Financial services tax digest

As we say goodbye to 2024 and look forward positively to 2025, at Forvis Mazars we know that financial institutions and funds will have to deliver in an evolving complex domestic and/or cross-border tax environment. Banks, insurers and asset managers all over the world may have to capture M&A opportunities and/or deal with some efficient restructuring operations to reach their growth objectives.

This is the reason why we are including, in this quarterly edition of our Forvis Mazars financial services tax digest, a direct overview of many of the relevant Finance Bills for 2025. In this edition, we focus on significant tax changes affecting banks. Some of the Finance Bills are already fully enacted and others are still pending subject to additional MP (or similar) votes and/or constitutional validation. They all include some tax measures that will need to be understood and closely monitored locally and globally.

In the US, we expect an extension of at least part of the 2017 Tax Cuts and Jobs Act (with many sections normally due to expire in 2025) that may include some additional tax cuts, while in Europe budget constraints may entail some tax increases in some jurisdictions. In Asia, growth is expected to readjust to pre-COVID19 levels subject to the economy remaining positive globally but specific focus on transfer pricing and export/import duties may be required. In all jurisdictions, technology and data treatment may also impact the way financial institutions and funds are dealing with tax.

As we expect some significant M&A transactions in 2025 involving financial institutions and funds following the transactions already announced in the second semester of 2024, tax will be high on the agenda in many jurisdictions in 2025 particularly in geographical Europe with the integration and enhanced cooperation among banks in various sectors to achieve synergies and to benefit from digitalization and AI. We have seen for instance Italian banks being quite active in capturing opportunities domestically and globally supporting our focus on the Italian 2025 Finance Bill enacted few days ago here-below. The North American continent, Africa and Asia shall also offer opportunities to selected players.

May 2025 be a successful year for all our readers.

Jerome Labrousse, Partner, Head of Banking Tax, Forvis Mazars Group

United States

2025 ushers in a year set to be filled with much debate about tax policy in the United States. Given President-elect Trump’s messaging on the campaign trail, much of this debate will focus on extending provisions sunsetting within the Tax Cuts and Jobs Act of 2017. Many of the expiring provisions would indirectly impact the financial services industry, as such provisions may impact customers’ cash flow.  Without action from Congress, at the start of 2026 some of the more influential changes would be:

•        §199A Qualified Business Income Deduction — no deduction (this would impact banks that operate as Subchapter S corporations in the United States).

•        Estate and Gift Tax Exemption — drops significantly.

•        State and Local Tax (SALT) “Cap”— no longer a set dollar threshold for “cap”.

•        Variety of individual taxpayer changes — standard deduction and Child Tax Credit drops, top individual tax rate increases.

One provision that may impact the financial services industry directly is the expiration of bonus depreciation, which impacts the timing of deductions for many types of asset-based transactions of financial service entities (e.g., equipment leasing transactions).

A big factor on the minds of legislators is funding for proposals in the coming year given the economic environment of the country. While President-elect Trump discussed possible funding mechanisms during his campaign, the question of balancing legislative priorities with the state of the U.S. deficit will be a point of discussion in the coming year.

Faye Tannenbaum, Partner, Forvis Mazars US

United Kingdom

The Finance Bill[1] and a bill increasing National Insurance Contributions (“NICs”)[2] may be enacted early in 2025. The UK Government aims to raise £41 bn, £25 bn coming from increasing employers’ NICs in April 2025, up from 13.8% to 15% of payroll costs and by cutting the secondary allowance per employee from £9,100 to £5,000 p.a.

Following abolition of the bankers’ bonus cap in 2023, and the regulators’ current consultation on reducing the bonus deferral from 8 to 5 years for senior bankers and 4 years for others,[3] banks are revisiting remuneration strategies to consider NIC efficiencies, including bonus waiver, salary sacrifice and pension contributions.

Amendments to regulations on the CRS and FATCA would take effect in 2026 if finalised, increasing the compliance burden on Financial Institutions (“FIs”).[4] Changes include: mandatory registration for all Reporting FIs, obligatory completion by clients of self-certifications upon request, updating the penalties and appeals process and inclusion of ‘Relevant Crypto-Assets’ and ‘Specified Electronic Money Products’. Some changes are to implement the OECD’s 2023 CRS amendments. Parallel regulations will be issued to implement the OECD’s Crypto Asset Reporting Framework.[5]

In ‘alternative finance’ (Islamic finance), the Finance Bill would broaden the scope of ‘shared ownership arrangement’ products which financial institutions and regulated providers can offer, where the tax treatment is made equivalent to lending. Properties that do not currently qualify for Capital Gains Tax Private Residence Relief, such as rental properties, second homes and commercial properties, would come within scope.[6]

Ian Thomson, Associate Director, Forvis Mazars UK

France

On December 4, 2024, Michel Barnier and his government were toppled after a majority of Members of the French Parliament Assemblée Nationale voted in favour of a non-confidence motion.

Consequently, the review of the Finance Bill for 2025 was suspended and the non-confidence motion made it impossible to adopt a budget for 2025 before the end of 2024, i.e., France ended 2024 without a dedicated budget for 2025.

However, both chambers of the French Parliament have voted a “special law” (“loi spéciale”) in the second half of December 2024 which is a constitutional tool guaranteeing the financial continuity of the State until a proper budget can be voted in 2025. The “special law” is only designed to allow the French government and social security system to authorize the French public institutions and State to continue collecting taxes and organize State borrowing as applicable based on the last enacted Finance Bill (voted end of 2023).

