- 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 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. The proposal is intended for adoption in 2027.
- Facilitating cross-border reorganisations by expanding the Tax Merger Directive to cover additional transactions.
- FASTER withholding tax procedures aligned with the revised framework.
- Timing: implementation could begin from 2028 onwards, subject to approval by EU Member States and transposition into domestic law.
Resources (click to open)
- European Commission’s tax omnibus proposal published (Deloitte tax@hand, June 2026)
