EU: Formal EC notice requesting France, Germany, and Italy to align with PSD; EC updates on DAC9 infringement proceedings
Developments related to infringement procedures by the European Commission (EC)
The European Commission (EC) on July 8, 2026, announced its decision to open infringement procedures by sending letters of formal notice to France (INFR(2026)2087), Germany (INFR(2026)2089), and Italy (INFR(2026)2088) with respect to the local application of the Parent Subsidiary Directive (Council Directive 2011/96/EU – PSD).
According to the EC announcement, tax legislation in Germany, France, and Italy is not aligned with the PSD as it taxes dividends received by a parent company from subsidiaries resident in other member states multiple times beyond what is allowed in the directive. The EC’s announcement does not include further details on the specific provisions of the tax laws in each of the three jurisdictions that lead to this outcome.
It should also be noted that the EC recently launched an additional infringement procedure against France finding that the French legislation restricts the withholding tax exemption under the PSD to situations where the parent entity’s “place of effective management” is located within an EU member state. The EC considers this approach incompatible with the PSD, which defines an eligible parent company solely by reference to its tax residence under the laws of its member state.
Read a July 2026 report prepared by KPMG’s EU Tax Centre
Also on July 8, 2026, the EC published updates in its infringement proceedings concerning the transposition of Directive (EU) 2025/872 (DAC9), which introduces the EU framework for the exchange of top-up tax information returns filed by groups in scope of Pillar Two with the tax administration of an EU member state and which all EU member states were required to implement into domestic law by December 31, 2025.
- In January 2026, proceedings were initiated and targeted a total of 11 member states that had failed to notify the EC of national measures transposing the directive into domestic legislation.
- The EC subsequently announced that it had closed the infringement procedure against Romania and has now announced that it has also closed its infringement procedure against Sweden.
- The EC sent reasoned opinions to Belgium, Bulgaria, and Cyprus on the grounds that the three member states had not yet adopted or notified all measures required to fully implement DAC9—representing the second stage of the infringement proceedings initiated in January 2026 through letters of formal notice. The three member states now have two months to respond and take the necessary measures. Otherwise, the EC may refer the cases to the Court of Justice of the European Union (CJEU) and request financial sanctions.
- Infringement procedures remain open for the other six notified countries (i.e., the Czech Republic, Greece, Malta, the Netherlands, Poland, and Portugal).
Read a July 2026 report prepared by KPMG’s EU Tax Centre