Entity Setup
Structuring Entities Globally in Light of VAT-in-the-Digital-Age and EU Package Reforms
The EU’s ViDA package and simplification proposals are reshaping indirect tax burdens for digital services and cross-border businesses. Here's how to plan entity structure accordingly.
By NomadicTax Research Team • 5-8 min read • September 5, 2026
## Overview of EU VAT-in-the-Digital-Age (ViDA) and Simplification Proposals
ViDA is a set of EU rules aiming at modernising VAT framework: e-invoicing, one-stop-shop for cross-border services, better reporting, digital certificates. The Tax Simplification Package released on 24 June 2026 also introduces proposals like abolishing withholding taxes between EU companies and recasting the Directive on Administrative Cooperation (DAC) to reduce 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))([taxation-customs.ec.europa.eu](https://taxation-customs.ec.europa.eu/index_en?utm_source=openai))
## Impacts on Entity Setup and Cross-Border Supply Chains
- **Withholding Tax Removal**: Planned abolition of withholding taxes on dividends, interest, and royalties between EU companies eases cash flow and reduces treaty relief 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))
- **VAT Registration Simplification**: With ViDA, businesses may benefit from a **One-Stop-Shop (OSS)** registration covering multiple Member States and extended Import OSS, reducing need for multiple VAT registrations.([taxation-customs.ec.europa.eu](https://taxation-customs.ec.europa.eu/document/download/dbb90387-6bac-4797-8f15-f29fe6076221_en?filename=C_2026_1480_F1_ANNEX_EN_V4_P1_4514028.PDF&utm_source=openai))
- **Reporting Simplification under DAC Recast**: Fewer reporting obligations for certain cross-border tax arrangements, especially for MNEs subject to GMT rules.([taxation-customs.ec.europa.eu](https://taxation-customs.ec.europa.eu/document/download/ffd65142-ff66-43ea-b479-41e7e5eb6d08_en?filename=Working+Document_Proposal+for+a+Council+Directive+-+Taxation.pdf&utm_source=openai))
## Structuring Strategies
- Consider locating holding companies or IP-holding entities in EU Member States that will automatically benefit from removal of withholding taxes.
- For digital service providers, using platforms or intermediaries registered under OSS or Import OSS can simplify VAT compliance.
- To reduce reporting complexity, ensure entity structures align with safe harbours under GMT and work to avoid triggering unnecessary DAC obligations.
## Example
A digital media company with multiple branches in EU Member States currently pays withholding taxes on royalty payments between its branches. Under the Omnibus proposal, these withholding taxes would be abolished, improving net cash flows. Also, using OSS for sales to consumers in different EU countries significantly eases VAT filing burdens.
## Actionable Recommendations
- Review current entity chains and inter-company financing/royalties structure; from 2026-2028, plan for flows to take advantage of withholding abrogation.
- Map where digital platforms are needed for VAT threshold compliance.
- Monitor transposition timelines—both for ViDA and Faster Withholding Tax Relief Directives—as Member States need time to implement.
This evolving EU landscape rewards strategic structure decisions made ahead of legislative adoption.