On 24 June 2026 the European Commission published a DAC recast proposal (COM(2026) 308) that would consolidate the existing DAC1 through DAC9 framework into a single directive, remove mandatory disclosure obligations under DAC6 for groups already within Pillar Two scope, extend the intermediary reporting deadline from 30 to 90 days, and delegate to the Council the power to define substance criteria for hallmark D2 by implementing act. The proposal is not yet law: it requires unanimous Council approval and is targeted for adoption in 2027–2028. Until that adoption, Directive (EU) 2018/822 (DAC6) continues to apply in full, and groups must continue to assess reportable cross-border arrangements under the existing hallmark regime.
Context: From DAC6 to the Recast
Directive (EU) 2018/822 introduced mandatory disclosure rules requiring intermediaries – and, in certain circumstances, taxpayers themselves – to report cross-border arrangements that bear one or more prescribed hallmarks to their national tax authority. Those authorities then exchange information automatically with counterparts across the EU. The directive left penalty regimes entirely to Member States, producing a patchwork in which the consequences of non-disclosure differ substantially depending on where the reporting obligation arises. This inconsistency has been a recurring source of tax risk management concern for multinational groups with activities in multiple jurisdictions.
The Commission's recast ambition is consolidation and simplification. Rather than continuing to layer amending directives on top of DAC1 through DAC9, COM(2026) 308 proposes a single coherent instrument. The stated policy rationale combines administrative efficiency with a recognition that certain disclosure obligations have become redundant where other transparency mechanisms – notably the Pillar Two global minimum tax framework – already generate equivalent or greater information flows to tax authorities.
Separately, the Direct Taxation Omnibus (COM(2026) 560), published on the same date, amends six other directives, including the Interest and Royalties Directive, the Tax Merger Directive, the Parent-Subsidiary Directive, ATAD, the EU Dispute Resolution Directive and FASTER. It also introduces an EU-wide R&D allowance and tax-neutral treatment for all reorganisations recognised under EU company law. These two proposals sit within a broader tax simplification package but operate on distinct legislative tracks.
The Pillar Two Carve-Out: Scope and Open Questions
The most immediately significant change for large multinationals is the proposed removal of DAC6 arrangement reporting for groups that fall within the scope of the Pillar Two framework. The policy logic is straightforward: groups subject to Pillar Two already produce detailed Country-by-Country Reports and are subject to a global minimum effective tax rate regime. Requiring simultaneous mandatory disclosure of arrangements under DAC6 hallmarks creates duplicative compliance burdens without a commensurate increase in tax authority intelligence.
However, several practical questions remain unresolved at the proposal stage:
- Scope of the carve-out: it is not yet confirmed whether the exemption will apply to all DAC6 hallmarks or only to specific categories. Groups whose structures straddle Pillar Two thresholds will need to monitor the final text carefully.
- Sub-threshold entities: a group may be within Pillar Two scope at the consolidated level while individual constituent entities fall below threshold in their local jurisdiction. Whether those entities benefit from the carve-out in the same way as the consolidated group is an open interpretive question.
- Transition period: arrangements already reported under DAC6 before the recast enters into force will not, on current drafting, be retroactively affected. Groups that have been reporting on a precautionary basis will need to reassess their protocols once the final text is adopted.
- Non-Pillar Two groups: for groups below the Pillar Two threshold, the existing mandatory disclosure regime under DAC6 would continue in amended form. These groups – often mid-market multinationals and investment structures – face unchanged or potentially heightened scrutiny.
For groups engaged in DAC6 reporting practice across the EU, the carve-out creates a planning fork: understanding precisely where a given group sits relative to Pillar Two scope will determine whether reporting obligations persist in their current form.
