EU starts implementing new transatlantic trade agreement
On 21 August, the EU and US issued a joint statement establishing a new framework for transatlantic trade and investment, following the 27 July political deal between Presidents von der Leyen and Trump. The statement sets a 15% maximum “all-inclusive” US tariff rate for most EU exports such as cars, pharmaceuticals, semiconductors and lumber, while products already subject to Most Favoured Nation (MFN) tariffs of 15% or higher will face no extra duties. For cars and car parts, the 15% ceiling will apply in parallel with EU steps to reduce tariffs on US products. From 1 September, certain items including cork and other unavailable natural resources, all aircraft and aircraft parts, generic pharmaceuticals with their ingredients and chemical precursors will only face MFN tariffs under a special regime both sides intend to broaden. The EU and US also committed to cooperate on steel and aluminium overcapacity, secure supply chains and a tariff rate quota solution for EU exports in these sectors. In line with this, the EU suspended its 24 July rebalancing measures on 7 August. However, tensions re-emerged at the end of August when the European Commission dismissed US accusations that the Digital Services Act (DSA) and Digital Markets Act (DMA) unfairly targeted American firms, while President Trump threatened fresh tariffs and sanctions, alleging discrimination against US companies and favouritism towards China. On 28 August, the European Commission presented two proposals to begin implementation of the trade agreement: one to eliminate tariffs on US industrial goods and grant preferential market access for a range of US seafood and non-sensitive agricultural products, and another to prolong the tariff-free treatment of lobster, now including processed lobster. The proposals include a suspension mechanism allowing the EU to suspend the agreement if the US fails to meet its commitments.
OECD starts analysis of possible side-by-side system under Pillar Two
Over the summer, the OECD launched its analysis of the June 2025 agreement between the US and G7 countries on exempting US companies from Pillar Two’s global minimum tax through a possible “side-by-side” (SbS) regime designed to align the US GILTI system with the GloBE rules, subject to Inclusive Framework approval. While delegates broadly welcomed the G7’s commitment to a consensus-based outcome, many raised questions about the system’s design and potential implications. According to media reports, a first discussion paper was circulated by the OECD Secretariat outlining how an Eligible SbS Regime could prevent the same income from being taxed under both GloBE and domestic rules by deactivating the Income Inclusion Rule (IIR) and Undertaxed Profits Rule (UTPR) while still allowing top-up tax domestically. Possible eligibility criteria include comprehensive taxation of in-scope multinationals at or above an agreed minimum rate, taxation of the ultimate parent entity’s share of controlled foreign company income including undistributed earnings, and/or provision of foreign tax credits or equivalent relief for any QDMTT. Implementation options under consideration involve treating SbS regimes as qualified IIRs subject to Inclusive Framework assessment, amending the Model Rules to specify GloBE overrides, or creating a safe harbour that deems zero top-up tax where GloBE is deactivated. The discussion paper was circulated together with two additional documents on simplifying Pillar Two administration through an Effective Tax Rate safe harbour and on adjusting the treatment of substance-based non-refundable tax credits. Delegates were invited to submit written comments on all three proposals by 5 September 2025 ahead of further discussions later in the month, with the first responses reportedly highlighting concerns that the SbS approach could undermine GloBE’s effectiveness, disadvantage non-US companies and restrict national tax sovereignty.
