Financial services tax digest - June 2025

As the saying goes, “the only constant in life is change.”  As we enter the third quarter of 2025, global economic uncertainty continues to escalate. President Trump’s pause on “reciprocal” tariffs is set to expire on 8 July 2025. Currently, the U.S. has only reached trade deals with the UK and China. However, negotiations with other countries have recently escalated. At the time of the drafting of this newsletter, a marathon voting session on the provisions of The One Big Beautiful Bill was underway in the US Senate. If passed by the Senate, it will return to the House for vote.  President Trump has been pushing to have the bill signed by 4 July but has acknowledged that he is open to pushing back the deadline.

While it is not anticipated that banking activity will be subject to impending tariffs, opponents of the tariffs have voiced concerns over broad economic consequences such as increased default rates, reduced loan demand, an increased need to hedge interest rate and FX currency risks and elevated market volatility.  Conflict in the Middle East could further heighten volatility in the financial markets. Increases in oil prices lead to increases in energy costs that drive up inflation and stall economic growth. This could result in delays in interest rate cuts and a reduction in investor confidence. All these factors impact profitability.  Additionally, the escalated conflict increases cybersecurity risks. Banks are evaluating cybersecurity controls and protocols to ensure they are best positioned to protect the organisation and its clients from ransomware and phishing attacks.

In this, our third Global Financial Services Tax Digest, we focus on tax developments as they affect the financial services sector across seven jurisdictions. We include updates on new and planned legislation in these jurisdictions, covering a range of topics including relevant provisions of the One Big Beautiful Bill.  We look forward to partnering with you as you work through the ever-changing global tax landscape.

Leigh Hayes, Partner, Forvis Mazars in the U.S.

France

Newly published anti-abuse administrative guidelines dealing with cumcum transactions involving French equities and index (dividend arbitrage)

On 17 April 2025, the French tax authorities published administrative guidelines on Article 96 of the French Finance Bill for 2025 n°2025-127 that was recently enacted on 14 February 2025.

The French Finance Bill for 2025 amended the existing Article 119 bis A I of the French tax Code (FTC), by adding a new wording providing that the “transfer of value” under certain type of dividend arbitrage transactions is deemed to constitute dividend income subject to withholding tax in France. A safe harbour provision has also been provided for in the law should the main purpose and effect of a dedicated transaction are not aiming at (i) avoiding the domestic (or reduced treaty) withholding tax rate or (ii) obtaining a tax advantage.

The newly issued guidelines are meant to clarify the 2025 Finance Bill provisions providing for a 25% withholding tax on income deemed to be distributed in the context of “dividend-driven” transactions (i.e., dividend arbitrage) on French equities and/or European Indexes known as “delta one” transactions or quasi delta one transactions.

The guidelines provide that:

• the new legal provision implemented by the French Finance Bill for 2025 only applies to transactions giving rise to an effective distribution of dividends by a French issuer;
• only linear “delta one” or “quasi-delta one” instruments are concerned;
• transactions entered into on regulated markets should not be captured (except in case of abuse);
• transactions involving equity indexes are subject to withholding unless the safe harbour provision applies when the index is sufficiently diversified (CAC 40 and Euro Stoxx 50 are explicitly referred to in the guidelines), unless these indexes are used as part of combined transactions producing for a non-resident an economic effect similar to the effect of holding the securities within the index; and
• the safe harbour provision should apply for effective hedging needs.

However, several uncertainties remain, including regarding to the application of the equity index safe harbour provision for which the French tax authorities’ guidelines may appear to be substantially inconclusive.

Unfortunately, as of today’s date, the French legal and administrative environment does not provide for the legal certainty required by large financial institutions trading desks active directly and/or indirectly on French equities.

Therefore “Delta one” desks must immediately undertake a critical review of all delta one or quasi delta one equity transactions involving French listed equities / indexes as the 2025 French law and relevant guidelines are immediately enforceable for most provisions. 

Jerome Labrousse, Partner, Forvis Mazars in France

Germany

New German government issues proposed tax legislation

Following the federal election in February and the signing of a coalition agreement in April 2025, the new German government consisting of CDU/CSU and SPD has immediately started its work on tax legislation.

