Tax Bytes: Week of June 30, 2025

Tax developments

Impact of US and G7 Agreement on Pillar 2 

On Friday, June 27, 2025, US Treasury Secretary Bessent announced a deal had been reached with the G7 countries such that “OECD Pillar 2 taxes will not apply to US companies,” and indicated that the parties will work to implement the agreement across the OECD jurisdictions “in coming weeks and months.” Although the specifics of the deal are still being worked out, the announcement from the G7 references a “proposed side-by-side solution [is expected] under which US parented groups would be exempt from the Income Inclusion Rule (IIR) and Undertaxed Profits Rule (UTPR) in recognition of the existing US minimum tax rules.” 

The US Senate responded by removing proposed section 899, known as the "revenge tax," from the budget reconciliation bill, the "One Big Beautiful Bill" Act (OB3), which the Senate passed on July 1, 2025. Read our full alert here.

Canada’s DST Withdrawal and G7 Members’ Response 

Canada, a G7 member, announced that it would rescind its 3% digital services tax (DST) in anticipation of a mutually beneficial comprehensive trade agreement with the United States. The move was intended to rekindle economic and security discussions and reach an agreement by July 21. Digital services taxes have been targeted by the Administration and were part of proposed section 899 in the OBBBA, before it was removed from the legislation as passed by the Senate after an agreement on Pillar 2 taxes was reached with the G7.

Although Canada announced it would rescind its DSTs, the UK and France have indicated no intention to eliminate their DSTs, and there are ongoing discussions in the EU regarding the potential for an EU DST.

IRS re-commits to pre-filing agreements

On June 17, 2025, the IRS announced improvements to its pre-filing agreement program, which are meant to offer greater certainty to taxpayers, as well as to encourage voluntary compliance and curtail costly examinations for both the taxpayer and the government. The program aims to enable taxpayers and the IRS to resolve issues, which would likely appear in a post-filing examination, before the taxpayer’s return is filed.

Read our full alert here. 

Recent Eversheds Sutherland Tax insights

New UK policy for VAT recovery on pension fund investment services