European Commission Adopts Tax Simplification Package: Taxation Omnibus

The goal of the Taxation Omnibus 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 proposal introduces amendments to six major directives:

• Interest and Royalties Directive (2003/49);
• Merger Directive (2009/133);
• Parent-Subsidiary Directive (2011/96);
• Anti-Tax Avoidance Directive (2016/1164) (ATAD);
• Tax Dispute Resolution Mechanisms Directive (2017/1852); and
• Directive on Faster and Safer Relief of Excess Withholding Taxes (2025/50) (FASTER) amended to ensure that its scope accommodates updates to the PSD and IRD.

Key measures of the Direct Taxation Omnibus (Proposal for a Council Directive amending Directives 2003/49/EC, 2009/133/EC, 2011/96/EU, (EU) 2016/1164, (EU)2017/1852, (EU) 2025/50 as regards the simplification of the Union framework on direct taxation and supporting growth and competitiveness of the EU) include:

• exemption from withholding tax on all cross-border payments of dividends, interest, and royalties between companies in the European Union;
• introducing a common minimum standard for the tax treatment of investment in R&D-related tangible assets across the European Union;
• simplification of the interest limitation rule in the ATAD by eliminating implementation options and making the de minimis threshold mandatory;
• exclusion of low-risk third-party loans from the scope of the interest limitation rule in the ATAD to ensure that genuine bank and market financing is not subject to unnecessary restrictions;
• removal of overlapping provisions between the CFC rules in the ATAD and the Minimum Taxation Directive, reducing unnecessary complexity and overlap;
• removal of the ATAD rules on imported hybrid mismatches, as these have proven overly complex while delivering no or limited results;
• introduction of a single-model approach for the CFC rules in ATAD in order to simplify application across the European Union;
• addressing issues related to the interpretation and application of the Dispute Resolution Mechanism Directive to make it easier to use for taxpayers; and
• 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.

According to the European Commission press release, "the Taxation Omnibus is designed to simplify, not deregulate. The proposal revisits existing directives to ensure that they remain effective and fit for purpose, while fully preserving the progress and protections achieved over the past decades. There will be no compromise on the existing level of protection against tax avoidance[…]The proposal reduces fragmentation and removes unnecessary barriers, without diluting protection. The outcome will be a more harmonised system, with fewer implementation options, making it easier for businesses to navigate across the single market, while maintaining strong safeguards against abuse."

The Omnibus proposal will further be submitted to the European Parliament for consultation and the Council of the European Union for adoption.

If the proposal is adopted, the provisions will apply from 1 January 2029 (with certain exceptions).

Further documents available are:

• Questions and answers on the tax simplification package;
• Factsheet: Tax Simplification Package;
• Executive Summary Impact Assessment;
• Impact Assessment;
• Working Document; and
• Annexes.

The Commission adopted the tax simplification package on 24 June 2026.

Report from our correspondent Oana Popa, Principal Associate, IBFD. Follow our reporting on this via our daily Tax News Service(subscribers only).