1. The government adopted a first tax law draft on 5 June 2025[1] intending to boost investments and economy in Germany. The ambitioned time plan aims to complete the formal legislation process before the legislative summer break in July, the draft law is currently discussed in the houses of parliament. It includes the following major measures:
   • “Investment booster” for movable fixed assets: the declining balance depreciation method shall be(re-)introduced for movable fixed assets acquired or manufactured between 1 July 2025 and 31 December 2027. The percentage rate of the declining balance depreciation shall be limited to three times the straight-line depreciation rate, maximum 30% per year.
   • Tax incentives for the acquisition ofelectric company cars shall be improved from July 2025 by
     • increasing the price limit from EUR 70,000 to EUR 100,000 per newly acquired vehicle and
   • • introducing a special depreciation allowance of 75% in the year of acquisition (with declining balance method in the following five years).
   • Extension of tax incentives for Research & Development (R&D) – basis for eligible expenses shall be broadened by definition and increase from EUR 10 Mio. to EUR 12 Mio from 2026 onwards.
   • Lowering the tax burden for businesses from 2028:
     • The Corporate Income Tax (CIT) rate for corporations of currently 15% shall be gradually reduced starting 2028 by one percentage point per year in five equal steps, down to 10% from 2032 onwards.Respectively, the special income tax rate for retained profits from partnerships and sole proprietorships of currently 28.25 %[2]shall be gradually reduced in three steps to 27% for 2028/2029, 26% for 2030/2031 and 25% from 2032 onwards.
2. The government agreed on 28 May 2025 to prioritise further tax-relevant action points which will be subject to separate legislative processes, inter alia lowering the VAT rate for gastronomy and increasing the commuting allowance, both from 1 January 2026, as well as lowering the electricity tax rate.

Ireland

How the Draghi Report can enhance Ireland’s Section 110 regime

The Draghi Report, a strategic blueprint for revitalising European competitiveness, places strong emphasis on deepening capital markets and improving financial integration across the EU. For Ireland, a jurisdiction already recognised for its robust and internationally respected Section 110 regime, the report’s proposals offer a timely opportunity to reinforce its leadership in the securitisation space.

Ireland’s Section 110 regime: a best-in-class framework

At the heart of Ireland’s securitisation success is Section 110 of the Taxes Consolidation Act 1997. This regime provides a transparent and tax-neutral framework for qualifying companies engaged in the securitisation of financial assets. It is widely regarded as best-in-class due to its:

• Legal certainty and predictability, which are critical for structuring complex financial transactions.
• Alignment with EU regulations, including the Securitisation Regulation (EU) 2017/2402.
• Familiarity among global investors, who value the regime’s consistency and the ease of doing business in Ireland.

These features have made Ireland a preferred jurisdiction for setting up Special Purpose Vehicles (SPVs) and conducting cross-border securitisation transactions.

How the Draghi Report supports Ireland’s tax and securitisation ecosystem

1. Capital Markets Union (CMU) reinforcement

The Draghi Report calls for a revitalised CMU, which includes harmonising tax and insolvency regimes across member states. This aligns well with Ireland’s Section 110 framework, which already offers a tax-efficient and compliant structure. As the EU moves toward greater integration, Ireland’s established regime can serve as a model for best practices.

2. Encouraging private capital mobilisation

Draghi emphasises the need to unlock private capital to support innovation and growth. Ireland’s Section 110 companies are ideally positioned to channel institutional and private investment into European assets, including green and digital infrastructure, through securitised products.

3. Reducing regulatory fragmentation 

The report highlights the inefficiencies caused by regulatory divergence. Ireland’s clear and consistent tax treatment under Section 110 reduces complexity for investors and originators alike. As the EU seeks to streamline financial regulation, Ireland’s regime stands out as a ready-made solution that can be scaled or replicated.

4. Sustainable finance and ESG securitisation

With sustainability at the core of the Draghi Report, Ireland’s securitisation sector can leverage Section 110 structures to issue green and ESG-linked securities. The tax neutrality of Section 110 ensures that such instruments remain attractive to global investors seeking both impact and returns.

5. Resilience to global tax reforms 

While global tax initiatives like OECD’s Pillar Two introduce new challenges, Ireland has shown adaptability. The Irish Finance Act 2024, for instance, introduced targeted exemptions for securitisation entities, ensuring that Section 110 companies remain competitive and compliant in a changing tax landscape.

Conclusion

The Draghi Report’s vision for a more competitive, integrated and sustainable Europe aligns closely with Ireland’s strengths in the securitisation sector. With its well-established Section 110 regime, Ireland is not only prepared to benefit from these reforms but also to lead by example. By continuing to offer a transparent, efficient and investor-friendly tax environment, Ireland can attract more securitisation activity and play a pivotal role in the EU’s financial future.

