Tax Simplification Package

Over the past decade, the EU has significantly developed its direct taxation framework. Most notably, developments have addressed the challenges arising from globalisation, digitalisation, the rise of aggressive tax planning practices and the need to strengthen the functioning of the internal market.  This framework has delivered important results. However, the cumulative effect of successive legislative initiatives has also increased complexity and compliance costs for businesses operating cross-border.

The proposal addresses these issues and ensures that the Union's direct tax framework remains coherent, proportionate and effective. Its goal is to simplify the acquis in direct taxation, reduce unnecessary compliance burdens, enhance legal certainty, and facilitate cross-border activity in the internal market.

The Omnibus on Direct Taxation introduces key measures, such as:

• Simplifying cumbersome rules to improve the internal market: The Omnibus introduces an exemption from withholding tax on all cross-border payments of dividends, interest, and royalties between companies in the EU. By removing upfront procedural requirements and simplifying refund processes, the measure will facilitate financing, encourage investment, and enhance competitiveness. This measure alone should bring EU taxpayers savings and benefits of around €5.3 billion annually.
• Facilitating Financing: The Omnibus removes unnecessary restrictions on genuine third-party and market financing, making it easier for businesses to invest in the internal market. The Omnibus also simplifies the interest limitation rule in the Anti-Tax Avoidance Directive (ATAD) by eliminating implementation options and making the de minimis threshold mandatory. These changes will bring about compliance and administrative reductions amounting to over €500 million per year.
• Eliminating Duplication: The Omnibus removes overlapping provisions between the Controlled Foreign Company (CFC) rules and the global minimum tax (Pillar Two), reducing unnecessary complexity and overlaps. This measure should save businesses approximately €160 million in compliance costs annually.

The main objectives of the DAC recast proposal are to simplify, clarify and enhance the EU legal framework for administrative cooperation in the field of direct taxation. By bringing together the DAC and its eight amendments into one single legal text, the legislation is more user-friendly and coherent, thereby improving legal certainty.

The recast introduces some key measures in areas such as:

• Removing reporting obligations for certain cross-border arrangements 
• Supporting the Circular Economy: The recast increases the reporting threshold for the online sales of goods, removing reporting obligations on over 10 million private sellers, particularly those selling second-hand goods. 
• Improving Taxpayer Identification

Refer to the official European Commission webpage for additional information and background.

Read stakeholders’ Opinions and join the conversation.