What the EU Proposes in Its Tax Simplification Package
On 24 June 2026, the European Commission unveiled a sweeping Tax Simplification Package comprising two major legislative proposals: the Direct Taxation Omnibus Directive and a Recast Directive on Administrative Cooperation (DAC). These aim to simplify EU direct tax rules, reduce compliance burdens, and enhance competitiveness across the Single Market. (taxation-customs.ec.europa.eu) Key measures include:
- Abolition of withholding taxes on cross-border payments (dividends, interest, royalties) between EU companies. (taxation-customs.ec.europa.eu)
- Expanding the Tax Merger Directive to include all corporate reorganisations under EU company law (mergers, divisions, asset transfers) to be tax-neutral. (taxation-customs.ec.europa.eu)
- Recasting DAC directives into a single instrument for clearer, simpler reporting and removing duplicate or low-value obligations. (taxation-customs.ec.europa.eu)
- Increase thresholds and remove reporting duties for millions of private sellers and for certain low-risk cross-border arrangements. (ec.europa.eu)
Implications for Multinational Groups and Businesses
- Lowered barriers to remit profits, interest, royalties: Without withholding tax, EU subsidiaries transfer internal payments more efficiently.
- Cross-border restructurings made easier: Tax-neutral reorganisations reduce tax friction when reorganising group structures across member states.
- Reduced reporting burden: The DAC recast will cut unnecessary red tape; fewer notifications, fewer low-risk filings; huge relief especially for SMEs and e-commerce sellers.
- Greater legal certainty: Codification of multiple directives provides clearer rules and reduces ambiguity.
How to Prepare
- Review internal payment flows to determine future withholding positions on dividends, interest, royalties among group companies.
- Audit potential reorganisations: Check whether proposed changes to company law could allow or affect upcoming strategic restructurings.
- Track thresholds and notification requirements especially in online commerce and DAC reporting. If selling goods across borders or receiving royalties, know whether you’re subject to new rules.
- Stay updated through national transpositions: the directives require EU member states to enact domestic laws to align with the new package—it may vary across countries.
Example Scenario
An EU-based tech group has entities in Germany and Spain. Under current rules, Spain withholds 15% on royalties paid to its German sister. Under the new omnibus rules, withstood withholding should be abolished. Also, if the group wants to split a business line into a new entity via a division (recognized under company law), they may do so without triggering immediate tax recognition.
Key Insights and Actionable Points
- These proposals are medium-to-high impact for any non-U.S. multinational with structures in the EU—particularly those doing cross-border payments, holding IP, or engaged in group reorganisations.
- Timing is critical: once the directives are adopted and then transposed, businesses should act to maximise benefits under old rules if needed.
- Tax-efficient design should now assume no withholding within the EU as base case.
- The removal of low-value and duplicative reporting will particularly help SMEs and digital platforms.
Author: NomadicTax Research Team