Even when data exists, allocating indirect costs such as depreciation, amortization, and shared service expenses across multiple transaction streams is inherently complex and subjective. This undermines the reliability of the analysis and risks inconsistent outcomes across jurisdictions. The OECD Transfer Pricing Guidelines (2022)²⁸ acknowledge these limitations, noting that TNMM is best suited for situations where gross margin data is unreliable, but net profit indicators are available and meaningful.

From a compliance perspective, a transactional TNMM approach would dramatically increase the burden on taxpayers. Companies would need to segment financial data at a granular level, develop multiple sets of comparables, and justify cost allocations across transactions, often without sufficient internal or external data. This would not only inflate compliance costs but also increase the risk of audit disputes and double taxation. If the OECD proceeds in this direction, it must consider implementing de minimis safe harbours or exemptions for low-value transactions, industries with limited comparables, or entities operating in low-capacity jurisdictions. Without such relief, the administrative complexity could outweigh any theoretical gains in precision.

This tension is particularly stark when viewed alongside the OECD's concurrent efforts to implement Amount B - a simplified and streamlined approach (SSA) to pricing baseline marketing and distribution activities. Amount B is designed to reduce controversy and compliance burdens by offering fixed returns for routine functions. Yet, the transactional TNMM initiative seems to move in the opposite direction, introducing more complexity and subjectivity. The lack of coherence between these two policy tracks is troubling, especially for taxpayers seeking clarity and consistency in their transfer pricing obligations.

Ultimately, the OECD must reconcile its goals of simplification and precision. If the objective is to reduce disputes and promote tax certainty, then expanding Amount B and similar safe harbour regimes may be more effective than mandating transactional TNMM analyses. The Working Party 6's deliberations should be informed by stakeholder feedback, including the practical realities faced by MNEs. A balanced approach, grounded in economic substance, administrative feasibility, and global consistency is essential to ensure that transfer pricing rules remain fit for purpose in an increasingly complex international tax landscape.

Echoing this concern, business coalitions such as Business at OECD and the International Chamber of Commerce have urged the OECD to keep Amount B a simple, elective safe-harbour, and the OECD's February 2024 consultation summary even hailed Amount B as a 'game-changer' for African and other developing jurisdictions because a clear safe-harbour could eliminate most routine-distribution disputes.²⁹ With Amount B already included in the OECD Transfer Pricing Guidelines since January 2025, there is still a lack of widespread adoption of the SSA. Recently, Singapore has adopted Amount B on a three-year pilot basis (January 1, 2026 to December 31, 2028)³⁰, it would be a welcome move if more jurisdictions would follow identical steps into implementing the SSA or, at least, expressly recognize its acceptance to prevent possible double taxation issues.

Special Considerations for Intra-Group Services (OECD Chapter VII)

In the meantime, the OECD is expected to release a discussion draft on potential updates to Chapter VII of the OECD Transfer Pricing Guidelines pertaining to Intra-Group Services, by spring 2026. The proposed draft may provide further clarity on high‑value‑added services, the meaning, and application of the benefits test, which both businesses and tax authorities have sought to clarify and additional guidance on applying relevant transfer pricing methods.

Emerging Priorities: Business Restructurings (OECD Chapter IX)

Chapter IX of the OECD Transfer Pricing Guidelines (2022) focuses on the transfer pricing implications of business restructurings, which may include mergers, centralizations, and outsourcing. These organizational changes often lead to significant shifts in the functions, assets, and risks of affiliated entities, necessitating a closer look at how value is redistributed across jurisdictions. The chapter outlines that where a restructuring involves a transfer of something of value - such as intangibles, strategic functions, or future profit potential, exit or conversion charges may be required to reflect arm's-length conditions. Moreover, businesses must evaluate the options realistically available to both parties to ensure that the compensation mirrors what independent entities would have agreed to under similar circumstances.

Despite its foundational framework, Chapter IX has come under growing scrutiny, prompting OECD Working Party 6 to include it on its agenda for redrafting. One of the thorniest issues is the Options Realistically Available section, which remains conceptually complex and difficult to apply consistently. Tax authorities and taxpayers alike struggle with interpreting how alternative options should be assessed and documented, leading to uncertainty and compliance challenges. Compounding this, countries diverge widely in how they interpret a "transfer of something of value", with some focusing on legal ownership, others on economic substance, or even implicit synergies, creating an uneven and subjective application of the guidance across jurisdictions.

