Tax Planning
Tax Simplification in the EU: What Businesses Should Know Now
The EU’s latest tax simplification package could save over €8 billion annually — here’s what measures are proposed, when they may take effect, and how companies can prepare.
By NomadicTax Research Team • 5-8 min read • August 15, 2026
## Overview of the Tax Simplification Package
In June 2026, the European Commission adopted a **Tax Simplification Package**, comprising two legislative proposals:
- **Direct Taxation Omnibus Directive**: modernises the EU’s direct tax framework by simplifying corporate tax rules, particularly around withholding taxes, ATAD interest limitation, controlled foreign companies, R&D asset treatment, and cross-border reorganisations. ([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))
- **Recast of the Directive on Administrative Cooperation (DAC Recast)**: combines nine existing DAC directives into a single instrument and aims to reduce reporting burdens and increase efficiency. ([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))
The Commission estimates this package will generate **€7.9–8 billion in savings annually** for businesses, including more than **€3.3 billion in reduced administrative costs**. ([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))
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## Key Proposed Changes & Impacts
| Area | Proposed Change | Likely Impact & Timing |
|---|---|---|
| Withholding taxes | Abolish withholding taxes on dividends, interest, royalties paid between EU companies; extend incentives to pension institutions under the Parent-Subsidiary Directive. | Easier cross-border financing; expect implementation once Omnibus becomes law (post-Council & Parliament adoption) — likely phased. ([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 | Increase mandatory de minimis threshold; modernise and limit scope of interest limitation rules; exclude low-risk third-party borrowing & market-based finance. | Reduced compliance for many companies; simplification for smaller borrowers; risk still remains for aggressive financing structures. ([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)) |
| R&D investment assets | Allow full and immediate expensing for tangible assets used in R&D across all Member States. | Encourages investment in innovation; improves tax treatment uniformity. Make sure your country is ready and consult guidance. ([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)) |
| DAC Reporting burdens | Remove certain reporting obligations for MNEs already under Pillar Two; eliminate low value/low utility cross-border arrangement reporting. | Significant cost savings; fewer frivolous disclosures; need to track whether your group is covered by 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)) |
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## Practical Advice for Businesses
1. **Monitor legislative adoption**: These proposals are still at **proposal stage** as of 24 June 2026 and require adoption by both the European Parliament and Council. ([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))
2. **Assess your withholding exposure**: Companies paying cross-border dividends or royalties should map their exposure, especially in jurisdictions where withholding is still in place.
3. **Review financing arrangements**: Structures relying heavily on interest payments should be evaluated under ATAD rules: increased thresholds may help but overlapping CFC and Pillar Two rules may still complicate matters.
4. **Invest in R&D assets**: If your company invests in tangible R&D assets, plan to take advantage of full expensing, once rules are applicable in your Member State.
5. **Prepare for changes in reporting obligations**: Groups under Pillar Two or subject to DAC rules should streamline compliance systems — ensure data-flows required by current law but be ready for new definitions or eliminations.
6. **Engage with national authorities**: Since EU directives must be transposed, national laws may lag or differ — keep track of how and when your country implements the changes.
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## Example Scenario
A German industrial group with subsidiaries in France and Poland currently pays withholding tax on interest payments from Poland to Germany, and incurring compliance costs on multiple tax and finance reporting obligations (ATAD, CFC, DAC). Under the Omnibus:
- Once adopted, **withholding on interest payments** between EU entities would be abolished → cash flow benefit.
- **Interest limitation** scope narrowed → part of its debt financing becomes exempt.
- **DAC obligations reduced** because some reporting overlaps with Pillar Two → lower year-end compliance costs.
But until these proposals are legally enacted and transposed, the group should avoid assuming automatic benefit: plan based on current law, monitor both EU legislation and national transposition, and maintain conservative documentation standards.
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