Joe Walsh, Director, Forvis Mazars in Ireland

Italy

Underrated Italian ruling raises new attention on zero balance cash pooling risks

A rather recent ruling by the Italian Supreme Court (decision no. 998/2024), which has gone largely unnoticed, may have significant implications for intermediaries advising corporate clients on centralised cash management.

The Court examined an arrangement between an Italian subsidiary and its Irish parent that formally resembled a zero-balance cash pool. However, due to the absence of daily two-way transfers and the systematic upstreaming of excess cash, the structure was recharacterised by the tax authorities as a medium-to-long-term loan.

Although the Court ultimately ruled in favour of the taxpayer—citing insufficient evidence to shift the burden of proof — it endorsed the tax authorities’ interpretation in substance, applying transfer pricing principles to assess deemed interest income.

Importantly, the Italian Revenue Agency had previously clarified (Circular no. 11/E of 17 March 2005) that true zero balance cash pooling arrangements—characterised by reciprocal, non-repayable daily transfers and unavailable pooled balances—do not qualify as intercompany loans. As such, they fall outside the scope of Italy’s interest deduction limitation rules (art. 96 TUIR, so-called earning stripping rule).

However, if reclassified as a shareholder loan (e.g. where the Italian participant is constantly in a debit position), any arm’s length interest accrued under transfer pricing rules would become subject to such limitation.

Intermediaries should monitor client structures to prevent unintentional requalification and ensure consistent application of both transfer pricing and interest deduction rules.

Raffaele Villa, Partner, Forvis Mazars in Italy

Switzerland

The Swiss Federal Council has recently issued the results of the analysis in the aftermath of the collapse of Credit Suisse and the absorption by UBS. In the same instance, it proposed an extension of the favourable tax treatment of certain capital instruments used by systematically important banks in Switzerland.

Stricter capital requirements for systematically important banks in Switzerland

According to the Federal Council, the Credit Suisse crisis showed that the too big to fail regime needs to be improved in order to reduce risks for the state, taxpayers and the economy. To achieve these improvements, the Federal Council, among others, proposed stricter capital requirements for systemically important banks with foreign subsidiaries.

In the future, systemically important banks should fully deduct the carrying value of foreign subsidiaries from the parent bank’s CET1 capital (previously, only a partial reduction was required). This approach ensures that the valuation losses on foreign subsidiaries in the parent bank’s balance sheet will not impact on its CET1 capital. At the same time, the measure strengthens the Swiss parent bank’s capitalisation within the group structure. Conversely, the Federal Council has refrained from taking measures to generally increase capital requirements, which it considers to be less suitable.

Tax impact of the proposed amendment

Swiss systematically important banks can meet their capital requirements by either improving their debt-equity-ratio or by issuing so called AT1 bonds (“additional tier one” – contingent convertible bonds). AT1 bonds pay a fix interest over a defined period. However, if a triggering event (as defined by statutory law) occurs, AT1 bonds are converted into equity. It can be expected that affected banks will meet the new requirements at least partially by issuing AT1 bonds.

Interest paid on bonds is generally subject to Swiss withholding tax at a statutory rate of 35 %. Interest paid by AT1 bonds, however, benefits from an exemption from Swiss withholding tax to increase the attractiveness of AT1 bonds for investors and strengthen the position of Swiss systematically important banks in international competition while at the same time increase their capital position. This exemption is currently valid throughout 2026. In June 2025, the Federal Council issued a dispatch to the Federal Assembly to request an extension of this exemption through 2031. It can be expected that – if approved by the Federal Assembly – the extension enters into force simultaneously with the stricter capital requirements for systematically important banks.

Accordingly, if the Federal Assembly approves both proposed laws (stricter capital requirements and extension of the withholding tax exemption for interest on AT1 bonds), it will foster the attractiveness of AT1 bonds as a source of fix interest for investors without Swiss withholding tax (however, with the potential risk of a partial or entire loss of the investment if a triggering event occurs).

