European Commission adopts tax simplification package: Omnibus and DAC Recast

On 24 June 2026, the European Commission adopted a tax simplification package comprising two proposals; the direct taxation Omnibus and the Recast of the Directive on Administrative Cooperation (DAC), both aimed at simplifying EU tax rules and reducing compliance burdens for businesses.

The proposals will be discussed in the European Council, with proposed adoption and implementation into domestic law targeted for 2027-2028.

Omnibus

The Omnibus proposal includes the following changes to the Anti-Tax Avoidance Directive and other Directives.

General appreciation

The proposed Omnibus Directive provides for most-welcome measures to facilitate investment (with)in the EU, thereby also clearly addressing pain points and ‘overreaching’ existing measures raised by industry, and creating an equal level playing field between Member States. It goes ‘at the cost’ of an extension of GAAR to also withholding tax and Pillar Two and elimination of the CFC Model B, and introduction of a subject -to-tax condition as to interest and royalty payments, be it with relevant exceptions for entities (pertaining) to groups subject to Pillar Two. The impact of the latter is in general expected to be relatively limited, especially for multinational groups, cf. multiple Member States already having adopted similar or equivalent legislation and/or absence of withholding tax under domestic law as to interest and/or royalty payments.     

On that basis and as to Belgium specifically, the most important proposed changes with expected broadest relevancy seem to relate to :

• abolishment of the 10%/25% relevant ownership requirement as to participation (dividend) and withholding tax (dividend, interest and royalty) exemption;

• non-application of CFC as to companies and subsidiaries part of a group subject to Pillar Two. This practically takes away for relevant multinational groups many uncertainties and interpretation and application issues and complexity. Acknowledging the United States remaining the biggest foreign investor in Belgium, it is regretful that such relaxation may not be entirely available for Belgian companies pertaining to US HQ’ed groups;

• exclusion of qualifying third party loans from the application of the EBITDA rule and mandatory implementation of the group escape clause;

• elimination of the imported hybrid-mismatch rule(s), taking away at least part of the uncertainty and interpretation and application complexity of those, in particular also relevant for US HQ’ed groups;

• Introduction of a new (EU wide) R&D tax incentive (R&D allowance);

• the availability of a clear European legislative framework as to most sorts of corporate restructurings.
  

Anti-Tax Avoidance Directive (ATAD)

The ATAD contains minimum anti-avoidance rules for corporate taxpayers in the EU, with several business friendly revisions now proposed, at the expense of a broadening of general anti-abuse. 

R&D allowance

A minimum standard for deductibility of certain R&D expenditure is introduced, along the following headlines :

• expenditure related to plant, machinery, and other tangible assets (excl. land and buildings) used directly for or to support R&D activities or facilities, insofar wholly and exclusively as such deployed for at least three consecutive years;

• deductibility in the year expenditure is incurred or within the following four tax periods;

• balancing adjustment for disposals, demolitions, or other transfers based on disposal value;

• Adjustment of the EBITDA interest calculation to ensure no reduction of interest deductibility.

Interest limitation rule

The ATAD interest limitation rule restricts the deductibility of exceeding borrowing costs, generally by reference to a percentage of EBITDA. The main proposed changes are:

• the 30% EBITDA threshold becoming mandatory (thus disallowing lower thresholds);

• the EUR 3 million safe harbor becoming mandatory within the first three years, subject to annual inflation indexation;

• exclusion of certain low-risk third-party loans used solely to fund the borrower's own activities, and elimination of the existing standalone company exemption;  

• add-back (to EBITDA) of qualifying R&D expenditure deducted under the new R&D or more favorable national rules;

• full deduction of exceeding borrowing costs in any year where EBITDA falls by at least 50% compared to the prior year;  

• mandatory carry forward of non-deductible exceeding borrowing costs and the group escape rule.

General anti-abuse rule

The ATAD general anti-abuse (GAAR) rule obliges EU member states to disregard non-genuine arrangements put in place for the main purpose, or one of the main purposes, of obtaining a tax advantage. The proposal amends the wording of the GAAR confirming its application to all direct taxes levied on companies, including withholding taxes and Pillar Two top-up taxes.