Hallmark D2 and the Delegated Substance Criteria
Hallmark D2 under DAC6 targets arrangements that circumvent or undermine automatic exchange of information obligations or beneficial ownership identification requirements. It has been among the more contentious hallmarks in practice because its scope is defined in broad, purposive language that does not lend itself easily to bright-line application. Interpretations have varied across Member States, generating legal uncertainty for intermediaries advising on structures with cross-border financial account implications.
The recast proposal addresses this by empowering the Council to set substance criteria for hallmark D2 by implementing act. This is a significant design choice. Moving the definitional work to a Council implementing act means that the criteria will be adopted by qualified majority rather than embedded in the directive itself (which requires unanimity). It also means the criteria can be updated more efficiently as financial products and exchange-of-information frameworks evolve.
The practical implications are material for tax structuring and compliance teams:
- Until the Council implementing act is adopted, the existing hallmark D2 language in Directive (EU) 2018/822 governs. Groups must continue to apply the current standard.
- Once criteria are set by implementing act, there is a question of whether national courts – and ultimately the CJEU – will treat those criteria as exhaustive or as a non-exhaustive floor. The relationship between the implementing act and broader purposive interpretation will need to be tested.
- Intermediaries with clients in jurisdictions that have adopted divergent national interpretations of D2 should document their analytical approach carefully. A subsequent implementing act that differs from an intermediary's prior interpretation will not retroactively cure disclosure failures in the intervening period.
- Financial institutions supervised by ESMA or the EBA and that also act as DAC6 intermediaries face a particular complexity: their existing Common Reporting Standard and exchange-of-information obligations interact with hallmark D2 in ways that the implementing act criteria will need to address.
The Extended Intermediary Reporting Deadline
The proposal to extend the intermediary reporting deadline from 30 to 90 days is a practical simplification measure that has received broad support in initial stakeholder commentary. The 30-day window under the current directive has been widely criticised as insufficient for arrangements involving multiple jurisdictions, multiple intermediaries and complex legal analysis – particularly where the trigger event for the reporting clock requires legal interpretation to identify.
The extension does not change the substantive scope of reportable arrangements. It does, however, alter the risk calculus in tax audit contexts. A longer deadline reduces the likelihood of purely procedural non-compliance where an intermediary is genuinely engaged in analysing whether a hallmark applies. National tax authorities, however, may scrutinise late filings within the new 90-day window more carefully as a potential indicator of deliberate delay rather than genuine analysis time. Clear internal documentation of when the trigger event occurred and how the analysis was conducted will remain essential.
The Unshell Directive: A Related Withdrawal
It is relevant context that ECOFIN discontinued the Unshell Directive (ATAD 3) in June 2025, and the proposal is being formally withdrawn. ATAD 3 had proposed minimum substance requirements for entities used primarily for tax purposes, with direct links to denial of tax treaty benefits and EU directive benefits for non-compliant entities. Its withdrawal removes a layer of proposed anti-avoidance rules that would have operated in conjunction with DAC6 and the recast's hallmark regime.
The withdrawal does not leave the field entirely clear. Existing anti-avoidance provisions in national law, ATAD 1 and ATAD 2 (covering hybrid mismatches), the Principal Purpose Test in tax treaties following the BEPS Multilateral Instrument, and the GAAR under ATAD all remain operative. Groups that had been structuring in anticipation of ATAD 3 should review their positions in light of these existing instruments rather than assuming the ATAD 3 withdrawal creates a clean space.
If your group is re-evaluating its holding or financing structures in light of these developments, Ferraz & Whitmore's team can assist with a structured review of existing positions. Please contact us at info@ferrazwhitmore.com or visit our contacts page.
Cross-Border Implications and Transfer Pricing Interaction
The DAC recast does not directly amend transfer pricing rules, but the two regimes interact in ways that practitioners must understand. Certain DAC6 hallmarks – in particular those under Category C relating to cross-border transactions – already capture transfer pricing-adjacent structures. The recast preserves this overlap for non-Pillar Two groups.