André Kuhn, Partner, Forvis Mazars in Switzerland

Steven Gruendel, Manager, Forvis Mazars in Switzerland

United Kingdom

Potential tax increases, updated compliance for digital currency and taxation of “co-ownership contractual schemes”

The spending review of 11 June set out the UK Government’s spending plans for over the next 5 years.  Speculation is rife about potential tax rises for the Autumn budget if the UK’s finances do not improve. Some Ministers want tax rises to cover a £5 billion gap. In May, a leaked ministerial paper suggested raising the bank profits surcharge from 3% to 5%. This would run counter to the Government’s drive for international competitiveness but nevertheless, some tax rises are expected.

In June, the OECD published its CRS Consolidated Text, including the 2023 amendments to the Common Reporting Standard. The amendments bring within scope specified electronic money products and central bank digital currencies, as well as indirect investments in crypto assets, through derivatives and investment vehicles. They also strengthen due diligence and reporting obligations. The UK’s draft implementing regulations are expected to come into force 1 January 2026. Generally, the draft amendments will increase the compliance burden on financial institutions.

In March, new regulations concerning taxation of “co-ownership contractual schemes” took effect. These regulations introduce a new onshore unauthorised fund vehicle, called a “reserved investor fund”, which will be fiscally transparent for income purposes but opaque for gains. It can be either open- or closed-ended, so making it a suitable fund vehicle for UK property and other asset classes.

Ian Thomson, Associate Director, Forvis Mazars in the UK

United States

The Section 899: A close call – a simplified overview of the potential impacts
on the banking industry in three points

Rarely has the tax landscape been so fast-changing. After making the Section 899 – a new provision which would have enabled US retaliations against countries that impose taxes considered unfair – its spearhead in its international tax policy offensive, the US administration reached a deal on global minimum taxes rendering section 899 moot. On 26 June, U.S. Treasury Secretary Scott Bessent announced that, in essence, the G7 member states have agreed that pillar two of a global tax framework would not apply to US companies and that, as a consequence, he was asking Republicans in Congress to remove the Section 899 from consideration in the “One, Big, Beautiful Bill Act” (OBBBA).

Yet is Section 899 already a thing of the past? It is far from certain as discussed in this note. And, while bankers have only experienced a remote impact from the recent U.S. tariffs, the Section 899 would have significantly affected them.

In this note, we outline the key issues related to this new regime through three questions:

1. Which banks would have been affected?
2. How would the Section 899 have operated?
3. Can the Section 899 come back?

Please note that this summary has been intentionally simplified for clarity. For further information, please reach out to any of our team members.

1. Which banks would have been affected

In a simplified manner, the following entities would have been subject to the provisions of the Section 899:

• Entities established in a country identified by the US Treasury as a “Discriminatory Foreign Country” (DFC), or
• Entities whose parent company[3] – whether direct, intermediate or ultimate – is based in a DFC.

DFCs are countries that have implemented taxes deemed “unfair and discriminatory” by the U.S. authorities. The bill identified three main types of “unfair and discriminatory” taxes: the Under Taxed Profit Rule (UTPR), the Digital Service Tax (DST) and the Diverted Profit Tax (DPT).

In practice, the following countries are affected:

2. How would the Section 899 have operated?

The Section 899 had three critical components:

Increase of WHT

The Section 899 would have led to an increase in U.S. withholding tax under Code the Sections 1441(a), 1442(a) and 1445(a) and (e), which apply to various types of U.S. passive investment income earned by foreign investors, including dividends, interest, royalties and rents.

The additional tax would have begun at 5 percentage points and would have risen annually to a maximum of 15 to 20 percentage points above the relevant statutory rate.

These additional taxations would have been computed after the application of the Double Tax Treaty and will therefore exceed the conventional WHT rate.

Increase of CIT rate for non-residents (including branches)

The Section 899 would have resulted in an increase of the tax rate applicable to a number of US tax regimes relating to foreign residents, including branches. The covered regimes would have included, in particular[4]:

• The branch profits tax,
• The corporate income tax imposed on income effectively connected with a U.S. trade or business (‘ECI”),

Similarly, the additional tax would have started at 5 percentage points and would have increased annually to a maximum of 15 to 20 percentage points above the relevant statutory rate.

Modification of BEAT rules

The Section 899 also would have also expanded the application of the existing Base Erosion and Anti-Abuse Tax (BEAT) provisions (the “SuperBEAT”). In a simplified manner:

• BEAT would no longer be limited to large multinationals but would apply to nearly any U.S. or foreign corporation with ECI that is more than 50% controlled by persons resident of DFC countries.
• Similarly, various exceptions to base erosion payments that normally apply under the BEAT framework to limit its impact would have been repelled, making the BEAT impact more pervasive.
• In addition, the BEAT rate would have increased.

