Editorial Team – [2026] 183 taxmann.com 580 (Article)
World Tax News provides a weekly snippet of tax news from around the globe. Here is a glimpse of the tax happening in the world this week:
1. European Commission Seeks Input on Simplifying the EU Direct Taxation Framework
The European Commission has issued a call for evidence inviting stakeholders to submit their views on measures to simplify EU law and reduce regulatory burdens for businesses. The initiative seeks to enhance competitiveness and improve the effectiveness of the EU corporate taxation framework, including rules on parent–subsidiary arrangements, interest and royalties, mergers, anti-tax avoidance, and dispute-resolution mechanisms. Comments may be submitted until 16 March 2026.
The initiative’s overarching objective is to simplify the existing EU legal framework on direct taxation and strengthen competitiveness within the internal market, without compromising the key policy goals of the relevant Directives. These goals include eliminating double taxation of cross-border profits, interest and royalty payments; ensuring tax neutrality in cross-border corporate reorganisations; safeguarding the internal market from aggressive tax planning; and facilitating effective resolution of cross-border tax disputes. To achieve this, the initiative proposes:
- reducing unnecessary reporting and compliance burdens;
- removing outdated and overlapping tax provisions;
- simplifying tax legislation to improve internal market competitiveness;
- clarifying concepts within the tax framework; and
- streamlining and enhancing the application of tax rules, procedures, and reporting requirements.
The policy options under consideration may entail legislative amendments to the following instruments:
(a) Controlled Foreign Company (CFC) Rules under the Anti-Tax Avoidance Directive (ATAD) – to remove overlaps with Pillar Two and address inconsistencies arising from varied implementation choices across Member States.
(b) Interest Limitation Rules under ATAD – to mitigate procyclical effects, account for inflation, and consider concerns of sectors with structurally high but legitimate leverage, as well as the needs of small and medium enterprises, including possible rule simplification.
(c) Scope of the Parent-Subsidiary Directive, Interest and Royalty Directive, and Tax Merger Directive – to enhance the effectiveness of these Directives and, consequently, the functioning of the internal market.
(d) Procedural Requirements for Accessing Benefits under the Parent-Subsidiary and Interest and Royalty Directives – to reduce administrative and compliance burdens for businesses and improve the overall operation of these frameworks.
(e) Targeted Amendments to the Tax Dispute Resolution Mechanisms Directive – particularly concerning the admission stage, to remove ambiguities, promote consistent application across Member States, and facilitate usability for both taxpayers and tax authorities.
Source – Consultation
2. Tax Authority of Chile confirms no foreign tax credit where foreign operations result in a loss
The Chilean tax authority, Servicio de Impuestos Internos (SII), has issued Letter Ruling No. 286 dated 4 February 2026 addressing the availability of a foreign tax credit where a taxpayer’s net foreign-source income is zero or negative (i.e., a loss). The ruling responds to a taxpayer’s request seeking (i) allowance of a foreign tax credit in such circumstances and (ii) a refund of excess foreign tax paid due to non-utilisation of the credit.
In the ruling, the SII reiterates consistent with the Tax Code and its interpretative guidance in Circular No. 31 of 2021 that a foreign tax credit is available only in respect of foreign income that is also taxable in Chile. The credit may be set off solely against First Category Tax (Impuesto de Primera Categoría), Second Category Tax (Impuesto Único de Segunda Categoría), Complementary Global Tax (Impuesto Global Complementario), and Additional Tax (Impuesto Adicional). A prerequisite for claiming the credit is that the relevant foreign income must be subject to double taxation.
Accordingly, the SII clarifies that no foreign tax credit can arise where the taxpayer’s determined net foreign income is nil or reflects a foreign loss, since in such cases there is no taxable income in Chile that could give rise to double taxation. The authority further confirms that no refund of foreign tax paid is permissible in these circumstances.
Source – Servicio de Impuestos Internos (SII)
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