Compliance
Compliance Simplified: Navigating DAC Recast and Reporting Burdens
DAC recast promises clear, singular rules for tax cooperation—removing duplicative reporting and easing compliance, especially under Pillar Two and cross-border arrangements.
By NomadicTax Research Team • 5-8 min read • August 29, 2026
## What Is the DAC Recast About?
The **Directive on Administrative Cooperation (DAC)**—originally DAC1—has been amended numerous times (DAC2-DAC9), resulting in complexity, divergent reporting obligations, and duplication, especially for digital platforms, MNEs, SMEs, and tax administrations. The **DAC Recast proposal**, part of the EU’s Tax Simplification Package from 24 June 2026, aims to:
- **Codify** all existing DAC directives into a single coherent legal act.
- Introduce **new substantive changes** to reporting obligations—particularly reducing obligations for firms already under the 15% global minimum tax (Pillar Two).
- Simplify DAC6 (cross-border tax arrangements), DAC7 (digital platforms), DAC4 (country-by-country reporting), etc., to reduce overlap and administrative effort.
- Raise thresholds for reporting online sales of goods to remove burdens from occasional sellers. ([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 Shifts You Need to Prepare For
### A. Reporting Relief for Pillar Two Groups
If your multinational enterprise (MNE) is already subject to Pillar Two rules (e.g. 15% effective tax rate), DAC recast proposes to **remove or reduce reporting obligations** for certain cross-border tax arrangements. This change could relieve up to **€300 million** annually in compliance 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?utm_source=openai))
### B. Simplifying DAC6 (Cross-Border Arrangements)
Expect easier tests or streamlined Main Benefit Tests (MBT), fewer low-value arrangements needing reporting, and clearer metadata requirements. Use internal tools to categorize whether arrangements meet “limited added value” tests before reporting.
### C. Common Notification for Top-Up Tax & Country-by-Country Reporting
Under proposed changes, there would be a **single notification obligation** covering both country-by-country reporting and top-up tax returns. This avoids two filings for the same information. Useful if your group has reporting obligations in multiple Member States.
### D. TINs and Product Identifier (PID) Rules
To improve data quality, EU proposes stricter requirements around **Tax Identification Numbers** and uses of **Product Identifiers (PIDs)**—especially for cross-border online goods. From **1 November 2026**, PID declarations become mandatory. ([taxation-customs.ec.europa.eu](https://taxation-customs.ec.europa.eu/news/guidance-and-legal-text-temporary-flat-fee-low-value-imports-which-will-apply-until-1-july-2028-2026-06-08_en?prefLang=sk&utm_source=openai))
---
## Action Plan: What Businesses Should Do Now
| Task | Who Should Take It | Timeline |
|---|---|---|
| Map all current reporting obligations under DAC4, 6, 7, etc. | Tax/legal team or external counsel | Q3-Q4 2026 |
| Identify arrangements eligible for relief under Pillar Two or “limited added value” | Finance/compliance departments | Before applications under new recast directive |
| Implement or upgrade systems to handle TINs, PID, and single notification workflows | Internal IT or vendor systems | Target ready by end-2026 / early 2027 |
| Review and update cross-border contracts and intercompany agreements | Legal/tax advisors | Ongoing |
---
## Examples: Compliance in Practice
- A tech platform operating across multiple EU Member States currently files both DAC7 digital platform income reports and separate country-by-country reports—post-recast, many MNEs plan to combine notifications to domestic authority under a unified format.
- A company with foreign subsidiaries under Pillar Two that were double reporting certain arrangements may, under the recast, see relief where those arrangements are “already covered” under other obligations.
---
## Risks & What to Watch
- Member States may delay transposition or interpret obligations differently—document your compliance plan clearly, with internal memos and external counsel opinions.
- Changing thresholds means some smaller arrangements that escaped reporting may now be captured—monitor revenue thresholds and definitions.
- Data integrity is critical. Faulty TINs or non-compliance with PID requirements risk penalties.
---
## Bottom Line: How to Stay Ahead
The DAC Recast offers a chance to **simplify and reduce burden**, but change in EU tax law often comes with complexity until implementation settles. Early mapping, system upgrades, and legal documentation are your best tools. Stay closely aligned with Member State implementation timelines.