Is it important to note that the Section 899 would have overridden U.S. tax treaty exemptions and rate reductions. Please note as well that services were not impacted (unless through the “SuperBEAT”). Exemptions would have applied (as an example, U.S. treasury bonds would have been exempt, as well as the portfolio interest exemption)

3. Can the Section 899 come back?

There was always uncertainty as to whether Section 899 would pass. The Senate is narrowly republican-controlled senate and the wider OBBBA is facing criticism from moderate republicans. Furthermore, lobbies such as the IIB[5] or the ICI[6] have expressed deep concerns about the impact of the Section 899 on US competitiveness and attractiveness for foreign and domestic investments.

The decision, by the Trump Administration to scrap the Section 899 may eventually turn out to be a temporary one. As of 27 June, US Secretary Bessent mentioned that a major agreement had been reached with other G7 countries on Pillar 2. But the Digital Service Tax (DST) and the Diverted Profit Tax (DPT) regimes remain in a number of countries. Observers on the hill consider that President Trump could revive the Section 899 – or a variant thereof – depending on its interests, in the context of the global trade war the US administration is waging. Already, in the press, investors say that the withdrawal of the Section 899 will not change plans to reassess their investments in the United States.

Forvis Mazars professionals throughout the Globe stand ready to assist banking groups navigating these uncharted waters.

Jeremy Brown, Partner, Forvis Mazars in the UK

Michael Cornett, Managing Director, Forvis Mazars in the US

Guillaume Madelpuech, Director, Forvis Mazars in France

Changes to treatment of domestic research and experimental expenditure could allow immediate deductions rather than capitalisation

Background:

• Current law requires taxpayers to capitalise and amortise domestic sourced research and experimental expenditures (REEs) over a 5-year period while foreign sourced REEs are capitalised and amortised over a 15-year period. The development of software is treated as a research or experimental expenditure under Internal Revenue Code (IRC) Section 174.
• Two pieces of proposed legislation are under consideration that could impact the requirement to capitalise REEs for tax purposes under Internal Revenue Code (IRC) Section 174.
  • House Ways & Means Committee reconciliation bill (W&M bill) introduced on 12 May 2025.
    • The W&M bill pauses capitalisation and again allows an immediate deduction for domestic R&E expenditures incurred in tax years beginning after 31 December 2024 and before 1 January 2030.
  • Senate Finance Committee (SFC) reconciliation bill (SFC bill) introduced on 16 June 2025.
    • The SFC bill permanently reinstates the deduction of domestic REEs and permits taxpayers to accelerate remaining amortisation deductions over a one-year or two-year period. Lastly, small businesses with average annual gross receipts of $31 million or less, can recover their domestic capitalised REEs applicable to years beginning after 31 December 2021.

Comparison of the bills

• The main difference between the House and Senate Bill lies in timing. The House Bill temporarily allows the immediate deduction of domestic REEs through 2029 while the Senate makes the immediate deduction permanent. Additionally, the House Bill does not allow businesses to retroactively deduct expenses or accelerate remaining amortisation.
• Both bills retain the requirement to capitalise and amortise foreign REEs.
• Both bills require taxpayers to reduce their REEs by the allowable Credit for Increasing Research Expenditures (R&D credit) or elect the reduced R&D credit under IRC Section 280C.

Takeaways for financial services firms

• Model the impact of timing differences in REE deductions on taxable income. 
• Maintain records for foreign REEs to facilitate continued capitalization proposed under each version of the bill.
• Evaluate impact of coordination between R&D credit and IRC Sec. 280C under proposed legislation.
• Consider opportunities related to the R&D tax credit under evolving rules, including potential retroactive or accelerated deductions.

Jeremy Berger, Partner, Forvis Mazars in the US

[1] “Entwurf eines Gesetzes für ein steuerliches Investitionssofortprogramm zur Stärkung des Wirtschaftsstandorts Deutschland“ (Law for a tax-based investment program to strengthen Germany as a business location) dated 5 June 2025, Bundesrat Drucksache 233/25, https://dserver.bundestag.de/brd/2025/0233-25.pdf; [2] according to Sec. 34a EStG (German Income Tax Act); [3] Or non-resident DFC entities present in the US (i.e. branch of a DFC head office); [4] Other régimes include FDAP income, FIRPTA, etc.; [5] Institute of International Bankers; [6] Investment Company Institute