Overview of the Tax Simplification Package
In June 2026, the European Commission introduced a two-part package comprising the Direct Taxation Omnibus (Omnibus Directive) and the Recast of the Directive on Administrative Cooperation (DAC). These proposals are still under consultation but aim to achieve €7.9-8.0 billion per year in savings for businesses. (taxation-customs.ec.europa.eu)
Key tax-planning features to watch
| Measure | What changes | Who benefits | Timing / Status |
|---|---|---|---|
| Abolition of withholding taxes on cross-border payments (dividends, interest, royalties) between EU companies | Cross-border financing becomes cheaper; no deduction or gross-up for withholding | Multinational Groups headquartered in the EU, group treasuries, internal financing strategies | Proposed in Omnibus; needs adoption by Parliament & Council. (taxation-customs.ec.europa.eu) |
| Extended Parent-Subsidiary Directive for pension institutions | Pension funds may receive dividends without withholding deductions; flow-through benefits | Pension institutions in large-capital EU states | As above. (taxation-customs.ec.europa.eu) |
| Full and immediate expensing for R&D-related tangible assets | Accelerated deduction of qualifying investment costs; improves cash flow and ROI calculations | Companies investing heavily in R&D facilities and machinery | Under proposal. (taxation-customs.ec.europa.eu) |
| Streamlined interaction between CFC rules and Pillar Two Global Minimum Tax (GMT) | Reduce overlapping compliance; clearer guidance on effective tax rate (ETR) computations | Multinational Enterprises with entities in low and high tax jurisdictions | Under proposal. (taxation-customs.ec.europa.eu) |
Actionable tax-planning recommendations
- Assess your withholding exposure: If you operate across EU Member States, evaluate implications of withholding tax removal. Consider restructuring intragroup payments to take advantage.
- R&D asset investment timing: If proposals adopted, accelerating investment into tangible R&D assets could maximize benefits under full expensing.
- Review CFC and GMT structure: Anticipate harmonised CFC rules; ensure your group’s low tax jurisdictions and incentive regimes still comply.
- Pension and Institutional Investor strategies: Pension funds should watch extension of exempt flows; could alter investment and capital repatriation strategies.
What’s still unknown
- Implementation date: Proposals need to be adopted and then transposed by member states. No binding effective date yet published.
- Interaction with national tax law: Some member states may resist full expensing or loss of withholding tax revenues; transitional rules may apply.
- Pillar Two safe harbours and overlap: Specific definitions, thresholds, or exclusions may vary in final text.
Practical example: SME vs MNE
- An SME exporting machinery to other EU Member States could see VAT and indirect cross-border tax savings if withholding taxes are abolished.
- A Multinational Enterprise (MNE) using low-tax jurisdictions and benefiting from certain incentives will need to evaluate how the harmonised CFC and Pillar Two rules shift effective tax burdens of cross-border structures. Use this phase to benchmark and possibly re-design group structure before changes become law.
What to do now
- Monitor legislative progress: Parliament and Council readings, transitional rules.
- Conduct internal impact assessment: cash-flow, tax leakage, incremental compliance costs.
- Engage tax advisors: to map current structure to proposed changes, especially for withholding, CFC, and R&D expensing.
- Adjust forecasts: budgets, investment plans, and withholding obligations in your jurisdictions based on status of proposals.
The Tax Simplification Package offers a rare opportunity for forward-looking tax planning. Early alignment and strategy can deliver material savings and position firms for regulatory certainty.