Controlled foreign company rules

The controlled foreign company (CFC) rules aim at countering the diversion of income to low-taxed controlled entities. The main proposed amendments are:

• mandatory application of the ATAD model A CFC regime (based on specific items of income) and thus eliminating model B (based on no or to low-taxed non-genuine subsidiaries); 

• focus of targeted income categories on passive income such as interest, royalties, dividends, financial leasing income, income from insurance, banking and other financial activities, and certain invoicing company income;

• exemptions where relevant income remains below one-third thresholds, with a specific exemption for small and medium-sized groups or stand-alone companies;

• exemption for entities part of multinational groups or large domestic groups subject to Pillar Two, with safeguards though as to groups with an ultimate parent company located in a jurisdiction with a qualified side-by-side regime, and low-taxed entities subject to a qualified domestic top-up tax without refunds or related financial benefits.

Hybrid mismatch rules

The ATAD hybrid mismatch rules seeks to neutralize tax mismatches arising from differences in how jurisdictions treat entities, instruments, or payments. The Omnibus proposal entirely removes the imported mismatch rule(s). 

Parent-Subsidiary Directive (PSD)

The PSD aims to prevent double taxation of profit distributions between companies in different EU member states. The main proposed amendments are:

• removal of the minimum holding requirement , extending the withholding tax exemption and double taxation relief to all cross-border intra-EU profit distributions regardless of participation level;

• applicability to pension institutions, through a specific exception to the subject-to-tax condition;

• applicability to certain permanent establishment situations, such as distributions attributable to a permanent establishment located in a different member state of the distributing company;

• introduction of a self-assessment model with ex-post controls and anti-abuse rules (disallowing prior authorization at source), and specific rules as to reclaim and refund of incorrectly levied withholding tax; 

• deductions for holding-related costs or losses possibly being denied in relation to 10% or higher holdings, be it capped at 5% of the dividend;

• update of the list of eligible company forms.

Tax Merger Directive (TMD)

The TMD provides rules for tax neutral treatment of certain cross-border reorganizations, including mergers, divisions, transfers of assets, share-for-share transactions. The proposed changes are:

• broadening of the merger definition include certain simplified / ‘silent’ mergers (i.e. here no new shares are issued);

• inclusion of divisions by separation, covering transfers of part of a company's assets and liabilities to one or more recipient companies with consideration issued to the transferring company (rather than directly to its shareholders);

• inclusion of cross-border conversions where assets and liabilities remain connected to the departure member state or a permanent establishment there, subject to possible recapture upon future disposal of the relevant shares or securities;

• update of the list of eligible company forms.

Interest and Royalties Directive (IRD)

The IRD provides for a withholding tax exemption on certain interest and royalty payments between qualifying companies in different EU member states. The main proposed amendments are:

• removal of the minimum 25% shareholding requirement;

• introduction of a self-assessment model with ex-post controls and anti-abuse rules (disallowing prior authorization at source), with notification obligation if conditions no longer being met;

• introduction of a double non-taxation safeguard, disallowing exemption or non-deductibility in case the recipient is located in a jurisdiction that does not levy corporate income tax or applies a zero rate to interest or royalty income, except where e.g. the recipient is subject to a qualified domestic top-up tax or the group is subject to Pillar Two or equivalent OECD model rules;

• expansion to interest and royalty payments attributable to a permanent establishment;

• update of the list of eligible company forms.

Tax dispute resolution mechanisms directive

The tax dispute resolution mechanisms directive provides a framework for resolving double taxation disputes between EU member states through a mutual agreement procedure and, where necessary, a dispute resolution phase. The proposed changes are:

• clarification of the definition of "affected person" so that each person directly affected by the same disputed question is treated as an affected person in their own right;

• amendments to the complaint procedure as to multi-entity cases;

• replacement of the simultaneous submission requirement by a 30-day submission window.

FASTER Directive

The FASTER directive is intended to make withholding tax relief procedures faster and more secure for investors, financial intermediaries, and tax authorities. The main proposed amendments are:

• adjustments to the scope to ensure procedures remain available where a withholding tax exemption is claimed under the amended IRD or PSD;

• relief of domestic refund in case exemption cannot be granted at source.

DAC recast

This proposal simplifies reporting obligations, reduce reporting with low-value, and improves the quality of information exchanged between EU member states, without reducing the existing level of protection against tax fraud, evasion, and avoidance.

Tax identification number verification

• The proposal introduces a centralized tool to improve the accuracy of TINs included in DAC reporting.