Valuation approaches in practice also differ substantially among jurisdictions, adding another layer of complexity. The lack of harmonized methodology for exit and conversion valuations has led to inconsistent outcomes in tax audits³¹. MNEs have voiced the need for practical, jurisdiction-neutral guidance to address how to measure transferred value during restructurings and how to determine adequate compensation under varying local rules. Enhanced clarity in these areas, particularly tailored examples and administrative simplifications or safe harbours, would be warmly welcomed by businesses navigating increasingly sophisticated cross-border reorganizations.

Key Global Tax Policy Updates for Q4 2025

OECD MTC and Global Mobility

In November 2025, the OECD released the 2025 Update to the Model Tax Convention (OECD MTC). The most relevant amendment is the revised version of the Commentary to Article 5 of the OECD MTC which clarifies the circumstances according to which remote and cross-border work arrangements may give rise to a PE. The revised commentary introduces a new analytical framework incorporating a working-time benchmark (50% threshold) and a commercial-purpose test to assess when home or remote working could trigger a PE. These developments are especially relevant for MNEs managing globally mobile workforces and signal a shift toward more nuanced interpretations of nexus in a post-pandemic, digitally enabled economy. See A&M Tax Alert for additional insights together with the analysis of the overall amendments to the OECD MTC.

As part of the project to address the tax implications of global mobility, the OECD also initiated a consultation process requesting inputs from the business community and with a view to define the scope of the next phase of its global mobility work. The OECD convened a public meeting on January 20, 2026, to discuss the stakeholder feedback on the broader tax challenges associated with global mobility. The discussions covered a wide range of issues, including the impact of remote work on individual and corporate tax residence, the complexity of tracking employee movements, the misalignment between income tax and social security obligations, and the compliance burdens arising from short-term business travel.

A&M Tax submitted detailed comments to the OECD as part of this consultation, which are publicly available on the OECD website³². The submission emphasized the need for internationally coordinated safe harbours to reduce compliance burdens for low-risk cross-border work, highlighted the operational challenges of real-time tracking and withholding, and advocated for greater alignment between tax, and social security rules. The submission also called for clearer guidance on the attribution of profits to PEs arising from mobile workforces and stressed the importance of tax certainty through advance rulings and published MAP outcomes.

These developments mark a significant step in the OECD's broader global mobility agenda, and further guidance is expected in due course. MNEs are encouraged to review their global mobility policies, reassess PE risk frameworks, and monitor the evolving international consensus on taxing cross-border work arrangements.

Pillar Two SbS Framework and Its Impact on MNE Groups

On January 5, 2026, the OECD Inclusive Framework released the long-awaited SbS package, introducing four new safe harbours and extending the Transitional CbCR Safe Harbour (TSH) by one year. These measures are intended to simplify Pillar Two compliance for in-scope MNE groups and ensure fair treatment of substance-based tax incentives. The new safe harbours include the SbS Safe Harbour, Ultimate Parent Entity (UPE) Safe Harbour, Substance-Based Tax Incentives (SBTI) Safe Harbour, and the Simplified Effective Tax Rate (ETR) Safe Harbour. The new safe harbours are intended to take effect from January 01, 2026. However, the Simplified ETR Safe Harbour will be fully mandatory only for fiscal years beginning on or after December 31, 2026 (FY 2027), and optional early adoption in certain cases from FY 2026. See A&M Tax alert for additional insights.

For MNE Groups, the practical application of the SbS package will depend on how and when jurisdictions implement the guidance which may vary across countries. In many cases, formal legislative action will be required to give effect to administrative guidance. The introduction of multiple new safe harbours, each with distinct eligibility criteria, thresholds, and elections requires MNEs to undertake a detailed jurisdiction-by-jurisdiction assessment to determine which safe harbours may apply.

MNE Groups should consider the overlap between the Simplified ETR Safe Harbour and the TSH, and evaluate for each jurisdiction, whether the TSH (with a 17% ETR threshold and a "once out, always out" rule) or the Simplified ETR Safe Harbour (with a 15% threshold and re-entry flexibility) offers greater benefit for fiscal years 2026 and 2027.

