In brief
The European Commission has proposed a comprehensive overhaul of several key EU tax directives through the proposal for an EU Tax Omnibus Directive published on 24 June 2026 ("Omnibus Proposal"). The Omnibus Proposal is intended to enhance competitiveness, reduce tax compliance burdens and simplify cross-border operations within the EU. Relevant measures include easing interest limitation restrictions, streamlining and broadening withholding tax exemption procedures, expanding tax-neutral restructuring rules and reducing certain reporting obligations. The Omnibus Proposal will be submitted to the European Parliament for consultation and will require unanimous approval by all Member States for adoption.
Simultaneously, a proposal for a recast of the EU rules on administrative cooperation in the field of taxation – better known as DAC – has also been published. Please see our initial findings below.
Key takeaways
- The EU aims to simplify and harmonize tax rules across the EU. The Omnibus Proposal contains several taxpayer-friendly measures, including more flexible interest deduction rules, targeted CFC exemptions, simplified withholding tax procedures and broader access to tax-neutral reorganizations.
- A recast of the DAC should simplify and reduce reporting obligations, e.g., by introducing an exemption from DAC6 reporting for multinationals in scope of Pillar Two and by the removal of certain DAC6 hallmarks.
- The Omnibus Proposal and recast of the DAC will require unanimous approval from all EU Member States. Therefore, it is uncertain if, or to what extent, the proposed amendments will be implemented, also considering budgetary implications.
- Taxpayers may wish to assess whether the proposed changes could improve tax positions, financing structures, dispute management processes or impact future reorganizations.
In more detail – Omnibus Proposal
The Anti-Tax Avoidance Directive (ATAD)
- R&D Allowance: It is proposed to extend the scope of ATAD to qualifying research and development (R&D) expenditure. A minimum R&D allowance is introduced, allowing qualifying R&D expenditure to be deducted either immediately or spread over any of the four subsequent tax periods. To prevent abuse, a claw-back provision is introduced which is broadly triggered if the R&D expenditure is not used for R&D purposes for a minimum period of three years; failing this, the benefit of the allowance may be denied under certain circumstances.
- Reducing interest limitation constraints: Under the current ATAD, Member States had to implement a rule that limits the deduction of interest to a maximum of 30% of a company’s tax-adjusted EBITDA with a de minimis exemption of up to EUR 3 million. It was at the Member States’ discretion to apply lower limits. The Omnibus Proposal requires Member States to apply th30% standard and a mandatory de minimis exemption of EUR 3 million. Furthermore, no interest deduction limitation will apply in years in which the EBITDA has decreased by 50% or more. Also, third party loans are no longer in scope provided the loan is used for a taxpayer’s own activities, i.e. the loan is not lent on to a group company. The defense sector is temporarily excluded from this rule. Lastly, currently optional elements such as a group escape rule and a carry-forward mechanism are made mandatory.
- Exemption from Controlled Foreign Company (CFC) rules: Groups in scope of Pillar Two and small or medium-sized companies may benefit from targeted exemptions provided certain conditions are met. Furthermore, Model A will be mandatory which might result in changes to CFC regimes in for example the Netherlands, Ireland or Malta.
- Eliminating the imported hybrid mismatch rules: The EU introduced targeted legislation for payments by EU tax resident entities if such payments financed a connected deduction of costs outside the Netherlands. It is suggested to delete this rule, because of its complexity and to ensure proportionality.
Interest and Royalty Directive and Parent-Subsidiary Directive
- The Omnibus Proposal significantly simplifies access to the withholding tax exemptions by eliminating the requirement that a recipient has a minimum holding in the capital of the paying company, and the requirement to maintain such a minimum holding for a certain period.
- Member States will no longer be allowed to require prior authorization or an administrative procedure for verifying whether the conditions for the exemption are fulfilled at the time of the payment. However, if the taxpayer cannot ensure eligibility at the time of the payment, either: (i) a fast-track refund under Faster and Safer Relief of Excess Withholding Taxes is made available; or (ii) domestic refund procedures should be applied within a reasonable time.
- An anti-abuse measure is introduced under which Member States are required to levy withholding tax on, or deny deductibility of, interest and royalty payments where the recipient is established in a jurisdiction that does not levy corporate income tax or a rate of zero per cent applies.
Directive on Tax Dispute Resolution Mechanisms in the EU
- This directive lays down rules on Mutual Agreement Procedures (MAP) to resolve disputes between Member States when those disputes arise from the interpretation and application of tax treaties.
- Taxpayers must be informed without delay where the competent authorities conclude that no agreement can be reached rather than waiting for the expiry of the two-year MAP period. This should accelerate access to arbitration.
- Another interesting development is that ongoing procedures are suspended once a complaint is submitted and will even be terminated with immediate effect if the complaint is accepted by all competent authorities.
Tax Merger Directive
- A few years ago, the EU introduced the Mobility Directive, which focuses on cross-border restructuring operations but did not yet include tax measures. The Omnibus Proposal updates the Tax Merger Directive's scope and definitions to align with the Mobility Directive.
- The proposed changes to the Tax Merger Directive include adding the concepts of ‘simplified mergers’ and ‘divisions by separation’ to the scope.
- Furthermore, tax-neutral restructuring is made available for migrations and cross-border conversions of EU companies (previously only available to specific EU legal forms).
In more detail – Recast of the DAC
Alongside the Omnibus Proposal, the European Commission also proposes a recast of the Directive on Administrative Cooperation ("DAC Proposal") within the EU. The DAC Proposal aims to simplify and consolidate the DAC framework (DAC1–DAC9) into a single instrument while introducing targeted measures to reduce administrative burdens and improve data quality. The DAC Proposal includes extensive reforms, including:
- An exemption for multinationals in scope of Pillar Two from DAC6 reporting on cross-border arrangements;
- The removal of certain DAC6 hallmarks, because they provide limited information on abusive tax structures and generate disproportionate reporting burdens.
The upcoming EU Council president, Ireland, has indicated the ambition to adopt the DAC Proposal by year-end, but unanimous approval by all Member States will be required.
Please contact us if you have any questions or would like to discuss this further.
Link to underlying documents here.