Case Studies
Infringement Notices Under the Parent-Subsidiary & Pillar 2 Directives: Compliance Steps for EU Multinationals
Germany, France, Italy, Belgium, Bulgaria and Cyprus are facing EU enforcement action for failing to align national laws with EU Directives—here's what multinationals should do now.
By NomadicTax Research Team • 5-8 min read • September 7, 2026
## What's going on?
- The European Commission has formally notified **Germany, France, and Italy** for failing to align their legislation on taxation of dividends from subsidaries with the Parent-Subsidiary Directive. ([malta.representation.ec.europa.eu](https://malta.representation.ec.europa.eu/news/july-infringements-package-key-decisions-2026-07-08_en?utm_source=openai))
- Belgium, Bulgaria, and Cyprus have been issued reasoned opinions for not fully transposing **Directive (EU) 2025/872**, which amends the Directive on Administrative Cooperation (DAC) to facilitate information exchange under the Pillar 2 global minimum tax regime. ([malta.representation.ec.europa.eu](https://malta.representation.ec.europa.eu/news/july-infringements-package-key-decisions-2026-07-08_en?utm_source=openai))
## Key Directives & What They Require
- **Parent-Subsidiary Directive**: Prevents double taxation of intra-EU dividends, ensures parent companies don't suffer excessive withholding or other taxes beyond the Directive’s limits.
- **Pillar 2 / Directive 2022/2523 & DAC Update (Directive 2025/872)**: Introduce a mandatory top-up tax information return to be exchanged automatically among Member States for large multinationals, part of ensuring a minimum 15% effective tax rate. ([malta.representation.ec.europa.eu](https://malta.representation.ec.europa.eu/news/july-infringements-package-key-decisions-2026-07-08_en?utm_source=openai))
## Implications for Multinational Enterprises
- Businesses operating cross-border in or among the affected countries could face:
* withholding tax exposure or legal uncertainty on dividends
* risks of inconsistent or outdated national laws conflicting with EU minimum tax rules
* potential delays or adjustments in tax relief or exemptions
## What Affected Companies Should Do Immediately
1. **Review national dividend taxation laws**: Are your country’s laws consistent with Parent-Subsidiary Directive (e.g. no excess withholding or layering)?
2. **Monitor transposition of Pillar 2 / DAC revisions**: For concerned Member States, verify whether national legislation has been updated to implement Directive 2025/872 fully. If not, there may not yet be automatic exchange of top-up tax returns.
3. **Engage local tax counsel**: Changes in law or regulation will matter both at the national and EU level; companies may want to participate in consultations or respond to formal notices if affected.
4. **Document compliance carefully**: Retain legal analyses and rationale for tax positions in case national law is later declared non-compliant.
## Example Scenario
A large French company receives dividends from its German subsidiary. Under the Directive:
* Dividend withholding in Germany should be alleviated or reduced under the Parent-Subsidiary Directive.
* If France allows a deduction or credit, it must align with EU law.
* If France or Germany changes laws in reaction to the formal notice, companies should adjust withholding procedures, documentation, and investor communications.
## Planning Tips for Stability
- Structure dividend flows using entities in jurisdictions with clear compliance records.
- Use advance rulings or opinions where possible.
- Stay alert to notices from the European Commission; in many cases you have only two months to respond before further enforcement.
Strong compliance with Directive requirements avoids penalties, preserves tax predictability, and protects cross-border investment. Signal to investors that your operations are robust and align with EU standards.