Entity Setup / Tax Planning

EU’s Direct Tax Omnibus & DAC Recast: A Game-Changer for Cross-Border Corporates

The EU is moving to simplify its patchwork of tax directives, removing withholding taxes and harmonising Cross-Border Anti-Avoidance and Admin Cooperation rules in a bid to save billions and reduce compliance friction.

By NomadicTax Research Team • 5-8 min read • August 31, 2026

## Overview of the Tax Simplification Package Announced on **24 June 2026**, the European Commission’s package comprises two legislative proposals: the **Direct Taxation Omnibus Directive** and the **Recast of the Directive on Administrative Cooperation (DAC)**. These aim to modernise EU corporate tax rules, reduce redundancy, and unlock up to **€7.9 billion in savings** annually. ([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 Measures in the Omnibus Directive - Abolition of **withholding taxes on cross-border payments** of dividends, interest, and royalties between EU companies. Major for cash flows and group financing. ([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)) - Extension of exemptions under the Parent-Subsidiary Directive to **pension institutions**. ([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)) - Full and immediate expensing for R&D-related tangible assets—making investment and innovation in Europe more attractive. ([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)) - Harmonisation of **CFC rules** with Pillar Two global minimum tax rules to reduce overlaps and clarify when jurisdictions enforce them. ([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)) - Streamlining the anti-tax avoidance interest limitation rules under the Anti-Tax Avoidance Directive (ATAD): higher de minimis thresholds, exclusions for “low risk” borrowing, etc. ([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)) ## Recast DAC: Administrative Cooperation Reimagined - Codifying nine existing DACs into a single coherent legal framework. Simplification of reporting obligations across various DAC 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?utm_source=openai)) - Removing certain reporting obligations for multinational enterprise groups already under Pillar Two minimum tax rules, cutting some reporting 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?utm_source=openai)) - Raising thresholds for online sales (DAC7) to reduce obligations for very small players. Adjusting monetary thresholds, removing “activity thresholds” that penalise minor occasional sellers. ([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)) - Improving taxpayer identification via mandatory verification of Tax Identification Numbers (TINs) and centralising notifications for reporting like country-by-country (DAC4) and top-up tax information (DAC9). ([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)) ## Impacts & Compliance Implications for Global Tax Planning - Companies operating in multiple EU Member States will see **reduced withholding costs**, smoother group financing, and lower friction in intercompany payments. - Entities subject to Pillar Two global minimum tax can benefit, as the proposals aim to align EU rules so that entities already covered don’t face double regulatory burden. - SMEs and smaller multinationals can expect lighter reporting burdens, fewer DAC notifications, and streamlined obligation regimes. - Entities should review and update compliance frameworks: check applicability of DAC reporting thresholds; ensure proper TINs for all relevant entities; adjust internal financial flows to take advantage of withholding tax abolition. ## Example Calculation - A tech group in Germany paying royalties to a subsidiary in France would pay withholding before—now, potentially zero if rules adopted. - A pension fund in Spain receiving dividends from companies in Italy or Poland will now benefit under the expanded Parent-Subsidiary regime. - An SME in Portugal doing occasional digital platform sales might now be below new thresholds under DAC7, materially reducing reporting workload. ## Keep an Eye On… - These proposals are **not yet adopted**: they will now go to the European Parliament and Council for negotiation. The direction is clear, but timing and final texts may change. - Entities should monitor national transposition: when/if adopted, Member States will need to pass implementing legislation. - Planning actions (e.g., reorganising intragroup financings or dividend flows) may be sensitive—wait for legal adoption and clarity on implementation dates. ## Key Takeaway For multinationals and tax-sensitive investors in Europe, the tax simplification package represents a once-in-a-generation opportunity to reduce cross-border tax friction. With proper transaction timing and compliance adjustments, businesses can position themselves to benefit substantially once the reforms take effect.