Compliance
Compliance Challenges & Strategies under EU’s Tax Simplification Package
The EU’s recent simplification package overhauls DAC and ATAD-linked rules—raising compliance strategy stakes for multinational enterprises.
By NomadicTax Research Team • 5-8 min read • September 1, 2026
## Overview of the Tax Simplification Package (June 2026)
In **June 2026**, the European Commission launched a package comprising two major proposals: an **Omnibus on Direct Taxation** and a **Recast of the Directive on Administrative Cooperation (DAC Rec-t)**. Their goal: modernize EU direct tax rules, reduce compliance burdens, and **boost competitiveness**. Estimated savings are around **€8 billion/year**, with **€3.3 billion** from reducing administrative costs. ([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 areas covered include:
- Removal of withholding taxes on cross-border payments (dividends, interest, royalties) between EU entities. Extension of this exemption to **pension institutions** under Parent-Subsidiary Directive. ([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))
- Harmonization in Controlled Foreign Corporation (CFC) rules and alignment with **Pillar Two** global minimum tax framework to avoid double burdens. ([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))
- Modernizing ATAD’s interest limitation rules: higher mandatory de minimis thresholds, removal of some options, more predictability. ([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))
- Under DAC recast: removal or reduction of certain reporting duties—e.g., DAC6 hallmarks of limited added value, DAC7 threshold adjustments. Significant reporting reduction (~35% fewer obligations) for smaller firms or those already under Pillar Two. ([taxation-customs.ec.europa.eu](https://taxation-customs.ec.europa.eu/document/download/a654ad8e-606b-4ad5-a8ff-3309554224d7_en?filename=Executive+Summary+of+Impact+Assessment_DAC_Proposal+for+a+Council+Directive+-+Taxation%E2%80%99.pdf&utm_source=openai))
## Risk-Areas for Compliance
- **Overlap between domestic CFC rules, ATAD, and Pillar Two**: Firms with global businesses may face more audits if inconsistencies persist despite proposed alignment. Ensuring coherent policies internally will be key.
- **Transition timelines & implementation**: While proposals are advanced, **enactment and Member States’ adoption** will take time; during transition, some ambiguity may remain about which rules apply.
- **Reporting gaps or high costs under DAC**, especially where firms were used to old thresholds or hallmarks. Even reduced reporting still needs accurate data systems, staff training, and perhaps external advisory help.
- **Potential state aid or tax incentive mismatches**, particularly when cross-border shareholders or pension institutions are involved.
## Best Practices and Strategy Tips
- Undertake a tax compliance audit: map all current reporting obligations under DAC6, DAC7, ATAD, CFC, etc., and assess which ones will be reduced or modified under the package proposals.
- Track the legislative process: those Omnibus and DAC recast proposals were adopted by the Commission on 24 June 2026, but **still need approval by the European Parliament and Council**. Implementation may lag by many months. Use internal tracking tools to monitor Member State transposition drafts. ([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))
- Invest in data infrastructure: because simplified reporting still depends on accurate exchange of information, investing now in systems to track cross-border transactions, digital platform income, royalties, interest payments, and ensuring correct TIN usage will yield benefits.
- Consider treaty reviews, particularly for Parent-Subsidiary, Interest & Royalties, and Tax Mergers rules—especially if you’re a pension institution or have complex group structures.
## Example scenario
A group headquartered in Ireland with subsidiaries in multiple EU states currently complies with DAC6 reports for cross-border royalty flows and CFC rules. Under the new Omnibus/DAC recast proposals:
- Royalties paid to a pension fund elsewhere in the EU: may become exempt from withholding tax.
- Some DAC6 hallmarks will no longer apply (or be refined), reducing reporting obligations.
- If the group is in scope of Pillar Two, certain reporting obligations under DAC will be removed.
Implementing this might involve adjusting intercompany agreements, updating internal reporting templates, and liaising with local tax authorities.