Tax Bytes: Week of December 8, 2025

Tax developments

IRS previews proposed guidance on repeal of one-month deferral election

In furtherance of its efforts to provide guidance related to the implementation of tax law changes that are part of the One Big Beautiful Bill Act of 2025, on November 25, 2025, the IRS issued Notice 2025-72 (Notice). The Notice previews proposed regulations that will provide guidance on how taxes paid by foreign corporations that are impacted by the repeal of the one-month deferral election under section 898(c)(2) of the Internal Revenue Code should be allocated for foreign tax credit purposes. Additional proposed regulations will modify a transition rule under existing section 987 regulations to mitigate the impact of the repeal of the one-month deferral election.

The IRS and Treasury intend to issue proposed regulations under sections 898 and 987 regarding the rules described in the Notice.

Read our full alert here.

Treasury and IRS issue final regulations on the stock repurchase excise tax: Key changes for M&A and foreign affiliates

The IRS and Treasury have issued final regulations (TD 10037) that eliminate stock repurchase excise tax exposure for M&A transactions, take-privates, and leveraged buyouts – a major win for deal structuring. The rules also provide critical relief for preferred stock redemptions and streamline compliance for employee equity programs, while tightening netting rules for foreign corporations. Generally, the final regulations are applicable to repurchases after December 31, 2022, and issuances/provisions during tax years ending after December 31, 2022. The final rules provide welcome clarity on computation mechanics, statutory exceptions, netting rules, and special foreign corporation provisions and make significant changes from the proposed regulations that will affect M&A structuring, capital planning, and employee equity programs.

Read our full alert here.

We can work it out: OECD adopts 2025 Update to the Model Tax Convention

On November 18, 2025, the OECD adopted the “2025 Update to the OECD Model Tax Convention,” which includes broad-ranging updates to the OECD model treaty.

The most significant updates to the commentary concern Articles 5, 9, and 26 – provisions that address permanent establishment, transfer pricing, and exchange of information, respectively. These revisions represent a fundamental recalibration of international tax principles in response to contemporary challenges posed by an increasingly mobile workforce and digitalized global economy.

The changes to the commentary provide critical guidance on remote work arrangements and permanent establishment risk, clarify the interaction between treaty-based profit allocation and domestic tax laws, and expand the scope and utility of information exchange for tax administration purposes. Taxpayers and tax authorities alike will need to carefully assess the implications of these updates for cross-border operations, transfer pricing policies, and tax controversy strategies.

Read our full alert here.

Recent Eversheds Sutherland Tax insights

UK Autumn Budget – November 2025

Key OECD changes to Model Tax Convention on remote work and natural resources

The EU’s Digital VAT Reform: Preparing for Mandatory E-Invoicing

Swiss Tax – The One Pager