• The Commission would develop a digital and automated TIN verification tool by 31 December 2030 at the latest. The tool would be available to tax authorities and reporting entities, with technical parameters set out in an implementing act.

• Use of the tool would be optional. However, where a TIN is verified through the tool, the reporting entity would be able to report a reduced set of identification data, namely the taxpayer’s name and TIN. Equivalent verified identification services could be used instead of a TIN with the same benefit of reduced identification reporting.

Automatic exchange of information (‘DAC 1’)

DAC 1 introduced automatic exchange of information between EU member states on certain categories of income and capital.

• The concept of “available information” would be broadened to include registers and databases of other national government-level authorities.

• Life insurance products would be removed as a category of information to be exchanged. The proposal indicates that this category is exchanged by only a limited number of EU member states and overlaps to a significant extent with financial account reporting.

• Beneficial ownership information for immovable property would be added to the automatic exchange of information framework.

Alignment of country-by-country reporting and Pillar Two information return (‘DAC 4’ and ‘DAC 9’)

DAC 4 covers country-by-country (CbC) reporting for multinational enterprise (MNE) groups. DAC 9 introduced information exchange in relation to Pillar Two, including the central filing of the top-up tax information return for MNE groups within the global minimum tax framework.

• The proposal would streamline notification obligations for MNE groups that are subject to both DAC 4 and DAC 9. MNE groups would be able to file one notification per group for both DAC 4 and DAC 9 purposes. The notification would be made using a common template and would follow the CbC reporting timeline, with filing envisaged by the last day of the fiscal year of the MNE group.

• Once filed with one tax authority, the notification would be exchanged with the relevant tax authorities within three months after the filing deadline reducing duplication and improving consistency across EU member states.

Access to registers (‘DAC 5’) 

DAC 5 gave tax authorities access to certain anti-money laundering information, including beneficial ownership and customer due diligence information. The DAC framework also relies on the ability of tax administrations to access and use relevant information held in national registers and databases.

• The DAC’s references to the EU anti-money laundering framework would be updated to reflect the new anti-money laundering directive and regulation. This includes access to updated registers and due diligence information.

• Tax authorities would also have access to the new interconnected real estate register and to national pension registers.

Mandatory disclosure rules (‘DAC 6’)

DAC 6 requires intermediaries and, in certain cases, taxpayers to report certain reportable cross-border arrangements that meet specified hallmarks. The reported information is exchanged between EU member states’ tax authorities.

• Arrangements involving Pillar Two entities would not be reportable as those groups are subject to the15% minimum effective tax rate. The rule does not apply to groups applying the side-by-side exemption. 

• The reporting deadline would be extended to 90 days and would only start once the first step of implementation has been made.

• Legal professional privilege would be narrowed to lawyers and authorized under national law for legal representation who would have no reporting obligation. The notification exemption applies to an even more limited group, such as attorneys.

• Category A hallmarks (which are generic hallmarks linked to the main benefit test) would be deleted, and the definitions of marketable and bespoke arrangements would be removed. The reference in hallmark C1 to OECD work on non-cooperative jurisdictions would be replaced by a reference to the EU Code of Conduct work on tax cooperation.

• The ‘Unshell’ directive has been withdrawn. Its substance criteria would be included in the proposed DAC recast. The Commission proposes to further develop the substance criteria in hallmark D2 through a Council implementing act.

• The main benefit test would be upheld. The proposal announces (non-binding) guidance on the application of the main benefit test and of the remaining hallmarks.

Online platform reporting (‘DAC 7’)

DAC 7 introduced reporting obligations for digital platform operators. Platform operators must collect and report information on certain sellers using their platforms, including sellers earning income from certain activities, such as the sale of goods, rental of immovable property, personal services, and rental of transport.

• The proposal would simplify certain DAC 7 reporting obligations, in particular, for sales of goods through digital platforms. For sales of goods, the transaction-count threshold would be removed, and the monetary threshold would be increased from EUR 2.000 to EUR 3.000.

• The proposal would also strengthen the framework for non-compliant third-country platform operators. It would clarify when sanctions apply, enhance cooperation between tax authorities, and enable simultaneous controls.

How Deloitte can help

Deloitte can assist multinational enterprise (MNE) groups with all possible impacts of the two proposed directives.