EU Tax Omnibus and DAC Recast Proposed: What Multinational Groups Should Know

On 24 June 2026, the European Commission published two significant legislative proposals – a Direct Taxation Omnibus (COM(2026) 560) and a recast of the Directive on Administrative Cooperation (COM(2026) 308) – that together seek to simplify and consolidate the EU's direct tax framework. These are proposals only: they require unanimous Council approval and are not expected to become law before 2027–2028 at the earliest. Multinational groups operating within the EU should begin assessing their exposure now, as the proposals touch on cross-border reorganisations, interest and royalties regimes, mandatory disclosure rules, and the Pillar Two interaction with DAC6 reporting.

Background: Why These Proposals Matter

The EU's direct tax landscape has grown incrementally over more than two decades, layering directive upon directive without a coherent consolidation. The Commission's June 2026 package represents the most ambitious attempt to rationalise that framework since the adoption of the Anti-Tax Avoidance Directives. For groups engaged in tax structuring, transfer pricing reviews, or cross-border M&A, the proposals signal a structural shift in how compliance burdens and anti-avoidance rules will interact at the EU level.

Notably, the proposed withdrawal of the Unshell Directive (ATAD 3), formally discontinued by ECOFIN in June 2025, removes a source of significant uncertainty for holding structures – though it does not eliminate substance risk, which remains live under existing domestic rules and applicable tax treaty provisions.

The Direct Taxation Omnibus (COM(2026) 560): Key Elements

The Omnibus proposes amendments to six existing directives in a single instrument:

• Interest and Royalties Directive – revisions to the conditions under which cross-border interest and royalty payments benefit from withholding tax relief within the EU;
• Tax Merger Directive – extended to provide tax-neutral treatment for all reorganisations recognised under EU company law, not only the transaction types previously enumerated;
• Parent-Subsidiary Directive – adjustments to anti-avoidance provisions;
• ATAD (Anti-Tax Avoidance Directive) – amendments to the existing anti-avoidance rules, including interaction with Pillar Two;
• Dispute Resolution Directive – procedural changes to improve the resolution of cross-border tax disputes between Member States;
• FASTER Directive – modifications to the fast-track withholding tax refund framework.

The Omnibus also introduces an EU-wide research and development (R&D) allowance, providing a harmonised deduction mechanism that could affect how groups plan their intellectual property and innovation expenditure across Member States.

For groups with complex holding or financing structures, the proposed tax-neutral treatment of all EU-law-recognised reorganisations is particularly significant. It would reduce the transactional risk associated with intra-group restructurings that currently fall outside the Merger Directive's enumerated forms. Legal counsel should assess whether pending or planned reorganisations could benefit from waiting for this change – or whether transacting under current rules is more appropriate given the 2027–2028 adoption timeline.

If you are considering a cross-border reorganisation, financing structure, or IP holding arrangement and wish to understand how the Omnibus proposals interact with your current position, our team is available to assist. Please write to info@ferrazwhitmore.com or visit our contacts page.

The DAC Recast (COM(2026) 308): Administrative Cooperation Consolidated

The DAC recast proposes to consolidate all nine iterations of the Directive on Administrative Cooperation (DAC1 through DAC9) into a single coherent instrument. Beyond consolidation, three substantive changes stand out for multinational groups:

• DAC6 and Pillar Two interaction: The recast proposes to remove the obligation to report cross-border arrangements under DAC6 for groups that fall within the scope of Pillar Two. This is a meaningful reduction in compliance burden for large multinational groups currently required to maintain parallel reporting obligations under both regimes. Groups should not, however, assume this change is already in effect – DAC6 reporting obligations remain fully operative until and unless the recast is adopted and implemented.
• Extended intermediary reporting deadline: The deadline for intermediaries to report notifiable arrangements would be extended from 30 days to 90 days, providing more workable timeframes for complex cross-border structures and reducing the risk of inadvertent non-compliance during tax audit or advisory processes.
• Hallmark D2 substance criteria: The recast would empower the Council to set substance criteria for hallmark D2 (arrangements that undermine reporting obligations) by implementing act, introducing greater flexibility and consistency in how this hallmark is applied across Member States – an area that has generated divergent national approaches and interpretive uncertainty.

