knowledge 8 July 2026 |

Tax Simplification: Recent EU Developments

On 24 June 2026, the European Commission adopted a proposal for a Council Directive as regards the simplification of the Union framework on direct taxation and supporting growth and competitiveness of the EU.  This proposal is designed to streamline existing EU rules on direct taxation and thereby reduce compliance burdens and administrative costs for businesses operating cross-border.  The Commission expects this tax simplification package to save EU businesses around €8 billion annually, of which €3.3 billion is expected to relate to administrative costs.

Tax Simplification Package

The European Commission’s proposal comprises two elements:

• A proposal for an Omnibus Directive on Direct Taxation (the “Omnibus Directive”); and
• A proposal for a Directive on administrative cooperation in the field of taxation (recast), which would codify the Directive on Administrative Cooperation and eight amending Directives into a new single, coherent instrument (the “DAC Recast”).

According to the Commission, this package aims to modernise the EU's direct tax framework and strengthen the competitiveness of the Single Market, while maintaining existing protections against tax fraud, evasion and avoidance.

Omnibus Directive

Key measures envisaged in the proposed Omnibus Directive include the following:

• Introduction of an exemption from withholding tax on all cross-border payments of dividends, interest and royalties between companies in the EU. The Commission estimates that this measure should deliver savings and benefits of around €5.3 billion annually.
• Removal of unnecessary restrictions on genuine third-party and market financing, as well as the simplification of the interest limitation rule in the Anti-Tax Avoidance Directive (as amended) (the “ATAD”).  The Commission estimates that these changes will deliver compliance and administrative cost reductions of over €500 million per year.
• Elimination of overlapping provisions between the Controlled Foreign Company (“CFC”) rules under the ATAD and the Pillar Two Directive.  The Commission estimates that this measure should save businesses approximately €160 million in compliance costs annually.
• Introduction of a single-model approach for the CFC framework across the EU, to simplify its application and enhance legal certainty.  The Commission estimates that this measure would reduce compliance costs by €45 million per year.
• Addressing issues related to the interpretation and application of the Dispute Resolution Mechanism Directive.
• Expansion of the scope of the Tax Merger Directive so that cross-border business reorganisations covered by EU corporate law can take place without immediate taxation.
• Introduction of a common minimum standard for the tax treatment of investment in R&D related tangible assets across the EU.

DAC Recast

As noted above, it is proposed that the DAC Recast will codify nine existing directives into a single new instrument, in the interests of making the legislation more user-friendly and coherent.

Other key measures proposed as part of the DAC Recast include:

• Removing reporting obligations for multinational enterprise groups subject to the minimum 15% tax rate under Pillar Two rules, generating compliance cost savings of around €300 million according to Commission estimates.
• Elimination of reporting requirements for certain cross-border arrangements that provide limited added value for tax administrations.  The Commission estimates that this measure should reduce reporting volumes by 35% and save €40 million annually.
• Increasing the reporting threshold for online sales of goods, the removal of reporting obligations on over 10 million private sellers.  The Commission estimates that this measure, designed to support the circular economy, will result in compliance cost savings of €678 million for digital platforms.
• Introduction of a single notification requirement for country-by-country reporting and central filing of top-up tax information returns, with a view to eliminating duplicate notifications.
• Introduction of a new verification tool for taxpayer identification numbers, ensuring that tax administrations can efficiently and effectively identify all reported taxpayers.
• Enhancing the existing framework for automatic exchange of information on certain categories of income and capital by requiring that all information available on all categories is exchanged while, at the same time, providing a legal basis to tax authorities to access this information.

What happens now?

The Commission’s tax simplification package will now be submitted to the European Parliament for consultation and to the Council for adoption.  The Commission has indicated that most of the simplification measures should be implemented by 2028, with the rest of the measures expected to be implemented by 2030.

Further information on the proposed Omnibus Directive and DAC Recast can be found in the Commission’s factsheet and Q&A document, which were published alongside their press release on 24 June 2026.

We will continue to monitor developments in this area.