On 25 June 2026, the European Commission published a proposal to simplify six EU direct tax directives, aiming to reduce administrative burdens for businesses operating cross-border. The proposal targets a 25% reduction in administrative burden for all businesses and 35% for SMEs by the end of the mandate, addressing disproportionate compliance costs and legal uncertainty.
EU businesses spend nearly 2% of turnover on tax compliance, with cross-border costs averaging EUR 3,308 per year for SMEs and EUR 8,266 for larger firms. Legal uncertainty from unclear rules was flagged by 73% of 117 respondents, while 68% noted overlaps between the Pillar 2 Directive and existing ATAD rules, particularly concerning controlled foreign company (CFC) rules. Withholding tax relief issues under the Interest and Royalties Directive (IRD) and Parent-Subsidiary Directive (PSD) were cited by 67% of respondents. One-off compliance costs for Pillar 2 are estimated at EUR 1.2 billion, with recurring costs of EUR 517 million per year; ATAD compliance can reach EUR 100,000 per year per multinational enterprise.
The proposal covers the IRD, PSD, Tax Merger Directive (TMD), Anti-Tax Avoidance Directive (ATAD), Dispute Resolution Mechanism (DRM), and the Pillar 2 Directive (EU 2025/50). It aims to streamline overlapping rules, clarify ambiguous terms (e.g., holding requirements under IRD and PSD), and reduce compliance costs without undermining anti-tax avoidance objectives. A separate DAC Recast proposal is being prepared in parallel.
Stakeholder impact - EU businesses (especially SMEs): Positive impact from reduced compliance costs and legal clarity, though some may face transitional adaptation costs. - National tax authorities: May need to adjust administrative procedures and interpretations, potentially increasing short-term workload. - Tax advisors and compliance firms: Negative impact as demand for cross-border tax advisory services may decline due to simpler rules. - EU policymakers: Positive impact from improved competitiveness and growth, but must balance simplification with anti-avoidance effectiveness.
Institutional follow-up The proposal now moves to the Council for discussion and adoption. The European Parliament will be consulted. Member states are expected to scrutinise the simplification measures, particularly regarding the balance between reduced burdens and tax base protection.