In addition, MNE Groups should assess whether existing incentives qualify under the new SBTI safe harbour rules and consider the potential impact on their ETR calculations and top-up tax exposure. MNE Groups headquartered outside the United States should monitor developments as other jurisdictions seek recognition for Qualified SbS or UPE regimes, which could materially impact the applicability of certain safe harbours.

MNEs Groups must continue to meet near-term compliance obligations for FY24 and FY25, including GloBE Information Return (GIR) filings, as the relief under the SbS package becomes effective only from FY26 onward, subject to local implementation.

As emphasized in A&M Tax Policy Insights – December 2025, proactive planning, scenario analysis, and early decision making will be essential to manage compliance obligations, mitigate risk, and leverage available simplifications under the new SbS Framework.

Key Regional Tax Policy and Controversy Updates for Q4 2025

US and Canada

The United States closed 2025 with significant tax reforms aimed at clarity, efficiency, and global alignment. U.S. measures focused on simplifying Corporate Alternative Minimum Tax (CAMT) rules, clarifying the 1% stock buyback excise tax, and advancing international tax reforms under the One Big Beautiful Bill Act (OBBBA). Additional guidance on digital assets, Base Erosion and Anti-Abuse Tax (BEAT) and Foreign Investment in Real Property Tax Act (FIRPTA) provisions and sovereign investment taxation further signaled the government's intent to streamline compliance and reduce uncertainty. Canada's Minister of Finance tabled its 2025 budget, which was followed by draft legislation for both new and previously announced tax measures. Budget 2025 focused on spending over broader tax measures. These developments reflect a broader shift toward simplification, transparency, and predictability in North American tax policy, with implications for cross-border investment, compliance planning, and dispute resolution.

US

Key Policy Update in Q4:

