Background
The European Commission has launched the Tax Omnibus initiative (the “Initiative” or “Tax Omnibus”) to simplify and modernise corporate direct taxation across the EU. The aim is to reduce administrative burdens, clarify rules, and increase the competitiveness of the internal market. The Initiative follows the Council Conclusions of 11 March 2025, which set a tax decluttering and simplification agenda with a view to contributing to the EU's competitiveness, and is part of the Commission's broader objective of reducing administrative burdens by at least 25% for all businesses and by at least 35% for SMEs.
The Initiative builds on previous EU reforms, including the global minimum tax (Pillar 2) and anti-tax avoidance measures. It addresses outdated, overlapping or overly complex rules and aligns taxation with modern economic realities. In particular, the Initiative responds to concerns that certain provisions of the Anti-Tax Avoidance Directive require revision in light of the implementation of the Global Minimum Tax through the Pillar 2 Directive, as well as significant changes in the broader economic landscape, including rising interest rates and high inflation.
The Tax Omnibus is particularly important for companies operating across multiple Member States, where compliance with different national regulations has often been complex and costly. The corporate tax directives include various implementation options at national level, and this flexibility has created a fragmented EU landscape, as Member States have taken differing approaches in transposition. Taxpayers face the burden of navigating divergent rules which are often subject to varying interpretations, creating significant direct administrative costs and legal uncertainty.
Businesses should prepare for simpler, more predictable EU tax rules that reduce compliance costs and support cross-border operations.
Scope of the initiative
The Initiative reviews several key EU directives, including:
- Anti-Tax Avoidance Directive (ATAD),
- Parent-Subsidiary Directive,
- Interest and Royalties Directive,
- Merger Directive, and
- Tax Dispute Resolution Mechanisms Directive.
In respect of the Anti-Tax Avoidance Directive, the Initiative is expected to address, inter alia: (i) the Controlled Foreign Company rules, which partially overlap with Pillar 2 rules, potentially leading to instances of economic double taxation and unnecessary administrative burdens; (ii) the Interest Limitation Rule, which does not appear to adequately address earnings volatility arising from an entity's life cycle or broader economic conditions, nor does it adequately reflect sector-specific characteristics or the needs of SMEs; and (iii) the scope of the General Anti-Abuse Rule, which may require review to ensure it covers all relevant direct taxes. In respect of the Parent-Subsidiary Directive and the Interest and Royalties Directive, the Initiative is expected to address the divergent procedural requirements for accessing benefits, which in certain jurisdictions are so burdensome that they may discourage taxpayers from relying on the directives. The scope of the Tax Merger Directive is expected to be realigned with the Merger Directive under company law, in order to address mismatches that currently undermine the competitiveness of the EU Single Market. Finally, the Initiative envisages limited and targeted amendments to the Tax Dispute Resolution Mechanisms Directive, in particular the provisions regarding the admission phase, to remove ambiguities and ensure consistent application across Member States.
The Tax Omnibus aims to remove redundant or obsolete rules, simplify procedural and reporting obligations, harmonise the application of rules across Member States - in particular by reducing the implementation options that have led to divergent transposition - and ensure proportional compliance for SMEs.
Simplifying reporting and procedure across borders
The European Commission targets a 25% reduction in administrative costs for all companies and 35% for SMEs. This will be achieved by simplifying reporting and filing requirements, clarifying tax obligations, and eliminating redundant procedures.
Businesses operating in multiple Member States will benefit from consistent rules and simplified cross-border reporting, making compliance more predictable and less resource-intensive.
Improving competitiveness and clarity
The Tax Omnibus also aims to enhance EU competitiveness. Harmonised rules on dividends, interest, royalties, mergers, and other intra-EU transactions should promote investment and reduce disputes between national tax authorities. In terms of fiscal impact, the envisaged measures aim to be tax neutral for taxpayers and are not expected to lead to any material redistribution of tax revenues between Member States.
Next steps
The Call for Evidence was published on 16 February 2026, inviting stakeholders to provide feedback on the identified problems and the need to act. No separate public consultation is planned; however, the Commission Services have carried out extensive targeted consultations involving all Member States and approximately 50 multinational groups and business associations. The Tax Omnibus directive is expected by Q2 ‑2026. The proposal will be based on Article 115 TFEU and will require adoption by the Council acting unanimously in accordance with the special legislative procedure, after consulting the European Parliament and the Economic and Social Committee.
The Commission plans to conduct ongoing monitoring to ensure the simplifications achieve their objectives, particularly in reducing administrative burdens and facilitating cross-border transactions.
Practical impact
Businesses should expect predictable and uniform rules across the EU, simplified reporting requirements, and a reduction in administrative burdens, especially for SMEs. Larger groups will benefit from improved harmonisation, reducing uncertainty and disputes.
The Initiative reflects the EU’s commitment to fair taxation while improving economic efficiency.
Conclusion
The Tax Omnibus represents a significant step towards a simpler, more coherent, and modern corporate tax system within the EU. Businesses can expect lower compliance costs, clearer rules, and a framework better adapted to today’s economic and cross-border realities.
With the legislative proposal expected in Q2 2026, businesses should begin assessing the potential impact of the anticipated simplifications on their existing compliance processes, cross-border structures, and tax dispute strategies, and consider engaging with the Call for Evidence to ensure their concerns are reflected in the final proposal.
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