Global tax controversy newsletter – April 2026

April 2026

The first quarter of 2026 has seen significant activity across global tax controversy, with legislative reforms, regulatory consultations, and enforcement actions shaping the risk environment for multinationals. In this edition, we highlight key developments and themes across jurisdictions to help multinationals navigate the evolving landscape. We also look ahead to major reforms and pending litigation that will impact taxpayer strategy in the coming months.

Download PDF [PDF 647KB]

1.  Legislative Developments and Consultations

This quarter, two significant regulatory developments warrant close attention from multinational taxpayers. Australia’s proposed foreign resident capital gains tax (CGT) reforms and the UK’s consultation on extending the Uncertain Tax Treatment (UTT) regime both signal an increasingly assertive approach by tax authorities to broaden their reach and enhance transparency. 

In a critical development for foreign investors in Australian assets, the Australian Government has released exposure draft legislation in connection with the foreign resident CGT reforms originally announced in the 2024/25 Budget. The legislation, if enacted in the current form, would broaden the scope of assets that fall within Australia's foreign resident CGT regime. It would do so by broadening (with retrospective effect) the meaning of the term "real property" within the regime to capture assets which did not previously satisfy that term under the existing law. This includes, among other things, structures or thing(s) "fixed or installed" on land, and licences, leases and contractual rights over such thing(s). The proposed provisions disregard technical matters, such as the operation of State and Territory severance provisions or the common law status of an asset as a fixture or chattel. The exposure draft proposes to enact this expanded meaning of "real property" into law despite it being rejected in two separate Australian Federal Court proceedings late last year. 

Most surprising to those monitoring this space is the proposed retrospective application of some of the provisions as far back as 20 years (to 12 December 2006) without grandfathering or transitional provisions. Such retrospective application will impact many taxpayers, including those currently in dispute with the ATO through the Court system and formal audits. The scope of the retrospective application is unprecedented, and has been described by a leading tax Counsel in Australia as "outrageous". From an enforcement perspective, it is not known whether the ATO will disturb historical disposals by foreign resident investors, which presents a significant tax liability risk.

The suite of proposed reforms are extensive, and further include as follows:

• The exposure draft introduces a 365-day principal asset test, which will test whether more than 50% of the underlying property was not taxable Australian real property (TARP) at any point during the 365 days prior to the disposal (rather than the current approach of testing at just before the CGT event happens).
• The broadened definitions of "real property" and TARP have not been adopted for the managed investment trust (MIT) rules, so we anticipate tension in the interpretation of the rules for MITs.
• The reforms may bypass certain aspects of Australia's double-tax agreements (DTAs) with other jurisdictions, to the extent the relevant treaty contains an alienation of real property article. If a DTA provides more favourable outcomes than Australia's domestic tax law, the new changes appear to prevent foreign resident investors from accessing that more favourable treatment.
• In certain conditions, the proposed reforms will require foreign resident vendors to notify the ATO of a proposed sale worth A$50m or more. This means purchasers will need to obtain evidence from the vendor's notification to the ATO as part of the due diligence process and is likely to extend parties' transaction timelines.

The Australian Taxation Office (ATO) updated its website (16 April 2026) on this issue to state:

• "The draft law confirms, with retrospective effect, the ATO’s long-standing view and compliance approach that the term 'real property' is not limited to its narrow, technical legal meaning. This aligns with how the ATO has administered the law. If the law is enacted, the ATO would not expect to change its existing administrative approach.
• In practice, the ATO would continue its current compliance approach for disposals that:
  • are currently subject to review
  • have occurred in the past 4 years.
• Generally, they do not conduct reviews on disposals older than 4 years, even if the period of review is still theoretically open. However, if an older case came to their notice for other reasons, they may review it. For example, if a taxpayer applied for a ruling that involved the amended law, they would consider any retrospective effects.
• Similarly, the ATO will not seek to re-open settlements that the parties intended to be final, except in very rare exceptions.
• Therefore, the ATO does not expect the retrospective changes to the law, if they are  enacted, to affect many taxpayers. The changes will mainly clarify the law for those taxpayers already subject to review or who would normally be subject to review."

However, considering many non-residents taxpayer may have disregarded capital gains under the original provisions and not filed an Australian income tax return, this will impact the application of statutory time limits.

A separate exposure draft was also released providing for a CGT concession for foreign residents investing in Australian renewable energy assets. The proposed amendments would introduce a 50% CGT discount for a limited class of foreign resident corporate entities and trustees (not individuals) disposing of Australian renewable energy assets or qualifying indirect interests in such assets. The discount is designed as a transitional measure to assist foreign investors in the renewables sector to price CGT into their investment models. The concession is only proposed to be offered until 1 July 2030.

The consultation period closed at the end of April, which is an unusually short consultation timeframe for reforms of this scale. Foreign investors in Australia (those with current investments and those considering investments) are encouraged to monitor this space over the next few weeks. The Ashurst tax team in Australia has made a submission on the proposed changes to the Australian Government.

UK UTT Regime: Proposed Extensions Under Consultation

The UK Government is currently consulting on proposed extensions to the UTT regime. First introduced in 2022, the UTT currently requires large businesses to inform HM Revenue and Customs (HMRC) of when they have taken a tax position that is “uncertain” and a tax advantage arises (i.e. there is a tax benefit in adopting an interpretation the taxpayer has taken of the relevant legislation versus HMRC’s interpretation) exceeding £5 million. The UTT aims to bring tax risks arising from legal interpretation uncertainties to HMRC’s attention, so they may be “discussed and resolved sooner”. 

