European Commission issues Tax Omnibus and DAC Recast proposals

On June 24, 2026, the European Commission (EC) published a Tax Omnibus proposal aimed at simplifying EU tax rules, reducing compliance burdens for businesses, and strengthening the competitiveness of the EU Internal Market. At the same time, the EC also released a proposal for a recast of the Directive on Administrative Cooperation (DAC).

Key proposed updates include:

Parent-Subsidiary Directive (PSD) and Interest & Royalties Directive (IRD):

• The EC proposes to remove holding requirements (minimum shareholding and duration) and to extend the list of eligible companies, thus resulting in a broad withholding tax exemption for intra-EU dividends, interest and royalties.
• Withholding tax relief is provided for dividends paid to pension institutions.

Merger Directive:

• Its scope is aligned with recent EU company law developments (to include simplified mergers and divisions by separation), and
• Tax neutrality is extended to cross-border conversions.

Anti-Tax Avoidance Directive (ATAD):

• The EC wants to introduce an EU-wide R&D allowance which grants full deductibility of capital expenditure on plant, machinery and tangible assets used directly for R&D or to support R&D facilities.
• The EC proposes changes to the Interest Limitation Rules (ILR): e.g. mandatory deductibility threshold of 30 percent of tax EBITDA,  3 million EUR de-minimis safe harbor made mandatory, exclusion for qualifying third-party debt, exclusion for public benefit projects and defense sector.
• The Tax Omnibus proposal includes a carve out from the scope of CFC rules for groups in scope of Pillar Two and SMEs and the mandatory application of the categorical passive-income approach for CFCs (model B).
• The EC proposes to extend the scope of the General Anti-Abuse Rule (GAAR) to withholding tax and Pillar Two top-up taxes.
• The proposal also mentions the removal of rules on imported mismatches.

Dispute Resolution Directive: the proposed amendments aim to enhance the effectiveness, consistency and accessibility of dispute resolution procedures across the EU, while reducing administrative burdens and addressing divergent interpretations among Member States.

FASTER Directive: the proposal amends the directive to require fast-track procedures to also apply, on a mandatory basis, to refund claims in respect of income qualifying for withholding tax exemptions under the PSD and the IRD, provided the payments would also fall within the scope of FASTER.

The proposal requires unanimous approval in the European Council. Its provisions should apply as of January 1, 2029. However, Member States will only be required to apply certain amendments starting with

• January 1, 2037, for a significant number of amendments to the PSD and the IRD (a.o. holding requirements and pension funds).
• January 1, 2032, for the changes to the de minimis threshold related to the ILR under ATAD.

More details on the EC Tax Omnibus Proposal can be found here.

The Recast includes the following key amendments:

DAC4/DAC9: the proposal includes an option for MNE groups in scope of Country-by-Country Reporting and Pillar Two to file a combined notification form indicating the group to which they belong, as well as specifying who will file the report on their behalf and by when .

DAC6: the proposal amends the EU Mandatory Disclosure Rules, including a reporting exemption for groups in-scope of Pillar Two (limited to cases where no group member benefits from arrangements reducing effective taxation below 15 percent), and changes to the list of hallmarks (e.g., removal of generic hallmarks under section A), the reporting period (i.e., trigger point only where the first implementation step is taken (e.g. signing of binding contracts) and extension of the filing deadline from 30 to 90 days) and the notification requirements for intermediaries subject to legal professional privilege.

DAC7: the proposal changes the EU reporting obligations for platform operators, clarifies the term ‘Platform Operator’, excludes certain small and medium-sized Platform Operators, amends the exclusion criteria for sellers of low-value goods, and the exclusion of related party sellers.

This proposal also requires unanimous approval in the European Council. Different dates are proposed for the application of the various changes introduced by the DAC Recast, including:

• January 1, 2028, for the amendments to the EU Mandatory Disclosure Rules and to the reporting rules for Platform Operators.
• January 1, 2030, including the option to file a combined notification form for CbyC Reporting and Pillar Two purposes.
• January 1, 2030, the previous DAC (Directive 2011/16/EU) including its various amendments (DAC1 to DAC9) will be repealed, in light of this new consolidated Directive.

More details on the DAC Recast can be found here.

Should you have any queries, please do not hesitate to contact your KPMG tax advisor.