• Corporate Taxes:
  • During 2025, Treasury and the IRS released four notices regarding the CAMT. These notices provide interim guidance and preview of proposed regulations designed to simplify and clarify earlier rules. Key areas addressed include: (1) higher safe harbour threshold, allowing more companies to avoid CAMT under the simplified method, (2) simplification of partnership rules, (3) closer alignment with regular tax rules for domestic corporate transactions, troubled companies, and consolidated groups, (4) additional adjustments for unrealized financial statement gains and losses, and (5) no retroactivity and providing ability to selectively adopt sections of proposed regulations. The CAMT guidance is welcome news, but gaps remain, and more guidance is expected early in 2026.
  • Treasury and the IRS issued final regulations on the 1% excise tax on corporate stock repurchases, narrowing the scope of covered transactions and providing much-needed clarity for public companies, private equity firms, and multinational groups. Key exemptions include most corporate reorganizations, leveraged buyouts, take-private deals, certain preferred stock, and complete liquidations. The final rules also eliminate the "funding rule" that would have included repurchases by publicly traded foreign corporations funded by US affiliates. These regulations apply retroactively, so taxpayers should review transaction models, policies, and plans for refund opportunities and compliance requirements. See A&M Tax Alert for additional insights.
  • Treasury and the IRS released four notices outlining forthcoming proposed international tax regulations under the OBBBA. The guidance addresses (1) foreign tax credit calculations when a controlled foreign corporation (CFC) must conform its taxable year to that of its majority US shareholder, (2) a retroactive change to how US shareholders determine their pro rata share of subpart F income and global intangible low-taxed income (GILTI), (3) a new limit on foreign tax credits for taxes attributable to distributions of previously taxed earnings and profits (PTEP), and (4) a change to "deduction eligible income" for certain sales by domestic corporations to foreign persons. The notices generally apply to the 2025 taxable year and beyond. See A&M Tax Alert for additional insights.
  • Treasury and the IRS issued final and temporary regulations clarifying when income from US investments of foreign governments—including sovereign wealth funds, foreign government pension funds, and certain international organizations—is exempt from US taxation. Income is generally exempt if not derived from commercial activity or a controlled commercial entity (CCE). Separately, proposed rules would treat the acquisition of debt as a commercial activity unless certain conditions are met and would broadly define when a foreign government effectively controls a CCE, potentially triggering US tax on certain investments.
  • Treasury and the IRS have proposed removing the "domestic corporation look-through rule" for determining domestic control of Qualified Investment Entities (QIEs) under the FIRPTA. This rule required tracing foreign ownership through certain domestic C corporations, causing legal uncertainty and operational challenges. The proposal treats all domestic C corporations as non-look-through persons, simplifying compliance and aligning with statutory language. The proposed changes, once published as final regulations, would apply to transactions occurring on or after October 20, 2025, with optional retroactive application from April 25, 2024.
  • The IRS has provided a safe harbour for fixed investment trusts to stake digital assets without losing their tax status as investment or grantor trusts. The guidance outlines 14 conditions, including limits on trust activities, asset custody requirements, and quarterly distribution of staking rewards. The safe harbour applies to tax years ending on or after November 10, 2025, with a nine-month window for existing trusts to amend agreements.
  • Treasury and the IRS finalized regulations requiring taxpayers to capitalize interest for improvements that constitute the production of designated property, removing the "associated property rule" and similar rules. The associated property rule—which required including the adjusted basis of temporarily removed property in capitalization calculations—was invalidated by the Federal Circuit's decision in Dominion Resources Inc. v. United States (2012). The regulations also update the definition of "improvement" for determining capitalizable costs.
  • Treasury and the IRS finalized regulations clarifying the application of the BEAT rules for qualified derivative payments (QDPs) in securities lending transactions. Mark-to-market gains and losses on the securities leg of a securities lending transaction are not treated as QDPs, while substitute payments or other payments to a foreign related party are included in QDP calculations. QDPs are not considered base erosion payments if taxpayers meet certain reporting requirements. The final rules apply to taxable years beginning on or after December 18, 2025, with an elective early application for taxable years beginning on or after January 10, 2025. The QDP reporting requirements take effect for taxable years beginning on or after January 01, 2027.
  • The United States opposed the United Nations International Maritime Organization's (IMO) proposed global carbon tax, known as the Net-Zero Framework (NZF). IMO's NZF is intended to mark the first global tax targeting carbon emissions from international shipping. The US has raised concerns over unfair costs to American consumers, shipping companies, and energy providers, and warned retaliatory measures against countries supporting the tax, including port restrictions, visa limitations, and sanctions. Following opposition from the US, the IMO postponed adoption of the tax for at least one year, with talks resuming in 2026.
• Personal Taxes:
  • The IRS has issued some guidance regarding no tax on tips and overtime compensation under the OBBBA, including an interim approach for taxpayers for tax year 2025 when employer or payor reporting is unavailable. This guidance also provides transition relief regarding the requirement that qualified tips are received in the course of a specified service trade or business, Additionally, the IRS has granted penalty relief for employers and payors regarding new information reporting requirements and payee statements.
  • The IRS is phasing out paper tax refunds for individuals as part of a shift to electronic federal payments under President Trump's Executive Order 14247. For taxpayers without a bank account, limited exceptions will be available (not yet specified), as well as other options (e.g., prepaid debit cards and digital wallets). While most refunds are by direct deposit, the IRS does not currently allow direct deposits to a foreign bank account, and it is unclear if paper checks will remain available for those taxpayers. Further guidance for 2025 tax returns is expected before the 2026 filing season; until then, existing forms, and procedures should be used.
• Indirect Taxes:
  • California now generally conforms to federal personal income and corporate tax laws enacted as of January 01, 2025, replacing the previous 2015 conformity date. The state will adopt most provisions of the Tax Cuts and Jobs Act of 2017, except where it continues to selectively not conform, and will not conform to OBBBA provisions unless the new legislation specifically provides for it.
  • California enacted legislation requiring private equity firms and management services organizations to report certain agreements or transactions in the health care sector. The law addresses state concerns about "friendly doctor" arrangements, which allow non-physicians to indirectly invest in physician practices.
  • Texas now requires taxable entities, starting with the 2026 franchise tax report, to compute franchise tax based on federal income tax rules in effect at the time, replacing the previous reference to 2007 rules. Consistent with the OBBBA, state taxpayers may elect to fully deduct qualifying fixed assets acquired after January 19, 2025, beginning with 2026 reports. Taxpayers must report gains on sales of depreciable assets (as reported on their federal tax returns) when depreciation was included in their cost of goods sold but may make a one-time net depreciation adjustment to address federal-state differences for these assets.