Highlights from August UN Tax Convention negotiation sessions
From 4 to 8 August, UN Member States, civil society groups and other stakeholders gathered at UN Headquarters in New York for the first substantive session of negotiations on a UN Framework Convention on International Tax Cooperation, focusing largely on its core commitments. Sustainable development emerged as a central theme, with debates linking taxation to environmental policy, inequality, gender and human rights. Delegates discussed whether to begin with high-level commitments or first agree on underlying principles, while key issues included the fair allocation of taxing rights, dispute prevention and resolution mechanisms, and stronger administrative cooperation. Most countries sought to postpone technical debates, particularly on cross-border services taxation, until the two planned protocols are developed. Unresolved design questions included whether the convention should resemble the OECD’s Multilateral Instrument or instead adopt the UN Tax Committee’s fast-track model. From 11 to 15 August, the second session shifted to the early protocols. Negotiations on cross-border services taxation examined gross versus net withholding taxes, nexus rules not requiring physical presence, data for verifying service provision and dispute resolution. The discussion on the protocol on dispute prevention and resolution focused on its scope, including whether it should cover all cross-border disputes or only those under the convention, how to address cases without existing treaties and whether to include binding arbitration. Some delegations, including EU Member States, reportedly favoured making the protocols optional to reflect countries’ differing capacities. The scoping phase of both protocols is now complete, with concrete proposals expected at the next sessions scheduled for 10–12 November 2025 in Nairobi, 2–3 February and 6–13 February 2026 in New York. The intergovernmental committee aims to present draft texts of the two protocols and the overall convention to the UN General Assembly in the second half of 2027
European Commission opens call for evidence on its evaluation of the Whistleblower Directive
The European Commission launched on 21 August a call for evidence asking for feedback on its evaluation of the Directive (EU) 2019/1937 on the protection of persons who report breaches of Union law (so-called “Whistleblower Protection Directive”), scheduled for completion by the end of 2026. Transposed into national law by Member States in 2021, the Directive sets minimum EU standards to safeguard individuals who report work-related breaches of EU law that may harm the public interest. The evaluation, required under the Directive itself, will assess whether the rules are functioning as intended and if further measures or amendments are needed, including a possible extension of its scope to additional acts or areas, the Commission says. The assessment will be conducted against the standard evaluation criteria of effectiveness, efficiency, relevance, coherence and EU added value. The call for evidence is open until 18 September 2025, while a separate 12-week online public consultation will be launched later on the Commission’s Have your say portal.
European Commission launches public consultations on CBAM implementing regulations
The European Commission opened on 28 August several public consultations on three implementing regulations concerning the Carbon Border Adjustment Mechanism (CBAM). The first consultation addresses the methodology for the definitive period starting on 1 January 2026. The methodology consists of: - the determination of direct embedded emissions based on actual emissions; - the determination of embedded emissions for electricity; - the determination of indirect embedded emissions; - the default values for goods other than electricity, to be used when embedded emissions are not based on actual emissions. The second public consultation concerns how the Carbon Border Adjustment Mechanism (CBAM) certificates to be surrendered by authorised CBAM declarants must be adjusted to reflect the extent to which EU Emissions Trading System (ETS) allowances are allocated free of charge. Finally, the European Commission is asking for feedback on rules for converting into a corresponding number of CBAM certificates the carbon price paid in a third country for declared embedded emissions, taking into account any form of compensation available in that country resulting in a reduction of the price. These acts are scheduled for adoption in Q4 2025. The three public consultations run until 25 September 2025.
Upcoming FISC Subcommittee activities
The European Parliament’s FISC Subcommittee will resume activities in mid-September with a mission to Nicosia, Cyprus, on 16–17 September, led by FISC Chair MEP Pasquale Tridico. The delegation will meet officials from the Ministry of Finance and Tax Department, parliamentarians, and stakeholders from business, trade unions, academia, and civil society to discuss international tax challenges, including the OECD’s Two-Pillar reform, implementation of EU tax law, anti-abuse measures, exchange of information, simplification of tax systems, competitiveness, incentives and energy taxation. On 23 September from 15:45 to 17:00, the Subcommittee will hold a public hearing on the “Tax implications of the Trump administration’s policies,” examining the impact of recent US measures on EU competitiveness, OECD Pillar Two, potential EU digital services taxes as well as broader effects on international tax cooperation and EU policy responses to protect its interests. Additionally, the Subcommittee plans to contribute to the “28th regime” debate by commissioning a study on the “feasibility of a 28th tax regime in supporting EU competitiveness,” as decided at its 16 July coordinator’s meeting.
