Entity Setup

The Upcoming Direct Tax Omnibus & DAC Recast: What Businesses Must Plan for

EU’s big simplification push will eliminate withholding taxes and streamline reporting — here’s how your company should adapt.

By NomadicTax Research Team • 5-8 min read • September 16, 2026

## Overview: The Tax Simplification Package On **24 June 2026**, the European Commission introduced a package comprising two major proposals: the **Direct Taxation Omnibus** and the **Recast of the Directive on Administrative Cooperation (DAC)**. Key goals include reducing complexity and enhancing competitiveness in the EU Single Market. ([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)) ### Key Changes Under the Omnibus Proposal - Abolishes **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?utm_source=openai)) - Extends the **Parent-Subsidiary Directive** to include **pension institutions** to allow exemptions on dividend income. ([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)) - Expands corporate reorganisation rules under the **Tax Merger Directive**, covering mergers, divisions, and transfers at group level. ([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)) ### Key Changes Under DAC Recast - Codifies nine existing DAC directives into a single the **Directive on Administrative Cooperation**, simplifying legal texts. ([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)) - Removes reporting obligations for certain cross-border tax arrangements for groups already subject to **Pillar Two minimum tax rules**, cutting compliance cost for about **3,000** large multinationals (~€300 million yearly savings). ([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)) - Low-value online goods seller reporting thresholds increased; removes overly burdensome or low-value cross-border arrangement reporting for SMEs. ([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)) ## Timeline & Effective Dates - These proposals are **not yet law**—they must be agreed by Council & Parliament, then transposed into national laws. ([taxation-customs.ec.europa.eu](https://taxation-customs.ec.europa.eu/taxation/business-taxation/faster-directive_en?utm_source=openai)) - The Omnibus & DAC Recast are expected to significantly cut costs—total administrative savings estimated at **€7.9 billion/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?utm_source=openai)) ## What Businesses Should Do Now 1. **Assess inter-company cross-border payments**: If your group makes frequent royalty, interest, dividend payments to related entities in other EU states, map those flows now. 2. **Review whether you already qualify under Pillar Two rules**—if so, you may benefit from reduced reporting requirements. 3. **Align legal structure**: Entities like pension institutions should explore whether they can (or want to) benefit from expanded exemptions in coming laws. 4. **Update compliance systems**: With unified DAC rules, reporting platforms, thresholds, and processes will shift—establish adaptable internal tax reporting. ## Impact on Entity Setup & Tax Planning - Companies may restructure to take advantage of the abolition of withholding taxes—e.g. consolidating entities in jurisdictions better suited for dividend influx (if legal certainty improves). - Pension funds and institutional investors with cross-EU investments stand to gain from reduced WHT burdens and clearer tax positions. - But there are risks: delays in national transposition, potential anti-abuse rules, and uneven implementation across Member States. ## Example Scenario Imagine a Luxembourg parent company receiving royalties from subsidiaries in Germany and Spain. Under current rules, royalty payments are subject to withholding or require complicated reclaim. Under the new Omnibus, such payments between associated EU companies would become **wholly exempt**, improving cash flows and reducing admin. ## Conclusion: Key Takeaways - **Not yet effective**, but far-reaching. Businesses should **gear up now**, not wait. - Identify exposure to cross-border payments and reporting obligations. - Invest in compliance and forecasting for 2027-2028 when many changes may come live.