The Finance Bill for 2025 will be prepared by the new Government headed by long time politician François Bayrou and voted through by the Parliament in (early) 2025. It is expected in Q1 2025. The retroactivity components as of January 1, 2025 (or to prior periods by reference to income recognized during FY ending on December 31, 2024) of the Finance Bill will need to be closely monitored by Banks and other Financial Institutions including from a constitutional standpoint. Some measures included in the Finance Bill presented by Michel Barnier prior to December 4, 2024, may be included in the upcoming Finance Bill such as a raise of the corporate income tax rate for companies having net sales in France greater than 1 billion euros. This Finance Bill for 2025 will need to be closely monitored in 2025.

Jerome Labrousse, Partner, Head of Banking Tax, Forvis Mazars Group

Italy

The 2025 Finance Bill^[7]was published in the Official Gazette on December 31, 2024.

Among the provisions likely to have a significant impact on financial intermediaries and insurers there is the deferral of deductibility for corporate income tax and local tax purposes, scheduled for 2025 and 2026, of the reversals of deferred tax assets recognized on write-downs and losses of receivables, of the portions of amortization of goodwill and other intangible assets that led to the recognition of deferred tax assets and of the “tenths” of negative income components resulting from the FTA of IFRS 9.^[8]

The above is coupled with the reduction to 54 (from 80) percent of the amount of tax losses and ACE surpluses that in the 2025 tax period can be used to offset the higher taxable income arising from said deferral of deductibility;^[9] in addition to the recalculation of advance payments for 2025 and 2026 tax periods and constraints to the offsetting of the higher taxes due with available tax assets.^[10]

A reduced corporate income tax rate of 20% is introduced for the tax period following the one in progress as of 31 December 2024, provided that at least 80% of profits are allocated to reserves, at least 30 percent of these profits are used to acquire new capital goods belonging to the categories of Industry 4.0 and 5.0, there is an increase in the employment levels and no recourse to the wage supplementation fund (cassa integrazione guadagni).

Moreover, the Finance Bill provides for an increase in the substitute tax rate from 26 percent to 33 percent applicable to income from crypto assets along with the option for a tax step-up of the crypto asset value with the payment of a substitute tax of 18 percent.^[11]

Last, from 2025 onwards the stamp duties on life insurance contracts of class III and V are paid annually rather than at the time of redemption or surrender. Furthermore, a specific provision provides that for life insurance contracts in force as of January 1, 2025, the amount of stamp duty accrued at the end of each year and not yet paid as of December 31, 2024, in specific instalments from 2025 to 2028.[12]

Raffaele Villa, Partner, Forvis Mazars Italy

Germany

As of January 2025, Germany is governed by a minority coalition led by Chancellor Olaf Scholz’ Social Democratic Party (SPD) and The Greens following the collapse of the previous three-party coalition in November 2024. As a consequence of Chancellor Scholz having lost a vote of confidence in December 2024 snap elections are scheduled for 23 February 2025.

Nevertheless, numerous new tax regulations with the potential for material effects on both the Financial Services sector and its customers came into force that must be observed for the fiscal year 2025 – in the following some examples of regulations with noticeable effects:

The 2024 Finance Act which was finalized in December 2024 introduces an exit taxation on certain investment fund shares taking effect on 1 January 2025: unrealized gains on these shares become taxable upon relocation from Germany if the taxpayer held at least 1% of the fund’s shares in the past 5 years or if acquisition costs exceed € 500,000.

The Finance Act further opens the ability to fully offset losses from forward transactions against other capital income for private investors. In combination with corresponding case law, the regulation, therefore, removes the restriction on offsetting such losses that has formally been in place since 2021 with factual retroactive effect. The previous regulation limited investors to offset losses from forward transactions up to EUR 20,000 per year against forward transaction gains and not against other gains. This restriction has now been abolished: losses from forward transactions can now once again be fully offset against all types of investment income.

In addition, the taxation concept of so-called tainted or contribution-born shares is to be abolished. This taxation concept previously led to a retroactive taxation of hidden reserves when so-called tainted shares are sold within seven years after a tax neutral contribution for which the shares have been granted. The concept is to be applied for the last time to contributions where the event triggering the taxation occurs before 1 January 2025. Irrespective of the time of a contribution, so-called tainted shares now fall under the scope of Section 17 par. 6 German Income Tax Act and are therefore subject to regular taxation of sale of shares from the assessment period 2025.

Jens Nußbaumer and Veronika Gloßner, Partners, Forvis Mazars Germany

[1] Finance Bill 2024-25 (https://bills.parliament.uk/bills/3873); [2] National Insurance Contributions (Secondary Class 1 Contributions) – Bill https://bills.parliament.uk/bills/3888; [3] PRA and FCA publish consultation on pay for senior bankers (https://www.bankofengland.co.uk/news/2024/november/pra-and-fca-publish-consultation-on-pay-for-senior-bankers); [4]HMRC Open consultation – Draft regulations: The International Tax Compliance (Amendment) Regulations 2025(https://www.gov.uk/government/consultations/draft-regulations-the-international-tax-compliance-amendment-regulations-2025); [5] HMRC Open consultation – Draft regulations: The Cryptoasset Service Providers (Due Diligence and Reporting Requirements) Regulations 2025(https://www.gov.uk/government/consultations/draft-regulations-the-cryptoasset-service-providers-due-diligence-and-reporting-requirements-regulations-2025); [6] Clauses 35, 54 and 55 and Schedule 7 of the Finance Bill; [7] Law 30 December 2024, No. 207 (“Finance Bill”); [8] Article 1, paras. 14-17, of Finance Bill; [9] Article 1, paragraph 18, of Finance Bill; [10] Article 1, paras. 19-20, of Finance Bill; [11] Article 1, paras. 23-29, of Finance Bill; [12] Article 1, paras. 87-88, of Finance Bill.