The developments discussed in this update should be viewed in the context of the European Commission (EC)’s broader effort to simplify and streamline EU tax initiatives. As part of this process, the EC has withdrawn – or announced its intention to withdraw – several directives, including:
- The Transfer Pricing (TP) directive, that aimed to harmonize TP principles and documentation requirements (see earlier Snippet).
- The Debt-Equity Bias Reduction Allowance (or DEBRA) directive, designed to reduce the tax bias favoring debt over equity by introducing notional interest deduction on equity increases, while limiting interest deductibility on debt.
- The Unshell directive (or ATAD 3), as discussed in our earlier Snippet.
Looking ahead, the EC is expected to propose the “Omnibus on taxation” in mid-2026, an initiative focused on simplifying existing EU tax directives. This proposal reflects the EC’s commitment to clearer rules and more efficient implementation. While details remain limited, the omnibus is anticipated to include amendments to the earnings stripping rule (a generic interest deduction limitation) and the Directive on Administrative Cooperation (which facilitates the exchange of tax related information between EU Member States).
These developments mark progress toward a more streamlined EU tax framework.
However, despite the aim for simplification, several significant initiatives remain on the EC’s agenda, including the common consolidated corporate tax base (BEFIT), the digital services tax, and rules for corporate taxation of significant digital presence. The EC appears intent on continuing work on BEFIT despite initial concerns by Member States over sovereignty with respect to tax matters.
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