Case Studies
Case Study: How a Small European Manufacturer Leveraged New R&D Expensing Rules
A hypothetical SME uses new full-expensing and withholding tax exemptions to reshape its R&D investment and cash flow after EU reforms.
By NomadicTax Research Team • 6 min read • August 18, 2026
## Setup: GreenTech Components Ltd.
GreenTech Components Ltd is a small manufacturer headquartered in Austria. It produces high-precision renewable energy components and has plans to establish an R&D facility in Hungary. Historically, it purchased prototypes and tooling that were capitalised and depreciated over many years, with cross-border royalties paid between group entities incurring withholding tax.
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## Applying the New Omnibus Measures
### Full Expensing for R&D Assets
Under the proposed Omnibus Directive, GreenTech can **fully expense machinery and prototyping assets used in R&D immediately**. This gives an upfront tax saving, improving cash flow and reducing taxable profits in early years. Without that rule, depreciation over 5-10 years would delay the benefit.
### Withholding Tax Exemptions
Before: Hungary subsidiary paid royalties to Austrian parent and deducted withholding tax in Hungary. After: with the extension of the Parent-Subsidiary Directive to pension institutions and removal of withholding taxes on cross-border payments between EU companies, GreenTech avoids that withholding. Cash-flow improves, and administrative work decreases.
### Simplified CFC & ATAD Rules
GreenTech had set up a branch in a lower tax jurisdiction outside EU, applying ATAD CFC rules and overlapping Pillar Two surcharges. Under the Omnibus, with greater harmonisation, some of the reporting complexity and duplication is reduced, bringing legal certainty and lower compliance costs.
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## Financial Impact (Estimate)
- Immediate expensing of €500,000 in R&D assets: Austrian parent saves ~25% corporate tax—€125,000 in tax saved in year one instead of spread over 5 years (would have accrued ~€50,000/year under depreciation).
- Withholding tax avoidance on royalties saving ~10% on flows, improving net cash flows.
- Reduced compliance costs: GreenTech expects saving thousands of hours of work and tens of thousands of euros in advisory fees thanks to DAC Recast reducing duplicate reports.
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## Key Takeaways and Strategies
- SMEs should assess current capex plans to accelerate investment before the law takes effect.
- Flow of royalties or interest should be reviewed—some group payments will become tax-free.
- For cross-border operations, clarity on CFC rules tied to Pillar Two avoids surprises in global minimum tax regimes.
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## Conclusion
With thoughtful planning, small manufacturers like GreenTech can turn EU tax reforms into tangible cash savings, growth opportunities, and streamlined compliance. The Omnibus and DAC Recast present one of the biggest shifts in EU tax regulation in years—leaning toward real-world opportunities if you move early.