The consultation proposes to extend the UTT regime by widening the scope of UTT to additional taxes (stamp duty land tax (SDLT), national insurance contributions (NICs), construction industry scheme (CIS) obligations, inheritance tax (IHT) and CGT), bringing wealthy individuals and trusts within scope (in addition to companies and partnerships already in scope), and introducing an additional notification trigger.

The additional trigger would require all taxpayers (whether companies, partnerships, individuals or trusts) to notify where (i) HMRC’s position is not known and (ii) there is more than one credible legal interpretation. The consultation summary notes that requiring notification in these circumstances “will help close the tax gap and increase certainty for the taxpayer”.

However, this is a significant extension, as currently notification is only required where the business has taken a position that is contrary to HMRC’s known position (as published in guidance or in direct dealings with HMRC) or the business has made provision in its accounts to reflect the probability that a different tax treatment will be applied. The threshold for a “credible interpretation” could be unworkably low, particularly given that HMRC’s position is regularly unknown (e.g. in circumstances where there is no HMRC guidance for new or amended legislation or where guidance is significantly outdated, and/or fails to adequately address a taxpayer’s position).

The consultation closes on 4 June 2026 and the Government is expected to publish its response later in summer 2026. If introduced, any changes would be included in the next Finance Bill and apply to returns filed after 1 April the following tax year.

If introduced as proposed, these reforms are likely to have a significant impact on wealthy individuals / high value trusts and the breadth of the new trigger will require notification in a far broader range of scenarios, increasing the burden on large businesses. Further, we note that insurers may seek higher premiums in circumstances where the relevant transaction has been notified to HMRC, which is more likely to be the case as a result of the expanded regime.

2.  Tax Authority Enforcement and Investigations

Tax authorities continue to intensify their enforcement efforts, with a particular focus on cross-border arrangements, transfer pricing, and the real estate sector. This quarter, we highlight notable developments from Italy, Spain, and Australia that illustrate the breadth and complexity of current enforcement activity.

Criminal Tax Fraud Investigation in Italian Real Estate Sector

In Italy, we have assisted an Italian real estate company owned by a Korean fund in connection with a criminal investigation regarding alleged tax fraud that could trigger corporate criminal liability under Italian law. The case concerns a land acquisition to create a logistics hub, where the Public Prosecutor alleges the purchase price of the land was overestimated, leading to inflated costs and reduced taxable income through allegedly fraudulent tax filings. The Public Prosecutor suspects that the difference was diverted through a related-party transaction involving fictitious services provision.

While no tax audit has yet been started against the real estate company, ongoing investigations involving counterparties may prompt action by the tax authorities before the statute of limitations expires. Depending on the tax authorities’ approach (e.g. disallowance of costs/VAT deductions or confirmation of the existence of a fraudulent conduct) potential tax exposure against the real estate company, including interests and penalties, could range significantly (e.g. from approximately EUR 9 million to EUR 46 million). 

On 12 March 2026 the Spanish Tax Authorities published their Audit Plan for 2026 which contains the general guidelines of the tax audits to be carried out in the current year. New priorities for the Spanish tax authorities for 2026 include emerging sectors such as digital economy, cryptocurrency, neobanks, e-commerce and influencers as well as Pillar II (Global Minimum Tax), in order to ensure that the 15% global minimum tax under Pillar II is effectively levied on large corporate groups.

The main actions planned by the Spanish Tax Administration Agency in the field of international taxation include certain areas that we highlighted in our January 2026 Global tax controversy newsletter, such as transfer pricing; beneficial ownership of dividends, interest and royalties; instrumental companies and tax residency shopping; and VAT fraudulent structures. It should also be noted that the Spanish Tax authorities are paying particular attention to the real estate sector, where the authorities plan reinforced controls over REITs, related-party valuations, tax-driven structures aimed at reducing tax payments, and deductibility of financial expenses.

The ATO has released its Decision Impact Statement (DIS) on the High Court of Australia’s decision in Commissioner of Taxation v PepsiCo Inc & Anor [2025] HCA 30 (PepsiCo). The purpose of the DIS is to provides the ATO's view on the implications of the decision, including on related public advice or guidance.

In PepsiCo, the High Court accepted that PepsiCo’s arrangements did not result in Royalty Withholding Tax (RWT) and, further, that Diverted Profits Tax (DPT) did not apply. The DIS emphasises that the ATO will continue to take a broad approach to assessing RWT and DPT, and that the PepsiCo decision is largely confined to its particular facts. Taxpayers with cross-border arrangements (including intra-group intellectual property (IP) licences) should expect continued scrutiny of those arrangements.

• On RWT, the DIS states that the ATO will rigorously “understand and, if necessary, test, the economic fundamentals of arrangements that involve the provision of IP but where no royalty is recognised”. Taxpayers can expect this approach to extend beyond the value of IP rights to the values of other things (goods, services or rights) being exchanged as part of the arrangement.
• On DPT, the High Court determined that no tax benefit arose for PepsiCo, since there was no reasonable alternative postulate to the scheme in question. The ATO’s view in the DIS is that the PepsiCo decision is confined to its unique facts, and that the decision has limited implications for the application of DPT and GAAR. It will therefore remain critical for taxpayers to properly evidence their position before entering into pricing arrangements. Taxpayers should proactively document their pricing arrangements, consider tax risk in contractual arrangements, and consider the implications of related and non-related party dealings.