The EC is simplifying taxes. What are the most important changes for entrepreneurs?
The most important information at a glance
- The European Commission has presented a tax simplification package aimed at reducing the administrative burden on businesses.
- The proposed changes could bring companies up to EUR 8 billion in savings per year, including approximately EUR 3.3 billion thanks to reduced costs related to meeting tax obligations.
- The package includes, among other things, simplifying the rules regarding withholding tax, business financing, tax reporting, and company reorganization.
- The greatest benefits may be felt by companies operating in several EU countries, capital groups and companies investing in research and development.
- Currently, these are legislative proposals that must be accepted by the European Union member states.
The European Commission is focusing on simpler taxes
On June 24, 2026, the European Commission presented a package of changes that may become one of the biggest reforms of EU tax rules in recent years.
What is the EU Tax Simplification Package 2026?
The EU Tax Simplification Package 2026 is a set of proposals from the European Commission, including the Direct Taxation Omnibus and a recast of the Directive on Administrative Cooperation in the Field of Taxation (DAC). Its goal is to simplify selected direct tax rules, reduce reporting obligations, reduce compliance costs, and facilitate cross-border business activity in the EU.
According to the Commission, the proposed solutions are intended to bring benefits to businesses savings of up to EUR 8 billion per year, of which approximately EUR 3.3 billion will result from reduced administrative costs.
Although the proposals still require unanimous approval from the Member States, it is worth analysing their potential impact on business operations today.
What changes does the EU tax simplification package bring? A comparison for entrepreneurs.
| Area | Current rules | Proposed changes | Potential benefits for entrepreneurs |
|---|---|---|---|
| Withholding tax (WHT) | The need to collect tax and apply for a refund (pay-and-refund) or apply for exemptions based on numerous formalities. | Abolition of the obligation to withhold tax on selected payments (dividends, interest and royalties) between EU companies. | Greater financial liquidity, less formalities and shorter settlement times. |
| Corporate financing | Restrictions on the inclusion of debt financing costs resulting from the ATAD directive. | Simplification of rules and exclusion of some financing from independent financial institutions from restrictions. | Easier investment financing and lower compliance costs. |
| Research and development (R&D) | Different rules for depreciation and settlement of investments in individual EU countries. | Unification of minimum rules for accounting for investments used in R&D activities. | Greater predictability and incentive to invest in innovation. |
| Tax reporting | Numerous reporting obligations resulting from subsequent amendments to the DAC Directive. | Limiting selected obligations and unifying provisions in a single directive. | Fewer reports, simpler procedures and lower administrative costs. |
| Company restructuring | Not all forms of reorganization benefit from uniform tax neutrality principles. | Extending the scope of the Merger Directive to all reorganisations provided for under EU law. | Greater flexibility in the reorganization of capital groups. |
The most important changes from the entrepreneurs' perspective - overview
1. Proposal to abolish pay-and-refund in WHT for certain intra-EU payments
One of the most anticipated changes is the proposal to completely abolish the pay-and-refund mechanism for withholding tax on cross-border payments:
- dividends,
- percentage,
- royalties,
made between companies from EU Member States.
For many corporate groups, this means simplified settlements, a reduction in the number of tax refund applications, improved financial liquidity, and fewer disputes with tax administrations. This solution can be particularly important for companies operating in several European Union countries.
2. Greater support for investment in research and development
The Commission is proposing the introduction of uniform minimum rules for accounting for expenditure on fixed assets used in research and development (R&D). In practice, this means greater flexibility in accounting for investment costs and an incentive to conduct innovative projects within the EU. For companies investing in technology development or automation, this could mean faster access to tax benefits.
3. Simpler business financing
The regulations on limiting the possibility of including interest in tax-deductible costs (ATAD directive) are also to be changed.
The Commission proposes, among other things:
- mandatory application of the de minimis threshold,
- exclusion from restrictions on financing obtained from independent financial institutions,
- simplification of current rules.
This is good news, especially for companies that finance their development with bank loans or bond issues.
4. Fewer reporting obligations
The second part of the package includes reform of the Directive on Administrative Cooperation in the Field of Taxation (DAC).
Key proposals include:
- limiting reporting obligations for groups covered bythe Pillar Two minimum tax rules,
- elimination of some of the reporting obligations on tax schemes (DAC6), which do not provide tax administrations with important information,
- simplification of regulations by replacing many amendments with a single directive.
