Tax Talk
Global Developments

Indirect Tax

Bhutan implemented the Goods and Services Tax regime on 1 January 2026

Excerpts from various sources

Bhutan introduced a new Goods and Services Tax (GST) regime effective 1 January 2026, replacing the earlier sales tax and excise duty system. The GST applies a standard rate of 5% on most taxable goods and services, including imports and digital services.

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New Zealand introduces an e-invoicing system

Excerpts from various sources

New Zealand is rolling out Peppol-based e-invoicing in phases from January 2026. While e-invoicing is voluntary for most businesses, it will be mandatory from 1 January 2027 for large suppliers to government agencies. The system covers domestic transactions only, excludes cross-border invoices, does not involve real-time tax reporting, and is enforced through government procurement rules rather than direct penalties. All invoices must be retained for at least 7 years.

EU VAT updates

Excerpts from various sources

As part of annual fiscal recalibration exercises, multiple EU member states introduced targeted VAT rate revisions effective 1 January 2026, reflecting shifting priorities around inflation control, sustainability, healthcare affordability, and revenue optimization

Country Name	Description	VAT update
Denmark	Books	Existing 25% VAT substituted with 0%
Finland	Food, medicine, books, transport, and accommodation	Existing 14% VAT reduced to 13.5%
Germany	Restaurant and catering services	Earlier announced 7% reduced rate is now made permanent
Ireland	Hire of rooms in hotels and guesthouses for use other than as accommodation	23% VAT
Netherlands	Short-stay accommodations	Existing 9% VAT increased to 21%
Switzerland	Standard VAT rate	The proposed increase in the standard VAT rate from 8.1% to 8.8% has been postponed, likely to 2028.

Transfer Pricing

UK: HMRC Updates Guidance on Transfer Pricing Risk (GfC7)

HM Revenue & Customs (HMRC) has updated its GfC7 transfer pricing (TP) guidance to strengthen voluntary compliance and clarify expectations around common transfer pricing risks. While not legally binding, the guidance influences HMRC’s risk assessments, including penalties and extended discovery periods.

The revised guidance introduces two new focus areas.

• Value Chain Analysis (VCA): Guidance on when and how VCA can enhance transfer pricing analyses, including best practices and common pitfalls.
• Offshore Procurement Hubs: New risk indicators for arrangements where overseas group entities charge UK companies for procurement services.

Overall, the revised GfC7 guidance reflects HMRC’s continued emphasis on transparency, substance, and commercially grounded transfer pricing positions.

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Cyprus: Tax Reform Introduces Key Changes to Transfer Pricing Documentation

In December 2025, the House of Representatives of Cyprus approved a tax reform package⁸ introducing significant amendments to TP documentation requirements, effective from the 2026 tax year.

Under the revised framework, the annual materiality thresholds for preparing a Cyprus transfer pricing Local File have been increased. Taxpayers will now be required to prepare a Local File only where controlled transactions exceed EUR 10 million for financial transactions, EUR 5 million for goods transactions, and EUR 2.5 million for other categories of controlled transactions.

The reform package also updates the definition of “connected persons” under Cyprus income tax law. Effective January 1, 2026, a company director or consultant will be regarded as a connected person if they, individually or together with other connected persons, hold at least 50% of the voting rights in board decisions, whether derived from the company’s articles of association or shareholder authorization.

These 2025 amendments reinforce Cyprus’ transfer-pricing regime.⁹

OECD: Publishes Fourth Batch of Updated Transfer Pricing Country Profiles

In January 2026, the Organisation for Economic Co-operation and Development (OECD) released the fourth batch of updated TP country profiles. These updates are intended to reflect the current status of domestic transfer pricing legislation across jurisdictions and to provide an overview of how closely national rules align with the OECD TP Guidelines.

The latest release includes updates for the following countries: Bosnia and Herzegovina, Brazil, Costa Rica, Croatia, Greece, Iceland, Korea, and Norway. The country profiles summarize key aspects of each jurisdiction’s TP framework, including the legal basis for transfer pricing rules, documentation requirements, availability of advance pricing agreements, dispute resolution mechanisms, and the treatment of specific issues such as intangibles and intra-group services.

These updates are part of the OECD’s ongoing efforts to enhance transparency and promote consistency in the application of transfer pricing principles across member and partner jurisdictions. The refreshed profiles also assist taxpayers and tax administrations in understanding the practical implementation of transfer pricing rules in different countries.

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OECD Pillar Two: Key Takeaways from the Side-by-Side Package

In January 2026, the OECD/G20 Inclusive Framework released the Side-by-Side (SbS) Package as part of the ongoing implementation of the Pillar Two global minimum tax rules. The package focuses on administrative simplification and better alignment between domestic minimum tax regimes and the GloBE framework.

A central element of the SbS package is the introduction of new safe harbor provisions designed to reduce the likelihood of overlapping top-up taxes and to ease the compliance burden for multinational groups. Under specified conditions, these measures may limit the application of the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR), particularly where the parent jurisdiction already applies a qualifying minimum tax.

The package also expands the range of available safe harbors. This includes a permanent simplified effective tax rate (ETR) safe harbor expected to apply from 2027, as well as an extension of the transitional CbCR safe harbor through financial years up to 2027. In addition, a substance-based tax incentive safe harbor has been introduced to ensure that certain qualifying incentives do not inadvertently trigger top-up tax outcomes.

Another key focus of the package is the continued prioritisation of Qualified Domestic Minimum Top-Up Taxes (QDMTTs). The framework reinforces the principle that jurisdictions should have the primary right to collect any top-up tax arising within their borders, thereby reducing the need for foreign jurisdictions to apply the IIR or UTPR.

Overall, the SbS package represents a step toward a more streamlined and coordinated application of the Pillar Two rules. By expanding safe harbours and clarifying interactions between domestic and global minimum tax systems, the OECD aims to provide greater certainty and reduce the administrative burden for both tax authorities and multinational enterprises.

OCED January 2026 Report