- On 24 June 2026, the European Commission (EC) released its proposal for a major simplification of the EU direct tax framework, updating several existing directives to reduce complexity and improve the competitiveness of the Single Market. The key elements are set out below.
- Removing the minimum shareholding requirement in the parent-subsidiary and in the interest and royalties directives, effectively eliminating withholding taxes (WHT) on cross-border payments of dividends, interest, and royalties between EU companies.
- Introducing a new EU-wide R&D tax allowance, providing for an accelerated deduction of qualifying R&D expenditure to encourage investment and innovation across the EU.
- Removing the overlapping requirements between the CFC regime and Pillar Two global minimum tax.
- Modernising the interest limitation rules, including mandatory interest deduction safe harbours and exclusions for certain third-party financing.
- Removing the imported hybrid mismatch provisions and strengthening tax dispute resolution mechanisms.
- Facilitating cross-border reorganisations by expanding the Tax Merger Directive to cover additional transactions.
- FASTER withholding tax procedures aligned with the revised framework.
- Timing: The proposal is intended for adoption in 2027, with the transposition by member states by end of 2028 and entry into force phased in between 2029 and 2037, subject to the final text.
Resources (click to open)
- European Commission’s tax omnibus proposal published (Deloitte tax@hand, June 2026)
