Tax Planning
Modernizing Cross-Border Investment: Using the Tax Simplification Package to Optimize Structures
With the EU’s new Tax Simplification Package proposals, multinationals can reduce friction in cross-border flows — here’s how to leverage changes around withholding tax, CFC rules, ATAD interest limits, and more.
By NomadicTax Research Team • 5-8 min read • August 23, 2026
## What is the Tax Simplification Package?
On **24 June 2026**, the European Commission proposed a sweeping package of reforms aimed at simplifying direct tax laws and EU administrative cooperation rules (DAC). Key objectives include **reducing compliance burdens**, **removing unnecessary withholding taxes**, and **harmonizing rules** around interest limitation, CFC regimes and cross-border restructuring. Estimated savings for businesses are approximately **€7.9 billion per year**. ([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))
## Key Proposals & Implications
| Reform Area | What’s Changed / Proposed | Why It Matters |
|-------------|----------------------------|----------------|
| **Parent-Subsidiary Directive** | Extended scope to include **pension institutions**, enabling withholding tax exemptions on dividends from subsidiaries in other Member States. | Aids pension fund cross-border investment, eases double taxation barriers. ([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)) |
| **Withholding Taxes (Dividends, Interest, Royalties)** | Abolishing most withholding taxes on cross-border payments between EU companies. | Reduces friction, improves capital flow and intra-EU investment. ([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)) |
| **CFC Rules & Pillar Two Interaction** | Streamlined interaction to reduce overlaps and legal uncertainty; harmonised model proposed. | Helps multinationals ensure compliance and reduce unexpected penalties. ([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)) |
| **ATAD Interest Limitation** | Raised mandatory de minimis thresholds, excluded low-risk debt and market-based financing, limiting complexity. | Simplifies rules, improves predictability for corporate debt 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?prefLang=fi&utm_source=openai)) |
## How to Plan Your Entity or Investment Structure
- **Map your cross-border flows**: identify where dividends, interest, royalties are paid or received within EU group; use proposed changes to minimize withholding tax exposure.
- **Review pension fund engagement**: if acting as a pension institution, anticipate benefit under the expanded Parent-Subsidiary scope.
- **Plan finance mechanisms**: with revised interest limitation, assess whether external financing can be structured to qualify as low-risk or market-based, thereby escaping burdensome limits.
- **Align with Pillar Two**: ensure your CFC and minimum tax models don’t inadvertently trigger top-up tax or UTPR liabilities due to overlaps or inconsistent definitions.
## Case Example
Imagine a Luxembourg-based R&D-focused group with subsidiaries in Spain and France, and a UK-based pension institution participating in dividend income.
With the proposed rules:
- Dividends to the pension institution could be exemption-eligible under expanded Parent-Subsidiary Directive.
- Intercompany interest or royalties payments become simpler due to abolished withholding tax between EU companies.
- Cross-border R&D investments could use full and immediate expensing for qualifying tangible R&D-assets — improved capital deployment. ([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))
## Timelines & Risks
- These proposals are currently **proposed**, not yet final. They must pass through the **European Parliament and Council** before becoming binding rules. ([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 measures may lag implementation; transitional uncertainties exist.
- Keep monitoring for guidance on implementation with DAC recast and the Tax Simplification Omnibus.
**Takeaway:** By staying ahead of these proposals and aligning tax planning accordingly, companies operating across EU borders can remove longstanding frictions, reduce costs, and secure stronger tax certainty.