Compliance
Compliance Guide: VAT Reforms & Administrative Cooperation in the EU’s Tax Simplification Package
The EU’s 2026 tax simplification package introduces sweeping changes—especially in withholding tax, cross-border payments, and administrative cooperation agreements.
By NomadicTax Research Team • 5-8 min read • September 15, 2026
## Overview of the EU Tax Simplification Package (June 2026)
In **June 2026**, the European Commission adopted a landmark **tax simplification package** comprising the “Direct Taxation Omnibus” and the “Recast of the Directive on Administrative Cooperation (DAC).” This ambitious legislative draft aims to drastically reduce complexity, remove redundant obligations, and improve competitiveness across the EU.([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?utm_source=openai)) Key among its proposals are **abolishing withholding taxes on dividends, interest, and royalties between EU companies**, strengthening reporting rules, and introducing unified filings.([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?utm_source=openai))
## Key Compliance Impacts for Global Businesses
- **Removal of Withholding Taxes for Intra-EU Payments**: If your business operates across EU borders, payments of interest, dividends, or royalties between EU entities may no longer be subject to withholding taxes—reducing friction in your capital flows.([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?utm_source=openai))
- **DAC Recast Simplifies Reporting**: The DAC recast codifies previous administrative cooperation directives (DAC 1-9) into a single instrument, standardizing rules for cross-border exchange of tax information—helpful for multinational enterprises or fund managers.([taxation-customs.ec.europa.eu](https://taxation-customs.ec.europa.eu/document/download/dbb90387-6bac-4797-8f15-f29fe6076221_en?filename=C_2026_1480_F1_ANNEX_EN_V4_P1_4514028.PDF&utm_source=openai))
- **Thresholds Increased and De Minimis Rules Relaxed**: For example, many online sellers and private individuals dealing with goods now face fewer reporting and compliance requirements, especially in second-hand and low-value goods sectors.([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?utm_source=openai))
## Actionable Steps for Businesses
1. **Assess your entity structure**: If you have subsidiaries or branches across EU member states, identify how withholding taxes currently apply on payments for dividends, royalties, and interest.
2. **Review contracts and payment flows**: Ensure cross-border agreements reflect the abolished withholding tax obligations, and amend contracts to avoid outdated clauses imposing withholding.
3. **Prepare for unified reporting**: Under DAC recast, expect consolidated exchange reporting—ensure your accounting, tax, and legal functions are aligned with this shift.
4. **Monitor implementation timelines**: Proposed EU directives still need to be adopted and transposed into national law—watch for deadlines which may vary by country.
5. **Engage with local tax authorities or advisors**: Especially if your business operates in multiple EU jurisdictions; country-by-country implementation may differ in detail.
## Example Scenario
A German SaaS company paying royalties to its NL-based subsidiary could previously have had withholding taxed in Germany which was then reduced or reclaimed via treaty. Under the new rules, that payment may become **exempt from withholding altogether**, simplifying the flow and reducing administrative burdens.
## Summary
EU’s simplification package promises tangible compliance benefits—especially abolition of intra-EU withholding taxes, unified reporting processes, and lowered de minimis/trivial reporting thresholds. For global businesses, staying ahead means mapping dependencies, contract reviews, and aligning with the rules as they are adopted.