European Commission proposes major tax simplification package
On 24 June 2026, the European Commission adopted a tax simplification package to streamline compliance and enhance competitiveness of the Single Market. The package comprises the Taxation omnibus Proposal and the Recast of the Directive on Administrative Cooperation (DAC) .
The Taxation omnibus Proposal introduces amendments to six major directives:
Interest and Royalties Directive); Merger Directive); Parent-Subsidiary Directive (2011/96); Anti-Tax Avoidance Directive (ATAD); Tax Dispute Resolution Mechanisms Directive); and Directive on Faster and Safer Relief of Excess Withholding Taxes (2025/50).
The following changes are particularly noteworthy:
- Fundamental simplification of EU withholding tax rules: exempting all cross-border dividend, interest and royalty payments between EU companies from withholding tax. This also applies to parent company structures.
- EU R&D tax framework: introducing a common minimum standard allowing full deductibility of qualifying R&D expenditure, including capital expenditure on plant, machinery and tangible assets used directly for R&D or to support R&D facilities. This represents a notable shift towards EU-level tax incentives for innovationand may enhance the attractiveness of locating R&D activities within the EU.
- Expanding the scope of the Tax Merger Directive: so that all cross-border business reorganisations covered by EU corporate law can take place without immediate taxation.
The Recast of the Directive on Administrative Cooperation (DAC) codifies the nine existing DAC directives into a single legal text and introduces several key simplifications and improvements that will reduce administrative burdens for EU businesses. Key changes include the alignment of tax reporting obligations under the DAC with the OECD Pillar 2 tax rules; simplification of DAC 7 reporting obligations for sales through digital platforms by increasing the reporting threshold for the online sales of goods (from €2,000 to €3,000); and enhanced automatic exchange of information and access to registers.
Next steps and Philea assessment:
The two proposals have been submitted to the European Parliament for consultation and the Council of the European Union for adoption. The adoption of tax Directives requires unanimous agreement among 27 Member States.
The negotiations will follow a fast-tracked process, with the aim to adopt DAC Recast by December 2026. The Tax Omnibus negotiations are expected to take more time. If the proposal is adopted, the provisions will apply not before 2029.
Philea welcomes the tax simplification proposed by the European Commission, which can be relevant for those foundations that own companies. However, as is the case with the Commission 28-regime proposal, we consider that tax simplification efforts should not be limited to companies but must be equally sought for other legal entities such as foundations.
Foundations also face a number of significant barriers in the area of taxation: from burdensome processes to claim back foreign withholding tax paid on investments in foreign companies to discriminatory tax treatment for cross-border philanthropy.
Philea therefore urges the Commission to extend its simplification efforts to foundations, in line with the recommendations set out in the European Philanthropy Manifesto: Philea stands ready to support the Commission’s work in this area.