Key Controversy Issues in Q4:

• The recent 3M appellate ruling dated October 1, 2025 (3M Company and Subsidiaries v. Commissioner of Internal Revenue, No. 23-3772) underscores a pivotal shift in transfer pricing enforcement, reinforcing statutory boundaries over agency discretion. By limiting the IRS's authority under IRC section 482 to income a taxpayer can actually control, the decision curtails attempts to override foreign legal restrictions and signals a stricter adherence to the Loper Bright standard. This outcome highlights growing judicial emphasis on legal certainty in cross-border transactions, shaping future interpretations of allocation rules and compliance strategies for MNEs.

Canada

Key Policy Update in Q4:

• Corporate Taxes:
  • On November 04, 2025, Canada's Minister of Finance tabled Budget 2025 followed by significant draft legislation for both new and previously announced tax measures. Budget 2025 was that of a minority government juggling different priorities of various political parties to garner enough support to pass, and focused on three main areas, (i) development of critical resources and minerals, and dual use of infrastructure within a broader defense strategy; (ii) development of manufacturing and production capacity to shift the economy away from reliance on the US with a focus on global trade and becoming "our own best customer"; and (iii) a smaller focus on domestic affordability and home development concerns. Budget 2025 passed first and second readings in the House of Commons and is currently before the Senate as Bill C-15 (as of January 27, 2026).
  • Reaccelerated Investment Incentive Property: The Accelerated Investment Incentive (AII) provides an enhanced first-year capital cost allowance (CCA), Canada's approach to tax depreciation, for eligible property acquired after November 20, 2018, that becomes available for use before 2028. Previously, AII began phasing out in 2024 and was set to be fully eliminated after 2027. Budget 2025 proposes to reinstate the AII for qualifying property acquired after 2024 and that becomes available for use before 2030, with a phase-out for property that becomes available for use between 2030 and 2033. In the draft legislation, the incentive is referred to as the "Reaccelerated Investment Incentive." The draft legislation also extends equivalent treatment to Canadian vessel property, as well as property classified under Classes 13 and 14. Clean Economy Investment Tax Credits
  • Clean Economy Investment Tax Credits: The Government of Canada previously announced a suite of major economic investment tax credits, representing $93 billion in incentives by 2034–2035, to create jobs and keep Canada on track to reduce pollution and reach net zero by 2050. Four of those clean economy investment tax credits were enacted, with draft legislation released for the Clean Electricity Investment Tax Credit in draft legislation released August 2024. Budget 2025 included several technical amendments to the Clean Economy Investment Tax Credits including, (i) expanding eligibility for the Clean Technology Investment Tax Credit for systems that produce electricity, heat, or both electricity and heat from waste biomass; (ii) expanding eligibility for the Clean Technology Manufacturing Investment Tax Credit for qualifying equipment used in eligible polymetallic mining projects, and expanding the list of eligible critical minerals; (iii) expanding eligibility for the Clean Hydrogen Investment Tax Credit to include hydrogen produced from methane pyrolysis; (iv) Significantly amending requirements of the Clean Electricity Investment Tax Credit to remove eligible jurisdiction requirements, expanding access for nuclear energy property, expanding the natural gas energy equipment definition, and reducing the expected ratio of net electrical energy to net heat energy exported to 1 from 2; and (v) extending the availability of full credit rates for the Carbon Capture Utilization and Storage Investment Tax Credit from 2031 to 2035.
  • Comprehensive Modernization of Transfer Pricing Rules: Further to previously released draft legislation and the Department of Finance consultation paper from June 2023, Budget 2025 proposed to modernize Canada's transfer pricing rules to better align with the Organization for Economic Co-operation and Development's Transfer Pricing Guidelines. Budget 2025 provided rules that will, (i) require transfer pricing analysis to not be based solely on the contractual terms of a transaction or series, but also on "economically relevant characteristics"—this includes contractual terms, functional profiles, characteristics of the property or service, economic and market context, and business strategies; (ii) introduce a new transfer pricing adjustment rule requiring that amounts under the Income Tax Act (Canada) be adjusted (in quantum or nature) to reflect what they would have been under arm's length conditions under the new definitions of "arm's length conditions" and economically relevant characteristics (as outlined above). Budget 2025 would also modify certain administrative measures, (i) streamlined documentation rules providing for simplified documentation requirements when prescribed conditions are met; (ii) penalty threshold – providing relief from transfer pricing penalties by increasing the threshold for the application of transfer pricing penalties from a transfer pricing adjustment of $5 million to $10 million; and (iii) shortened documentation timelines reducing the time to provide transfer pricing documentation from 3 months to 30 days. Budget 2025 does not contain any new measures relating to Pillar Two of the OECD/Group of 20 Inclusive Framework on Base Erosion and Profit Shifting, nor Canada's Global Minimum Tax Act (Canada) (GMTA) implementing these rules.
• Indirect Taxes:
  • Proposal To Introduce a New Reverse Charge Mechanism: To address the carousel fraud schemes exploiting Goods and Services Tax/Harmonized Sales Tax (GST/HST), Budget 2025 proposes to introduce a new Reverse Charge Mechanism (RCM) beginning with specified telecommunication services. The proposed new RCM would apply to supplies of specified telecommunication services, which would be telecommunication services that enable, (i) speech communication that is instant or with only a negligible delay between the transmission and the receipt of signals; or (ii) the transmission of writing, images, and sounds or information of any nature when provided in connection with services that enable such speech communication. For example, this would include supplies of voice-over internet protocol (VoIP) minutes. An example of such specified telecommunication services is supplies of voice-over internet protocol (VoIP) minutes. Although Budget 2025 mentions only certain telecommunication services, the Federal Government has proposed that the new rules would include a new legal authority that would allow the Federal Government to make other supplies subject to an RCM. Accordingly, we may see other supplies being brought under the scope of an RCM in the future by means of regulations.
  • Repeal of the DST and Other Indirect Tax Measures: Consistent with earlier announcements, Budget 2025 includes draft legislation that would repeal the DST in anticipation of a mutually beneficial comprehensive trade arrangement with the United States. Budget 2025 also proposes to eliminate (i) Luxury tax on subject aircraft and subject vessels starting November 5, 2025; (ii) the underused housing tax as of the 2025 calendar year; and (iii) GST for first-time home buyers on homes up to $1 million (and reduced GST for homes between $1 million and $1.5 million).

