What is the Tax Simplification Package?
On 24 June 2026, the European Commission introduced a major legislative proposal comprising two parts:
- The Direct Taxation Omnibus Directive, which revises EU direct tax law including rules on withholding taxes, interest limitation, and treatment of parent-subsidiary relationships. (taxation-customs.ec.europa.eu)
- The DAC Recast (Recast of the Directive on Administrative Cooperation), consolidating DAC1 through DAC9 into one coherent directive with simplified reporting obligations. (taxation-customs.ec.europa.eu)
Key Reforms and What They Mean
| Reform | What Changes | Practical Impacts | Actionable Steps |
|---|---|---|---|
| Abolishing withholding taxes between EU companies on dividends, interest, royalties | Payments across Member States won’t be subject to withholding tax if entities qualify | Reduced cash flow friction; simpler financing of subsidiaries and innovation projects | Check if your structure qualifies; plan treasury flows accordingly |
| Full expensing for R&D-related tangible assets | Investments in R&D assets get immediate tax relief rather than depreciating over years | Boosts return on investment; encourages investing in labs, equipment, manufacturing lines | Review forthcoming rules in your Member State; accelerate investment in qualified assets |
| Streamlined DAC reporting for multinationals and SMEs | DAC6 reporting hallmarks trimmed; overlapping notifications under DAC4 and DAC9 combined; higher thresholds for DAC7 (e-commerce) reporting | Major reduction in administrative burden and duplication | Conduct internal reporting reviews; align schedules and templates; train staff on upcoming DAC Recast changes |
| Interest limitation rule reforms under ATAD | Increased de minimis thresholds; reliefs for low-risk borrowing; removal of some options—less legal fragmentation | Lends flexibility to financing arrangements; reduces risk from minor borrowing structures | Analyze existing debt structure; assess whether new thresholds exempt you; adjust new contracts accordingly |
Timeline & Next Steps
- These are proposals: they still need adoption by the European Parliament and the Council. (taxation-customs.ec.europa.eu)
- The Commission aims to reduce administrative burden by ≥ 25% for all businesses and 35% for SMEs by 2029. (taxation-customs.ec.europa.eu)
- Businesses should begin planning now—especially those with cross-border structures or heavy reporting obligations. |
Example Scenario
Imagine a group headquartered in Netherlands with subsidiaries in Germany and Portugal, engaging in R&D. Under current EU rules:
- They pay withholding tax on royalties paid from Portugal to the Netherlands.
- Their R&D equipment investments are capitalised and depreciated over years.
- They report multiple notifications under DAC4, DAC6/7/9.
With the simplification package:
- Those royalty payments may be exempted from withholding tax.
- Full expensing of R&D assets means tax benefit today rather than over many years.
- Reporting burden drops significantly—possibly managing everything within one notification under the recast DAC.
What Businesses Should Do Now
- Perform gap analysis: map existing structures vs what qualifies under the new Omnibus.
- Engage tax specialists to monitor Parliament and Council negotiations.
- Train your compliance teams on expected changes, especially under DAC and ATAD for financing.
- Adjust investment timing, especially for R&D-intensive capital expenditure, to benefit from full expensing if adopted.
Bottom line: this simplification package could reshape cross-border tax compliance in the EU—making it easier, cheaper, and clearer for companies operating across national lines.