Compliance
Navigating the Upcoming EU Tax Simplification Package: What Businesses Need to Do Now
The EU has proposed sweeping changes through its Tax Simplification Package—including the Direct Taxation Omnibus and DAC Recast—that will reshape cross-border compliance and reporting. Here's how businesses can prepare.
By NomadicTax Research Team • 5-8 min read • September 3, 2026
## Overview of the Tax Simplification Package
In late June 2026, the European Commission adopted a major tax reform initiative aimed at simplifying the EU’s tax framework. This package includes two legislative proposals: the **Direct Taxation Omnibus Directive** and a **Recast of the Directive on Administrative Cooperation (DAC)**. Together, they target reductions in administrative burdens, simplification of cross-border tax rules, and improved legal clarity 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))
Key highlights:
- Abolition of withholding taxes on cross-border payments of **dividends, interest, and royalties** between EU companies.([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))
- Consolidation of nine existing DAC directives into a single coherent instrument.([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))
- Removal of certain reporting obligations: for ~3,000 multinationals under Pillar Two, and reduction for SMEs in low-value or low-risk arrangements.([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))
- Estimated annual savings: around **€8 billion**, including **€3.25 billion** in administrative cost savings.([taxation-customs.ec.europa.eu](https://taxation-customs.ec.europa.eu/document/download/bee8b767-1f9e-44aa-9910-faa8bc31a880_en?filename=190626_Tax+Simplification+Package_Factsheet_.pdf&utm_source=openai))
## What Has Been Proposed vs. What’s Final
These proposals are **not yet law**. They now await review by the European Parliament and Council before being adopted.([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))
## Implications for Businesses
### Cross-Border Corporates
Businesses operating across EU borders will benefit from reduced withholding friction and clearer rules for cross-border payments. However, until formal adoption, Member States may still require withholding or have divergent interpretations. Plan with interim measures.
### SMEs and Reporting Obligations
For small and mid-sized companies: reporting burdens under DAC will be eased, especially for cross-border arrangements of limited value or risk. Setting up compliance systems now that can adapt to both current and future regimes will save time and avoid disruptions.
### Pillar Two Interaction
The new rules interact with Pillar Two globally minimum tax regimes. For groups already subject to the 15% global minimum, some reporting obligations may be removed. Businesses should assess whether their existing structures trigger obligations under 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))
## Practical Steps to Take Now
- **Audit existing cross-border payment structures**: dividends, interest, royalties. Are withholding taxes currently deducted? If so, those arrangements may be streamlined soon.
- **Map reporting obligations under DAC and Pillar Two**: Identify what you report today, and which parts may become redundant or simplified.
- **Stay informed of transposition timelines**: Once proposals are passed, Member States must transpose them into national law. The timing may vary; being ready will let you move fast.
- **Engage in advocacy or consultations**: Many of the details remain subject to legislative debate. Industry groups or professional advisers can influence implementation to reduce unwanted complexity or costs.
## Case Example
Suppose a multinational headquartered in France pays royalties to a subsidiary in Estonia. Under current rules, France may withhold 15% on royalties. Once the Direct Taxation Omnibus is enacted, that withholding may be abolished if both entities are EU companies. This can mean immediate cash-flow benefits. But until the law is in force, compliance must still adhere to existing national rules.
## Timeline & What’s Next
- The proposals were published **24 June 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))
- They now proceed through EU-level legislative processes. Adoption will determine when changes become binding.
- Member States will need to adapt or change domestic laws to align with new directives.
**Conclusion:** The EU Tax Simplification Package represents one of the most ambitious efforts in recent years to streamline cross-border direct taxation, reduce compliance burdens and integrate the internal market. Businesses should get ready well in advance: audit current structures, map upcoming changes, and plan for legal and operational adjustments. The sooner you start preparing, the better positioned you’ll be when the changes take effect.