Compliance
Compliance and Reporting Shifts in the EU Tax Simplification Package for Multinationals
The EU’s new tax simplification proposals abolish withholding taxes within the single market and streamline cross-border reporting—crucial compliance changes for global groups operating in the EU.
By NomadicTax Research Team • 5-8 min read • August 19, 2026
## 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](https://taxation-customs.ec.europa.eu/news/european-commission-proposes-landmark-tax-simplification-package-streamline-compliance-and-boost-2026-06-24_en?prefLang=fi&utm_source=openai)) Key measures include:
- Abolition of withholding taxes on cross-border payments (dividends, interest, royalties) between EU companies. ([taxation-customs.ec.europa.eu](https://taxation-customs.ec.europa.eu/news/european-commission-proposes-landmark-tax-simplification-package-streamline-compliance-and-boost-2026-06-24_en?prefLang=fi&utm_source=openai))
- 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](https://taxation-customs.ec.europa.eu/news/european-commission-proposes-landmark-tax-simplification-package-streamline-compliance-and-boost-2026-06-24_en?prefLang=fi&utm_source=openai))
- Recasting DAC directives into a single instrument for clearer, simpler reporting and removing duplicate or low-value obligations. ([taxation-customs.ec.europa.eu](https://taxation-customs.ec.europa.eu/news/european-commission-proposes-landmark-tax-simplification-package-streamline-compliance-and-boost-2026-06-24_en?prefLang=fi&utm_source=openai))
- Increase thresholds and remove reporting duties for millions of private sellers and for certain low-risk cross-border arrangements. ([ec.europa.eu](https://ec.europa.eu/commission/presscorner/api/files/attachment/882627/Tax%20Simplification%20Package_Factsheet%20final.pdf?utm_source=openai))
## 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