To view the full article, click here.

Footnotes

1 OECD (2023). Multilateral Convention to Implement Amount A of Pillar One. OECD/G20 Base Erosion and Profit Shifting Project. Paris: OECD Publishing. https://www.oecd.org/en/topics/sub-issues/reallocation-of-taxing-rights-to-market-jurisdictions/multilateral-convention-to-implement-amount-a-of-pillar-one.html.

2G7 statement of 28 June 2025 and G20 communique of 17-18 July 2025. Also G20 Finance Ministers & Central Governors Meeting, 15-16 October 2025 and G20 declaration of 22-23 November 2025.

3 High Court of Delhi, Commissioner of Income Tax, ... vs Clifford Chance Pte Ltd on 4 December 2025, ITA 353/2025 and ITA 354/2025

4 OECD (2017), Model Tax Convention on Income and on Capital: Condensed Version 2017, OECD Publishing.

http://dx.doi.org/10.1787/mtc_cond-2017-en

5 Income Tax Appellate Tribunal, 'J' Bench Mumbai, Netflix Entertainment Services India LLP v. Deputy Commissioner of Income Tax... on 17 October 2025, ITA No. 6857/Mum/2024

6 Bloomberg, US Threatens to Retaliate Against EU Firms Over Digital Tax, 16 December 2025.

7 Office of the United States Trade Representative (USTR) (2021). Section 301 – Digital Services Taxes. Washington, D.C.: Executive Office of the President. https://ustr.gov/issue-areas/enforcement/section-301-investigations/section-301-digital-services-taxes

8 G-24 Working Group on Tax Policy and International Tax Cooperation (2019 ). Proposal on Addressing Tax Challenges Arising from Digitalization. Submitted to the OECD Inclusive Framework on BEPS, January 2019 . Washington, D.C.: Intergovernmental Group of Twenty-Four. The SEP was also the solution adopted in the 2018 Commission proposal Proposal for a COUNCIL DIRECTIVE laying down rules relating to the corporate taxation of a significant digital presence COM/2018/0147 final - 2018/072 (CNS)

9 India's SEP concept was introduced via Explanation 2A to Section 9(1)(i) of the Income Tax Act, 1961, through the Finance Act, 2018. However, when a tax treaty applies, the SEP provisions do not override the treaty's PE threshold. This means that for treaty-resident taxpayers, income is taxable in India only if a PE exists, and SEP alone does not trigger taxation.

