Entity Setup
Entity Setup Strategies: Structuring Intra-EU Holding Companies Under the New Tax Omnibus
The EU’s proposed Taxation Omnibus brings sweeping changes for holding companies—abolishing many withholding taxes and expanding benefits for pension institutions—making entity structuring more strategic than ever.
By NomadicTax Research Team • 5-8 min read • August 16, 2026
## What the Taxation Omnibus Proposes
- **Abolition of withholding taxes** on cross-border payments of dividends, interest and royalties between EU companies. This removes a long-standing barrier to cross-border investment within 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?prefLang=fi&utm_source=openai))
- **Extension of Parent-Subsidiary Directive** benefits to **pension institutions**, allowing them withholding tax exemptions on dividends from other Member States. ([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))
- **Common minimum standard** for treatment of R&D-related tangible assets: full and immediate expensing across Member States. ([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))
- **Simplification of ATAD’s interest limitation rules** and harmonisation of Controlled Foreign Company (CFC) rules to align with Pillar Two. ([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))
- Expansion of the **Tax Merger Directive** to cover all corporate reorganisations under EU company law, including mergers, divisions, asset transfers. ([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))
## Setting Up a Holding Company Under the Proposed Rules
**Step 1: Choose optimal location**
- Prioritize jurisdictions with robust legal frameworks and strong treaty networks.
- Monitor transposition differences: even after EU directives are adopted, Member States may vary in implementation practices (e.g. documentation, timing).
**Step 2: Leverage the withholding tax abolition**
- Design structure so that dividend, royalty, or interest flows stay within corporate entities in different EU Member States to benefit from zero withholding tax under the new law once enacted. Pension institutions may also benefit where applicable.
**Step 3: Align with R&D investment opportunities**
- Asset-heavy R&D industries may choose to locate investment in Member States that fully adopt immediate expensing rules early.
- Structure depreciation schedules to anticipate harmonised deduction periods.
**Step 4: Plan reorganisations under the expanded Tax Merger Directive**
- Use cross-border mergers or divisions to consolidate operations, reduce duplication, or migrate IP or financing entities, anticipating tax neutrality.
- Review local merger conditions (e.g. timing, notification, valuation) as Member States implement.
## Considerations & Risks
| Issue | Actionable insight |
|---|---|
| **Pillar Two / CFC alignment** | Ensure that the holding structure’s financing flows and CFC jurisdictions comply with the EU’s harmonised model to avoid unexpected top-up tax exposures. |
| **Transitional timing** | These proposals are not yet enacted: transitional burdens, reporting rules or reservation by some Member States might delay full benefits. |
| **Documentation & substance** | Strong economic substance for the holding entity still required—for example, minimal local staff, offices or oversight may still trigger scrutiny under anti-avoidance rules. |
| **Withholding tax on outbound payments to non-EU jurisdictions** | The proposals remove intra-EU withholding taxes—but payments to third countries remain subject to domestic withholding rules or treaties. |
## Practical Example
Imagine Company A, incorporated in Germany, owns a subsidiary in Spain. Under current rules, Spain may withhold tax on dividends to Germany, depending on domestic laws or treaties. Under the new Omnibus, once implemented:
- **Dividend flow**: No withholding tax within the EU between Spain and Germany for corporate recipients.
- **Interest and royalties**: Similar treatment—making cross-border financing or IP licensing more efficient.
- **Pension institutions** in Germany receiving Spanish dividends would benefit from the Parent-Subsidiary Directive extension.
## What to Watch in 2026–2027
- **Adoption dates**: The Taxation Omnibus and DAC Recast proposals are pending Council and Parliament review. Monitor legislative progress in Q4 2026. ([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))
- **National transposition**: Each Member State must adopt directive changes; some may use options, some may have delayed or phased implementation.
- **Interaction with Pillar Two**: While harmonisation is proposed, some national rules may still diverge until full alignment.
- **Regulatory risk**: The EU Court of Justice will likely interpret core directives; holding entity structuring must anticipate jurisprudence.
**Bottom line**: the Taxation Omnibus offers real opportunities for holding structures across the EU—but only for entities that move proactively, monitor enactment, ensure substance, and align financing with future rules.