Tax Planning

Tax Simplification Package in the EU: What Businesses Must Know

The European Commission has unveiled sweeping reforms aimed at simplifying direct taxation and administrative cooperation across the EU—designed to cut red tape and boost competitiveness from 2026 onward.

By NomadicTax Research Team • 5-8 min read • August 13, 2026

## Overview On **24 June 2026**, the European Commission adopted a significant **Tax Simplification Package** targeting EU-wide tax rules. It comprises two legislative proposals: the **Omnibus on Direct Taxation** and a **Recast of the Directive on Administrative Cooperation (DAC)**. Together, they are projected to reduce business compliance costs by approximately **€7.9–8.0 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))([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)) These reforms are part of the EU’s broader agenda to support a competitive internal market by easing cross-border activity and aligning national systems with modern economic realities. Key goals include removing outdated rules, harmonising practices across member states, and streamlining reporting and withholding tax procedures. ([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 Changes & Impacts ### Direct Taxation Omnibus - **Withholding Taxes:** Elimination of withholding taxes on EU cross-border payments of dividends, interest, and royalties between companies. Pension institutions will also gain referral under the Parent-Subsidiary Directive. ([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 Tangible Assets Expensing:** A minimum common standard across member states allowing full, immediate expensing of R&D-related tangible assets. ([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)) - **Harmonised CFC Rules & Pillar 2 Alignment:** Simplification of Controlled Foreign Company (CFC) rules, reducing overlap with Pillar 2 (the global minimum tax). ([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)) - **Interest Limitation under ATAD:** Higher mandatory threshold and exclusion of low-risk third-party borrowing and market-based 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)) - **Cross-Border Reorganisation Ease:** Expanding the Merger Directive to all EU-recognised corporate reorganisations for tax neutrality 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)) ### DAC Recast (Directive on Administrative Cooperation) - **Reduced Reporting:** Companies falling under Pillar 2 need not report under DAC6, and other entities face reduced obligations in DAC7, DAC1, etc. Reporting volumes might drop by ~35%. ([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)) - **Centralised Filings:** Consolidated filings for country-by-country reports and Pillar 2 top-up returns. Common deadlines and streamlined formats help cut duplicate work. ([taxation-customs.ec.europa.eu](https://taxation-customs.ec.europa.eu/document/download/a654ad8e-606b-4ad5-a8ff-3309554224d7_en?filename=Executive+Summary+of+Impact+Assessment_DAC_Proposal+for+a+Council+Directive+-+Taxation%E2%80%99.pdf&utm_source=openai)) - **Digital Tools & Verification:** Introduction of standard reporting templates, common notification channels, and systems for verifying tax identification numbers (TINs). ([taxation-customs.ec.europa.eu](https://taxation-customs.ec.europa.eu/document/download/a654ad8e-606b-4ad5-a8ff-3309554224d7_en?filename=Executive+Summary+of+Impact+Assessment_DAC_Proposal+for+a+Council+Directive+-+Taxation%E2%80%99.pdf&utm_source=openai)) --- ## Examples & Actionable Insights | Scenario | Before Reforms | After Reforms | Action for Business Owners/Tax Directors | |----------|------------------|----------------|-------------------------------------------| | A cross-border group paying royalties between EU subsidiaries | Withholding taxes may apply, different processes per state | No withholding tax for EU companies under Parent-Subsidiary Directive | Review existing financing flows to avoid redundant withholding costs | | A multinational with subsidiaries in low-tax jurisdictions using sophisticated CFC rules and Pillar 2 | Possible conflicting rules, double compliance | Harmonised CFC regimes, clearer alignment with Pillar 2 | Reassess cross-border entity structures & CFC exposure | | SMEs selling goods online via platforms (DAC7 scope) | Platform-based reporting required from many entities | Higher thresholds, reduced obligations | Track income via platforms & evaluate whether reporting requirements still apply | --- ## Timelines & Compliance Steps - Proposals have been adopted and are now going through negotiation with Parliament and Council. Implementation deadlines will vary. ([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)) - Businesses should begin internal audits of cross-border arrangements, interest payments, withholding tax liabilities, and reporting lines under existing DACs. Prepare to transition to new unified processes. --- ## Broader Implications - **For SMEs:** Relief from excessive reporting. Simplified merger and parent-subsidiary rules expand options for cross-border growth. - **For Investors & Pension Funds:** Removal of withholding taxes and alignment of rules improves returns and clarity. - **For Governments & Tax Authorities:** Requires coordinated implementation, upgrading systems, adopting harmonised standards, monitoring compliance with Pillar 2 framework. --- **Conclusion:** These reforms mark one of the most significant EU-wide efforts in recent years to modernise direct taxation and administrative cooperation. To capitalise, businesses should proactively assess current operations, identify potential tax savings or compliance risks, and position themselves to take advantage of the more streamlined landscape anticipated in the coming years.