[World Tax News] UK Introduces Mandatory Tax Exemption for Foreign PE and More

Editorial Team – [2026] 186 taxmann.com 1146 (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. UK Introduces Mandatory Tax Exemption for Foreign PE

The UK Government announced, on 21 May, significant changes to the taxation of foreign permanent establishments (PEs) of UK-resident companies. Under the revised regime, profits and losses attributable to foreign PEs will generally be exempt from UK taxation on a mandatory basis for accounting periods commencing on or after 1 January 2027. For UK-resident companies carrying on oil and gas exploration or extraction activities through foreign PEs, the new rules will take effect from 1 September 2026.

1.1 Existing Framework

A UK-resident company conducting business overseas may operate either through a foreign subsidiary or a foreign PE. Under the current rules, profits of a foreign PE are subject to UK Corporation Tax (CT), unless the company elects for the foreign PE exemption regime. Once such an election is made, future PE profits are excluded from UK CT, and future PE losses cannot be used to offset UK taxable profits. The election is irrevocable and is subject to transitional and anti-diversion provisions.

1.2 Rationale for the Change

Where no exemption election is made, losses incurred by foreign PEs may be used to reduce the UK taxable profits of the company or its group. However, corresponding foreign profits may not always be brought within the UK tax net due to factors such as double taxation relief or restructuring arrangements involving the incorporation of profitable foreign PE businesses. Consequently, multinational groups may obtain UK tax relief for overseas losses without a corresponding UK tax charge on foreign profits.

The Government considers this outcome particularly significant in sectors such as oil and gas, where substantial foreign losses or capital allowances can materially reduce UK Corporation Tax liabilities. The proposed changes are intended to prevent such asymmetries and align the UK regime with international practice.

1.3 Proposed Amendments

To address these concerns, the Government proposes to make the foreign PE exemption regime mandatory. Key features of the new regime include:

Mandatory exemption of foreign PE profits and losses for accounting periods beginning on or after 1 January 2027.
Earlier implementation from 1 September 2026 for UK-resident companies engaged in foreign oil and gas exploration or extraction activities.
Restriction on the use of pre-exemption foreign PE losses and related tax attributes to relieve UK profits arising after the effective date.
Repeal of provisions taxing profits of exempt foreign PEs arising from a “total opening negative amount”.
Introduction of anti-avoidance measures to counter arrangements designed to accelerate the utilisation of losses or otherwise mitigate the impact of the new rules.

The revised regime will prevent foreign PE losses from being used to shelter UK profits while continuing to exempt foreign PE profits from UK taxation. According to the Government, the changes are intended to preserve a simple and internationally competitive framework for UK businesses expanding into overseas markets.

Source – gov.uk

2. Hungary Expands Form 24GLBADO for Final Global Minimum Tax Reporting and Payment

Hungary’s National Tax and Customs Administration (NAV) has released an expanded version of Form 24GLBADO. While the original form, introduced in 2025, was intended for the declaration and payment of advance Qualified Domestic Minimum Top-up Tax (QDMTT), the revised form now also facilitates the declaration and payment of final QDMTT liabilities and top-up tax under the Income Inclusion Rule (IIR). In addition, a new section has been incorporated for corrections and certain other revisions.

Under Hungary’s global minimum tax framework, returns, data reporting, and payment of supplementary taxes must generally be completed within 15 months from the end of the relevant tax year. However, the 2024 tax year has been designated as a transitional year, extending the compliance deadline to 18 months from the end of the tax year. Accordingly, taxpayers following the calendar year must submit the required return, data report, and tax payment by 30 June 2026.

To assist taxpayers in meeting these obligations, NAV has published the draft expanded Form 24GLBADO, accompanying completion guidelines, and an XML preparation document. The design of the form reflects the data reporting requirements under DAC9, which must also be completed by 30 June 2026 and are governed by Ministry of Finance Decree 46/2025. Given the overlap between DAC9 reporting and the tax return requirements, the settlement return sections have been streamlined to include only the mandatory information prescribed under Ministry of Finance Decree 4/2026 and Act LXXXIV of 2023.

The expanded return may continue to be filed through the ONYA platform. NAV has also indicated that the form layout, completion instructions, and field identifiers may be revised further before finalisation.

Source – Nav.gov.hu