Tax Talk
Global Developments

Direct Tax

Implementation of Sales Tax on Digital Services in Maryland

Maryland implemented a 3% sales tax on digital and IT services from 1 July 2025, impacting cloud and software contracts. The 90-day tariff pause expired mid-July, potentially leading to higher tariffs starting in August. Additionally, several U.S. states have revised the scope of digital service taxes and updated marketplace facilitator regulations. These developments significantly heighten compliance requirements for companies operating in the technology and e-commerce sectors, and businesses are advised to closely monitor state-specific legislative updates to ensure timely compliance and mitigate potential risks.

Announcement of VAT increase in Estonia

Estonia raised its VAT rate from 22% to 24% as of 1 July 2025, affecting all taxable goods and services.

Extension of amnesty in Saudi Arabia

Saudi Arabia extends its VAT penalty amnesty through December 2025 and advances mandatory e-invoicing phases for large taxpayers.

Introduction of the Digital Tax Stamp system in Oman

Effective August 2025, Oman will enforce the Digital Tax Stamp (DTS) system on excisable goods such as tobacco products, carbonated and energy drinks, and alcoholic beverages. Under this mandate, all imported and locally manufactured excisable items must carry secure, digitally-coded tax stamps verifying tax compliance. Customs enforcement will begin in June 2025, followed by market-level enforcement from August 2025, prohibiting the sale of unstamped products.

Transfer Pricing

UK HMRC Consultation 2025: SME Exemption, ICTS & Transfer Pricing Documentation⁴

Since 1 April 2023, large UK businesses have been required to maintain OECD-compliant master file and local file transfer pricing documentation under the Transfer Pricing Records Regulations 2023. The HMRC consultation titled “Transfer pricing – scope and documentation” closed on 7 July 2025, having been launched on 28 April 2025, which seeks to strengthen UK transfer pricing documentation requirements and align them more closely with international standards. The key proposals are:

• Proposal Removal of SME Exemption
  The government proposes removing the medium-sized enterprise exemption from transfer pricing documentation requirements, retaining relief only for small enterprises (under 50 staff and turnover/balance sheet total below GBP 10 million). Thresholds would be converted from EUR 10 million to GBP 10 million, with exemption status changing only if limits are exceeded for two consecutive years.
• Proposal International Controlled Transactions Schedule (ICTS)
  The ICTS would require medium and large businesses, as well as certain permanent establishments with material cross-border related-party transactions, to file an annual schedule with their tax return. Small enterprises and low-value cases would be excluded.
• ICTS Scope & Thresholds
  Exclusions would apply for UK-UK transactions, APA-covered transactions, and exempt dividends. A GBP 1 million aggregate threshold for qualifying territory transactions and a GBP 100,000 per-category de minimis would apply, with higher thresholds for larger groups. Loan relationship reporting would have separate GBP 5 million/GBP 100,000 thresholds.
• Definition Updates
  The government proposes continuing to use turnover, balance sheet total, and staff headcount as SME metrics, while simplifying the definition of 'enterprise', removing the 'partner enterprise' concept, and reviewing the 'non-qualifying territory' exception to focus on higher-risk jurisdictions.
• Impact & Objective
  These reforms aim to align the UK’s transfer pricing framework with global best practices, enhance protection of the UK tax base, improve HMRC’s risk assessment capability, and reduce unnecessary enquiries. Administrative burdens would be minimized by aligning ICTS data requirements with the existing local file/master file format and applying aggregation rules.
• Timeline and Next Steps
  Legislation reflecting these changes is expected to be included in the Finance Bill 2025–26, with potential implementation from January 2026.

Kuwait’s Introduction to Transfer Pricing rules under the new DMTT law⁵

As part of Pillar 2 implementation efforts, Kuwait has issued executive regulations under the Domestic Minimum Top-up Tax (DMTT) framework. A key feature of these regulations is the introduction of transfer pricing rules that are broadly consistent with the OECD Transfer Pricing Guidelines. A high-level summary of the regulations is outlined below:

• Arm’s Length Principle
  Group entities operating in Kuwait are required to ensure that transactions with related parties, whether domestic or international, must be carried out on an arm’s length basis
• Related Party
  An entity is considered related if they are connected with each other or with a third person through ownership, control, or significant influence
• Applicability
  The transfer pricing rules apply to MNEs operating in Kuwait through entities and/or permanent establishments with global consolidated revenues of at least EUR 750 million in at least two of the previous four fiscal years.
• Transfer Pricing Requirements
  • A local file and a master file. Such documentation must be submitted within 30 days upon request; and
  • A transfer pricing disclosure form containing at a minimum detail of related party transactions and the transfer pricing method applied. The form must be filed with the tax return and must be audited by an approved audit firm.
• Transfer Pricing Adjustment
  The tax authorities have the right to adjust prices of related party transactions if the arm’s length principle is not followed.