INCREASE IN CORPORATE TAXATION IN EUROPE

In 2026, Europe is experiencing a combination of two key factors that affect the tax burden for corporations:
– first, the implementation of the global minimum tax rate (Pillar Two) and the inherent consequences of its application;
– second, national tax decisions of individual states that directly change or revise tax rates and tax bases in 2026.
Together, this creates a new reality for multinational groups and local companies, forcing them to reconsider tax planning, reporting, and cash flow.

Why is 2026 important?
While countries have been gradually implementing the OECD rules regarding Pillar Two, the end of 2025 and the beginning of 2026 became a critical period — many jurisdictions have already adopted or are preparing legislative changes that effectively “increase” the minimum tax base for large MNE groups (threshold ≈ €750 million). Pillar Two introduces a global minimum effective tax rate of 15%, and the mechanisms (IIR, UTPR, and QDMTT) create the basis for collecting a “top-up” tax where the actual ETR is lower than 15%. This changes the approach to profit location and to the calculation of the effective tax rate in each jurisdiction.

Pillar Two: short and clear
● Essence: Pillar Two (GloBE) establishes a global minimum effective tax rate (ETR) of 15% for MNEs with consolidated revenue ≥ €750 million; the mechanisms IIR/UTPR/QDMTT are applied to collect the “top-up” tax.
● Implementation status: many European countries are already mastering or have adopted the rules of transnational implementation; for an accurate action plan in each jurisdiction, it is recommended to consult PwC / specialized trackers and local explanations.

Global minimum tax rate (Pillar Two): practical consequences
● Increase in the real tax rate for large groups. Even if the statutory rate does not change, the application of top-up mechanisms ensures bringing the effective tax rate to 15% in those jurisdictions where it was artificially low. This means additional tax liabilities for MNEs without changing the local statutory rate.
● Growth in administration and reporting volumes. Compliance with Pillar Two requirements requires expanded reporting, accounting, ETR calculations, and specific reporting (including documents reflecting the allocation of profits by jurisdiction).
● Pillar Two compliance review. Large multinational groups must immediately assess whether they fall under the threshold (€750 million) and what top-up risks exist by jurisdiction.
● Rebalancing of profit location structures. With the existence of a minimum rate of 15%, demand for “low-tax” structures decreases; businesses may revise the model for placing IP, financial centers, or intragroup payments.
● Increase in administration and compliance costs. Additional resources are required to calculate effective rates, XML reporting, internal documentation, and external audit.
● Sectoral risks. Industries with specific increases (for example, banks in Poland) must revise business models, margins, and pricing policy.

Examples of specific national changes for 2026

Estonia
Estonia adopted changes that include an increase in the corporate tax rate to 24% from 2026 (together with other changes — increases in personal income tax and the standard VAT rate earlier). This is a structural change aimed at stabilizing public finances and financing the defense budget. For Ukrainian/European expat groups and holdings, this means the need to check how the tax burden on local operations and dividend distribution will change.

Poland
Poland adopted a gradual increase in the corporate tax rate for banks: in certain legislative acts, an increase from 19% to 30% for banks is provided from January 1, 2026, with a gradual reduction in subsequent years. This is an example of targeted sectoral policy that differs from the general corporate rate. For financial institutions and investors, this is a significant blow to sector profitability.

United Kingdom
In the UK, certain budget policy measures for 2026 affect the taxation of enterprises (for example, adjustment of rules regarding writing-down allowances for corporations with changes to the date of application of reliefs and first-year allowances). This affects the tax base and capital investment incentives more than the statutory rate.

Romania
In 2026, Romania provides for an increase in the dividend tax rate — from 10% to 16% (will be applied to gross dividends, with certain transitional rules). This is part of a package of fiscal and budgetary changes published in government reviews in 2025.

France
Financial framework 2026: the draft budget for 2026 provides for a number of tax measures, including changes to Pillar Two administrative rules, new contributions for large groups, etc.

Italy
The package of budget decisions for 2026 contains targeted measures, including taxes on financial transactions and other levies; specific provisions require monitoring during the passage of the Budget Law.

Netherlands
The tax plan for 2026 reflected changes in tax credits and social contributions; the general CIT rates did not undergo radical increases in the basic plan.

Germany
The package of stimulus / investment measures contains adjustments to depreciation and incentives, as well as plans to preserve the attractiveness of the location for business; this is more a “reorientation” than a direct increase in the CIT rate in 2026.

Overall impact on business and recommendations

1. Revision of dividend distribution policies and the ratio of internal financing / dividends, especially in jurisdictions where dividend tax increases (for example, Romania).
2. Modeling of Pillar Two (ETR models) for large groups: calculate possible “top-up” payments and cash impact in each jurisdiction. Use PwC / OECD trackers and local guides for accuracy.
3. Sectoral analysis: if the group has business in the banking sector in Poland — plan scenarios with 30% CIT in 2026; if present in Estonia — check the impact of defense / temporary tax elements.
4. Updating transfer pricing and internal documents: additional reporting requirements and enhanced reporting (Pillar Two, CbCR) require updating TP documentation.
5. Budgeting and cash management: expect increased cash outflows / compliance costs in 2026; recalculation of forecast taxes and cash reserves is critically important.