For groups within Pillar Two scope that benefit from the carve-out, the removal of DAC6 reporting obligations does not mean that transfer pricing documentation requirements under the EU's Country-by-Country Reporting regime or OECD guidelines are reduced. The information flows change channels: instead of a DAC6 report being filed with a national intermediary's competent authority and then exchanged, equivalent data is transmitted through the Pillar Two and CBC frameworks directly. Tax authorities' analytical capacity in respect of those structures does not diminish.
The European Commission's proposals are publicly accessible via EUR-Lex and the Commission's taxation and customs portal. The Commission's press release of 24 June 2026, available at taxation-customs.ec.europa.eu, provides official commentary on the package's objectives.
Groups with operations or holding structures in Nordic jurisdictions, where DAC6 implementation has been closely monitored, may wish to review the specific application of the recast to their arrangements. Our analysis of tax structuring considerations in Finland provides a worked example of how EU directive changes interact with national implementation in a Member State context.
Strategic Recommendations for Groups and Advisers
Given that the recast remains a proposal, the appropriate strategic response is not to anticipate the final text as though it were already in force, but to prepare adaptable compliance frameworks. The following considerations are relevant now:
- Assess Pillar Two positioning: groups near the Pillar Two scope threshold should obtain a definitive analysis of whether they qualify for the proposed carve-out. This analysis will inform both current DAC6 compliance and future structuring decisions once the recast is adopted.
- Audit existing DAC6 reporting protocols: review whether current reporting processes are calibrated to the 30-day deadline. If the 90-day extension is adopted, processes can be refined – but they should not be relaxed in anticipation of a rule that is not yet in force.
- Document hallmark D2 analysis: given the pending implementing act on substance criteria, all existing D2 determinations should be documented with sufficient analytical detail to withstand retrospective scrutiny under criteria that may differ from current national interpretations.
- Monitor Council negotiations: unanimity is required. Member States with large financial centres or significant intermediary industries have historically engaged actively in DAC negotiations. The final text may differ materially from the Commission's proposal.
- Review holding and financing structures: the ATAD 3 withdrawal and the Pillar Two carve-out together reshape the risk landscape for intermediate holding structures. A review under existing ATAD 1, ATAD 2 and domestic anti-avoidance provisions is prudent.
- Engage with corporate law implications: the Direct Taxation Omnibus's proposed tax-neutral treatment for reorganisations recognised under EU company law has direct relevance for restructuring transactions. Corporate law advice should be integrated into any restructuring analysis that crosses EU borders.
Legislative Outlook and Procedural Timetable
Both COM(2026) 308 and COM(2026) 560 are subject to the EU's special legislative procedure for direct tax matters: Council unanimity, with the European Parliament in a consultative role. This procedural requirement means that a single Member State can block or fundamentally alter either proposal. Historical precedent in the DAC legislative history – where multiple rounds of amendment have been required to achieve consensus – suggests that the 2027–2028 adoption target is optimistic in the event of substantive disagreement among Member States.
Key procedural milestones to monitor include: the Council Working Party on Tax Questions' technical examination of both proposals, the European Parliament's formal consultative opinion, and any ECOFIN political agreement that signals the direction of final compromises. Intermediaries and groups with significant EU cross-border activity should track these milestones through official EUR-Lex channels and the Commission's taxation and customs portal.
Until adoption, Directive (EU) 2018/822 remains the operative instrument. The proposal creates no safe harbour from current obligations and no right to rely on its terms as though they were already in force. This point is frequently overlooked in commentary that conflates the Commission's intent with binding law.
If your group is assessing the impact of the DAC recast proposal on its existing cross-border arrangements or disclosure procedures, Ferraz & Whitmore's tax and corporate teams are available to assist with a structured analysis. Reach us at info@ferrazwhitmore.com or through our contacts page.
Sources
European Commission, press release and proposal documentation, 24 June 2026: European Commission proposes landmark tax simplification package. Facts last verified: 22 September 2026.
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.