For many entrepreneurs, this means less documentation and lower compliance costs..
5. More efficient resolution of cross-border tax disputes
The European Commission's tax simplification package also aims to improve mechanisms for resolving tax disputes between member states. This can be crucial for businesses operating in multiple EU countries, especially in situations where the same transaction, income, or payment is assessed differently by the tax administrations of individual countries. More efficient dispute resolution procedures can reduce the risk of double taxation, shorten the waiting time for a decision, and increase the predictability of cross-border settlements. This is an important change, especially for corporate groups that conduct intra-EU transactions, utilize foreign financing, or conduct reorganizations involving more than one jurisdiction.
6. Easier company reorganizations
The Commission proposes to extend the scope of the Merger Directive to cover all forms of company reorganization and restructuringprovided for under EU law. This could facilitate mergers, divisions, transformations, and restructurings of capital groups without the immediate taxation of certain transactions.
Do the changes also apply to Polish entrepreneurs and what do they mean for them?
Yes, they do. Although the proposals are aimed primarily at companies operating cross-border, a much broader group of entrepreneurs could feel their impact.
The EU tax simplification package is still in the legislative process, but Polish companies should not wait to analyse its potential effects. The proposed changes could impact not only the settlements of international capital groups but also companies that make cross-border payments, use debt financing, report tax schemes, or plan business reorganizations.
EU tax simplification package 2026 - what should Polish companies check now?
First of all, it is worth verifying whether the company:
- pays dividends, interest or royalties to entities from other EU countries,
- uses the pay -and-refund procedure, an opinion on the application of WHT preferences or documentation confirming due diligence in withholding tax,
- has bank, bond or intra-group financing, which may be subject to restrictions under ATAD regulations,
- reports or analyses transactions in terms of MDR/DAC6 obligations,
- belongs to the group covered by the global minimum tax Pillar II,
- conducts research and development activities and invests in fixed assets used in R&D projects
- plans a merger, division, transformation, restructuring or other reorganisation involving entities from different EU countries.
This analysis will allow for a more rapid assessment of which areas of the business can benefit from the planned simplifications and which will still require special tax scrutiny. For many companies, it will also be a good opportunity to streamline their WHT, MDR, debt financing, and intragroup transaction documentation procedures before the new regulations are finally adopted.
The support of tax advisors at the analysis stage will allow the organization to properly prepare for new regulations and take advantage of potential simplifications.
What will happen next?
At this stage, we are dealing with legislative proposals from the European Commission. Before they come into effect, consultation with the European Parliament and unanimous consent from all EU member states will be necessary. The final shape of the regulations may therefore change. However, it is worth analysing now whether the planned simplifications could impact the financing model, capital group structure, or company tax obligations.
FAQ – the most frequently asked questions by entrepreneurs
No. The European Commission has presented a proposal to abolish withholding tax on certain payments between companies in EU countries. The changes are not yet in force and require adoption by member states.
Primarily, enterprises conducting cross-border operations, capital groups, exporters and companies covered by minimum tax regulations.
There is no final date yet. The proposals must go through the full legislative process at the European Union level.
This is the aim of the proposed changes. The Commission plans to reduce some of the obligations arising from the DAC Directive, particularly where the information provided does not provide significant value to tax administrations. Furthermore, the regulations will be streamlined by replacing multiple amendments with a single, more transparent directive.
No, because the regulations are not yet in force. However, it is worth analysing current cross-border flows, WHT documentation, the status of payees, and due diligence procedures.
The European Commission estimates that the package could save businesses around €8 billion annually. Benefits could primarily stem from:
- reducing costs related to administrative duties,
- simpler cross-border settlements,
- faster access to financial resources thanks to changes in withholding tax,
- greater transparency of tax regulations,
- easier investment planning and business reorganization.
It does not change the taxation principles under the Pillar Two Directive (Pillar II). However, the Commission proposes to reduce administrative and reporting obligations related to its application. The aim is to reduce compliance costs while maintaining the effectiveness of the regulations.
Yes. One element of the package is the harmonization of minimum rules for accounting for investments in fixed assets used in research and development. This is intended to encourage entrepreneurs to implement innovative projects within the European Union.