From a tax risk management perspective, the DAC recast's treatment of Pillar Two-scoped groups and the rationalisation of hallmark D2 are the two elements most likely to affect compliance planning in the near term once adopted. Groups should track the legislative process through EUR-Lex and the European Commission's taxation portal for updates.

For a detailed technical analysis of the DAC recast proposal and its implications for cross-border information exchange, see our in-depth review of the DAC recast proposal.

The Unshell Directive: Formally Withdrawn

ATAD 3 – the proposed Unshell Directive targeting shell entities with minimal substance – was discontinued by ECOFIN in June 2025 and is now being formally withdrawn. For groups that restructured or held back transactions in anticipation of Unshell, this removes one layer of prospective risk. However, it does not represent a relaxation of substance requirements more broadly: existing domestic rules, CJEU case law on beneficial ownership and abuse of EU law, and bilateral tax treaty provisions continue to require that entities have genuine economic substance commensurate with their functions. The discontinuation of ATAD 3 should not be read as a signal that substance analysis is less important – it remains central to any tax structuring exercise.

Who Is Affected

The proposals are most immediately relevant to:

• Large multinational groups within the scope of Pillar Two that currently bear DAC6 reporting obligations alongside their Pillar Two compliance workload;
• Groups with cross-border financing or royalty arrangements within the EU, where amendments to the Interest and Royalties and Parent-Subsidiary Directives may affect withholding tax relief eligibility;
• Groups contemplating intra-EU reorganisations, particularly those involving transaction forms not currently covered by the Merger Directive;
• Intermediaries and advisers subject to DAC6 reporting, who will be affected by the extended 90-day deadline and changes to hallmark D2;
• Groups with IP or R&D activities in the EU, for whom the proposed EU-wide R&D allowance may create planning opportunities once adopted.

Regulatory bodies such as ESMA and EBA are not directly involved in the tax legislative process, but groups in regulated sectors should note that the interaction between the proposed tax changes and their broader compliance frameworks – particularly around substance and governance – may require coordinated review across legal, tax, and regulatory functions.

Legislative Timeline and Uncertainty

Both proposals require unanimous agreement in the Council of the EU. Unanimity on direct tax matters has historically proved challenging, and the 2027–2028 adoption target reflects political as well as technical complexity. The European Parliament will be consulted but does not have co-decision powers in this area. National implementation timelines, transposition deadlines, and any Member State optionality will be defined once final texts are agreed – these details are not yet available.

Groups should avoid making irrevocable structural decisions premised solely on the assumption that either proposal will be adopted in its current form. Scenario planning that accounts for both adoption and non-adoption – or material amendment during negotiations – is prudent.

Immediate Action Items for Multinational Groups

Given the scope of the proposals and the uncertainty of the legislative process, the following steps are advisable at this stage:

• Map current DAC6 exposure: Identify which existing or pipeline arrangements are currently reportable under DAC6 and assess whether they would fall within the Pillar Two carve-out under the recast. Do not assume the carve-out applies now.
• Review cross-border reorganisation plans: If intra-EU restructurings are under consideration, evaluate whether the proposed extension of tax-neutral treatment to all EU-law-recognised reorganisations is material to the structure or timing. Seek advice on whether to proceed under current rules or to wait.
• Assess R&D allowance implications: For groups with significant EU-based R&D, model the potential impact of a harmonised EU R&D allowance on existing IP holding and cost-sharing arrangements.
• Review holding and financing structures in light of Unshell withdrawal: While ATAD 3 is withdrawn, conduct a substance analysis of existing holding entities against current CJEU standards and domestic anti-avoidance rules.
• Monitor the legislative process: Assign responsibility for tracking progress of COM(2026) 560 and COM(2026) 308 through the Council working party process, and update internal compliance and structuring documentation as texts evolve.

Our tax structuring practice and corporate law team regularly advise international groups on EU regulatory developments of this kind. If you would like to discuss how these proposals interact with your group's current structure or compliance position, please contact us at info@ferrazwhitmore.com or through our contacts page.

Sources

• European Commission, Landmark Tax Simplification Package, 24 June 2026 – taxation-customs.ec.europa.eu (COM(2026) 560 and COM(2026) 308)

Facts verified as at 22 September 2026. These proposals are subject to change during the legislative process. This alert is for informational purposes; it does not constitute legal advice on any specific situation.

Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.