10 Bailleul-Mirabaud, A., & Pasquier, C. (2018). INSIGHT: Digital Permanent Establishment: Where Are We Now? (Part 1). Bloomberg Tax, Daily Tax Report: International, 2 October 2018. https://news.bloombergtax.com/daily-tax-report-international/insight-digital-permanent-establishment-where-are-we-now-part-1.

11 Available at: https://ataftax.org/library/suggested-approach-to-drafting-significant-economic-presence-legislation/

12 IBFD (2025), G-24 Supports Net-Income Taxation for Digital Services Over Gross-Based Withholding Taxes

13 Draft UN Framework Convention Template.

14 EU Countries Still Wary of U.N. Language on Taxing Rights | Tax Notes

15 Debate on taxation of large digital platforms in light of international taxation, available at: https://www.europarl.europa.eu/doceo/document/CRE-10-2025-09-10-ITM-018_EN.html

16 OECD (2022). OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2022. OECD Publishing, Paris. https://doi.org/10.1787/0e655865-en. ISBN: 978-92-64-52691-4 (print), 978-92-64-92191-7 (PDF).

17 OECD (2015). Aligning Transfer Pricing Outcomes with Value Creation, Actions 8–10 – 2015 Final Reports. OECD/G20 Base Erosion and Profit Shifting Project. Paris: OECD Publishing. https://doi.org/10.1787/9789264241244-en.

18 OECD (2022). OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2022. https://doi.org/10.1787/0e655865-en

19 Canada v. GlaxoSmithKline Inc., 2012 SCC 52, [2012] 3 S.C.R. 3.

20 PepsiCo, Inc v Commissioner of Taxation [2024] FCAFC 86; 303 FCR 1.

21 PepsiCo v Commissioner of Taxation: On 26 June 2024 the Full Federal Court overturned the primary judgment, holding that no royalty existed because the arm's‑length bottling contract did not expressly provide one. The Court reaffirmed the primacy of contractual form when it reliably reflects commercial reality, highlighting how contentious royalty characterization can be and cautioning tax authorities against over‑stretching implied‑royalty arguments when the written agreement is clear. https://www.hcourt.gov.au/sites/default/files/case-summaries/2025-07/SP%20April%202025-2.pdf

22 Pepsi Co, Inc v Commissioner of Taxation v Stokely-Van Camp, Inc [2025] HCA 30.

23 The Coca‑Cola Co. & Subs. v. Commissioner, 155 T.C. No. 10 (Docket 31183‑15, 18 Nov 2020) https://www.hollandhart.com/webfiles/2020-45427_TNTCourts_CocaCola.pdf; William Byrnes, Will Coca-Cola's $9 Billion Transfer Pricing Tax Court Loss Be Overturned By The Eleventh Circuit?, Kluwer Tax Blog (2024)

24 THE COCA-COLA CO. & SUBSIDIARIES, Petitioner-Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent-Appellee IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT, 27 August 2025.

25 3M Co. v. Comm'r, 154 F.4th 574, 2025 U.S. App.

26 Acórdão do Supremo Tribunal Administrativo, 01169/09, 25 September 2025.

27 ITA No.6857/Mum/2024, 17 October 2025

28 OECD (2022), OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2022. https://doi.org/10.1787/0e655865-en

29 OECD/G20 Inclusive Framework, Outcome Statement on the Two‑Pillar Solution, 11 July 2023, para. 25; OECD, Public Consultation Document: Amount B under Pillar One – Simplified and Streamlined Approach, 17 July 2023, p. 6; Business at OECD (BIAC), Comment Letter on Amount B, 18 Sept 2023; International Chamber of Commerce (ICC), Submission on Amount B, 20 Sept 2023.

30 IRAS e-Tax Guide Transfer Pricing Guidelines (Eighth Edition), 19 November 2025.

31 RoyaltyRange (2023). TNMM Benchmarking Guide. RoyaltyRange Article.

32 Public consultation meeting: Global mobility of individuals

Originally published on 30 January, 2026

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.