Enhancing Ethics in Tax Advisory: IESBA Code Updates Effective July 2025

The International Ethics Standards Board for Accountants (IESBA) has taken a significant step to reinforce ethical conduct among professional accountants engaged in tax advisory services. The recently updated IESBA Code, effective from 1 July 2025, introduces a new framework that places heightened emphasis on the public interest, while considering the reputation, commercial, and broader economic implications of tax planning arrangements.

Tax planning services are advisory services designed to assist a client, whether an individual or an entity, in planning or structuring the client's affairs in a tax-efficient manner. Examples of such services 
include: 
  • Advising an individual to structure their tax affairs to achieve investment, retirement or estate planning goals.
  • Advising an individual business owner on structuring their ownership and income from the business to minimize their overall taxes.  
  • Advising an entity on structuring its international operations to minimize its overall taxes. 
  • Advising on the structuring of transfer pricing arrangements, taking into account tax related transfer pricing guidelines.
  • Advising on the utilisation of losses in a tax-efficient manner. 
  • Advising an entity on the structuring of its capital distribution strategy in a tax-efficient manner. 
  • Advising an entity on structuring its compensation strategy for senior executives to optimize the tax benefits.  

Tax planning related services

Tax planning related services include:
  • Assisting the client in resolving a dispute with the tax authority on the tax planning arrangement. 
  • Representing the client in administrative or court proceedings regarding the tax planning arrangement. 
  • Implementing the tax planning arrangement for the client. 
  • Advising the client on an acquisition where the valuation depends on the tax planning arrangement established by the target. 
  • Advising the client on estate planning based on a tax planning arrangement established for the client’s business.

Basis for recommending or otherwise advising on a Tax Planning arrangement

The standard requires that professionals ‘establish a credible basis’ for advising on a potential tax planning arrangement. This is to ensure that when pursuing a proposed tax planning arrangement, the professional accountant and client are both comfortable there is a legitimate base for it. The determination of whether there is a credible basis involves the exercise of professional judgment by the professional accountant.

This requirement does not preclude the professional accountant from being engaged by the client, or otherwise assisting the client, to remediate or rectify a tax planning arrangement which lacks a credible basis. Such type of service is a related service as described in paragraphs and includes, for example:

 
  • Assisting the client to restructure a tax planning arrangement to achieve a credible basis as part of a tax dispute resolution service.  
  • Agreeing with the client appropriate changes to the tax planning arrangement to achieve a credible basis as part of representing the client in administrative or court proceedings.
Examples of actions that a professional accountant might take to determine that there is a credible basis in relation to a particular tax planning arrangement include:
  • Reviewing the relevant facts and circumstances, including the economic purpose and substance of the arrangement.  
  • Assessing the reasonableness of any assumptions. 
  • Reviewing the relevant tax legislation. 
  • Reviewing legislative proceedings that discuss the intent of the relevant tax legislation. 
  • Reviewing relevant literature such as court decisions, professional or industry journals, and tax authority rulings or guidance.  
  • Considering whether the basis used for the proposed arrangement is an established practice that has not been challenged by the relevant tax authorities.  
  • Considering how likely the proposed arrangement would be accepted by the relevant tax authorities if all the relevant facts and circumstances were disclosed.  
  • Consulting with legal counsel or other experts within or outside the professional accountant’s firm regarding what a reasonable interpretation of the relevant laws and regulations might be.  
  • Consulting with the relevant tax authorities, where applicable.

Circumstances of uncertainty

In determining whether there is a credible basis for the tax planning arrangement, a professional accountant might encounter circumstances giving rise to uncertainty as to whether a proposed tax planning arrangement will be in compliance with the relevant tax laws and regulations. Such uncertainty makes it more challenging for the accountant to determine that there is a credible basis in laws and regulations for the tax planning arrangement and might, therefore, create threats to compliance with the fundamental principles.
  • Difficulty in establishing an adequate factual basis. 
  • Difficulty in establishing an adequate basis of assumptions. 
  • Lack of clarity in the tax laws and regulations and their interpretation
  • Lack of clarity regarding the economic purpose and substance of the tax planning arrangement. 
  • Lack of clarity about the ultimate beneficiaries of the tax planning arrangement.

Potential threats arising from providing a Tax planning service

Providing a tax planning service to a client might create a self-interest, self-review, 
advocacy or intimidation threat (Ref IESBA Code 380.19 A1). For example:
  • Self-interest 
  • Self-review 
  • Advocacy 
  • Familiarity 
  • Intimidation

Communication of basis of the Tax planning recommendation or advice

A professional accountant shall explain the basis on which the accountant recommended or otherwise advised on a tax planning arrangement to the client.

Disagreement with the client

If the professional accountant disagrees that a tax planning arrangement that a client would like to pursue has a credible basis, the accountant shall:
 
  • Inform the client of the basis of the accountant’s assessment; 
  • Communicate to the client the potential consequences of pursuing the arrangement; and 
  • Advise the client not to pursue the arrangement

Documentation

When providing a tax planning service, a professional accountant is encouraged to document on a timely basis:
  • The purpose, circumstances and substance of the tax planning arrangement.  
  • The identity of the ultimate beneficiaries.  
  • The nature of any uncertainties.  
  • The accountant’s analysis, the courses of action considered, the judgments made, and the conclusions reached in advising the client on the tax planning arrangement.  
  • The results of discussions with the client and other parties.  
  • The client’s response to the accountant’s advice.
Conclusion
The 2025 updates to the IESBA Code represent a critical advancement in aligning tax advisory practices with ethical standards and societal expectations. Professional accountants must rise to the occasion by exercising informed judgment, maintaining transparency, and ensuring that their advice not only serves the client's interests but also upholds the integrity of the profession.