European Commission proposes landmark tax simplification package to streamline compliance and boost competitiveness

On 24 June 2026, the European Commission adopted an ambitious tax simplification package that includes two legislative proposals aimed at simplifying EU tax rules, reducing compliance burdens for businesses, and strengthening the competitiveness of the Internal Market. The direct taxation Omnibus and the Recast of the Directive on Administrative Cooperation (DAC) are designed to modernise the EU's direct tax framework, make it more efficient and better adapt it to the current economic environment, while maintaining the same level of strong protection against tax fraud, avoidance and evasion. The package is estimated to bring savings and reduce compliance costs for business by approximately EUR 7.9 billion. The Commission's proposals are part of a wider commitment to simplification that aims to simplify the EU acquis, create a more business-friendly environment across the EU, and boost EU competitiveness. By simplifying complex rules and eliminating unnecessary requirements, the package enables businesses to focus their resources on growth, innovation, and investment.

The direct taxation Omnibus Directive: Simplifying EU tax rules

The Taxation Omnibus introduces a comprehensive package of measures to modernise the EU's direct tax framework, making it simpler, more efficient and more supportive of investment, growth and competitiveness across the Single Market.

A central element of the package is the abolition of withholding taxes on cross-border payments of dividends, interest and royalties between EU companies. By removing a longstanding barrier to cross-border investment, this measure will strengthen the Single Market, enhance the competitiveness of European businesses and support the development of the Savings and Investment Union by facilitating the free movement of capital across the EU. In addition, the scope of the Parent-Subsidiary Directive will be extended to pension institutions, enabling them to benefit from withholding tax exemptions on dividends received from other Member States.

The Omnibus also introduces a common minimum standard for the tax treatment of investments in R&D-related tangible assets. By allowing full and immediate expensing in all Member States, the measure will make the EU a more attractive destination for research, innovation and high-value investment.

To reduce complexity and improve legal certainty, the package streamlines the interaction between the Controlled Foreign Company (CFC) rules and the global minimum tax framework (Pillar Two). It removes overlapping requirements and introduces a harmonised model for the CFC regime, ensuring more consistent application across Member States.

The Omnibus further simplifies business financing rules by modernising the interest limitation provisions of the Anti-Tax Avoidance Directive (ATAD). The removal of implementation options and the increase of the mandatory de minimis threshold will reduce administrative burdens and improve the usability of the rules. In addition, low-risk third-party borrowing and market-based financing arrangements will be excluded from the scope of the limitation rule, providing targeted relief where there is no significant risk of tax avoidance.

The package also strengthens tax dispute resolution mechanisms by addressing procedural shortcomings that have often delayed or prevented the settlement of cross-border tax disputes. This will enable businesses to resolve tax conflicts more swiftly and with greater certainty.

To facilitate cross-border business activity, the Tax Merger Directive will be expanded to cover all forms of corporate reorganisations recognised under EU company law. As a result, mergers, divisions and asset transfers will be able to take place on a tax-neutral basis, making cross-border restructuring more seamless and efficient.

Taken together, these measures will reduce compliance costs, enhance legal certainty and create a more investment-friendly tax environment. By removing obstacles to cross-border activity and fostering innovation, the Taxation Omnibus will support sustainable growth, strengthen the competitiveness of European businesses and deepen the integration of the Internal Market.

Recast of the Directive on Administrative Cooperation (DAC): Reducing reporting burdens and improving the efficiency and effectiveness of administrative cooperation

By codifying the nine existing directives into a single, more coherent legal instrument, the recast improves legal clarity for both businesses and tax administrations. At the same time, the recast introduces several key simplifications and improvements that will reduce administrative burdens for EU businesses and make the framework more efficient and effective.

One of the most impactful changes is the reduction of reporting obligations. The recast removes reporting requirements on cross-border tax arrangements for approximately 3,000 multinational enterprise groups that are already subject to the 15% global minimum tax under Pillar Two rules, generating annual compliance cost savings of €300 million. Additionally, it eliminates reporting requirements for all other companies (including SMEs), in relation to certain cross-border tax arrangements that have demonstrated to be of limited added value to tax administrations, reducing reporting overall volumes by 35% and saving €40 million each year.

The recast also supports the circular economy by increasing the reporting threshold for the online sales of goods. This change removes reporting obligations on over 10 million sellers, particularly private sellers of second-hand goods, delivering compliance cost savings of €678 million for digital platforms.

To streamline compliance processes, the recast introduces a single notification obligation for the purposes of country-by-country reporting and the central filing of top-up tax information returns. This measure will save businesses over €260 million annually by eliminating duplicate notifications.

Moreover, the recast improves taxpayer identification by introducing a new verification tool. This ensures that tax administrations can efficiently and effectively identify all reported taxpayers,

Finally, the recast enhances the coverage of the existing framework, by making it mandatory to exchange information on all categories of income and capital. This will enable tax administrations to obtain access to more complete information to effectively apply their national taxation rules.

Together, these measures will reduce compliance costs for EU businesses by over €1 billion annually while ensuring that tax administrations remain fully equipped to safeguard tax revenues and combat tax fraud, evasion, and avoidance.

Next Steps

Both proposals will now be submitted to the European Parliament for consultation and Council for adoption. This package is part of the Commission's simplification agenda, aiming to reduce administrative burdens by at least 25% (35% for SMEs) by 2029.

Quotes

"Today's simplification package sends a clear message: Europe is serious about competitiveness, making it easier for our businesses to grow, invest, and succeed on its soil. We are upholding high standards of tax transparency and fairness, and at the same time, we are decreasing the administrative burden and modernising our tax framework, saving approximately €8 billion."

Wopke Hoekstra, Commissioner for Climate, Net Zero and Clean Growth

"Europe needs simpler rules to deliver better results. Our tax simplification proposals offer solutions will radically improve clarity and legal certainty for businesses and tax administrations alike. They will reduce overall compliance costs for European businesses by almost €8 billion per year, including €3.3 billion in annual administrative costs. This brings total savings from our simplification agenda so far to over €18 billion - almost half of our goal for this mandate. Our proposals will also help remove obstacles to cross-border investment and economic activity, strengthening the EU's Single Market and advancing the Savings and Investments Union. By simplifying the Directive on Administrative Cooperation, we are also advancing our regulatory deep cleaning agenda. The European Commission is determined to keep building a more competitive and prosperous Europe - we won't stop until we get there"

Valdis Dombrovskis, Commissioner for Economy and Productivity; Implementation and Simplification

Documents

• Explanatory Memorandum DAC proposal for a Council Directive
• Impact Assessment DAC Proposal for a Council Directive
• Annexes DAC proposal for a Council Directive
• Regulatory Scrutiny Board Opinion
• Executive Summary of Impact Assessment
• Subsidiary Grid

More information

Directive on Administrative Cooperation (DAC)

Minimum Corporate Taxation

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