On 24 June 2026, the European Commission published its long-awaited EU tax simplification package, a major legislative initiative aimed at reducing complexity in EU direct taxation and supporting the competitiveness of businesses operating across the European Union.

The package forms part of the Commission’s broader competitiveness agenda and responds to concerns from businesses that overlapping tax rules, reporting obligations and administrative requirements have increased compliance costs and created legal uncertainty across the single market.

The proposals represent one of the most significant reviews of the EU direct tax framework in recent years. While the measures are still subject to negotiation and approval by EU Member States, multinational groups and cross-border businesses should begin assessing the potential implications for their tax governance, reporting and compliance processes.

The package consists of two legislative proposals that seek to streamline existing rules, remove overlaps and improve the consistency of tax administration across the EU.

Tax Omnibus Directive: simplifying EU direct tax directives

The Tax Omnibus Directive proposes amendments to six existing EU tax directives and frameworks through a single legislative instrument. The initiative forms part of the European Commission’s broader competitiveness agenda and responds to concerns that overlapping rules and compliance obligations are increasing the cost of doing business across the EU.

Among the key proposed changes are:

• Simplification of cross-border withholding tax procedures.
• Updates to the ATAD interest limitation rules, CFC and GAAR provisions.
• Streamlining of rules applicable to cross-border reorganisations and mergers.
• Improvements to tax dispute resolution mechanisms between Member States.

While the final outcome will depend on the legislative negotiations, the proposal has the potential to simplify compliance obligations and reduce administrative complexity for businesses operating across multiple EU Member States. For Romanian taxpayers, however, one of the most significant proposed changes concerns the interest limitation rules.

Romania currently applies interest deductibility rules more strictly than the minimum standard required under EU law. Net borrowing costs are generally deductible within a safe harbour of €500,000 for related-party financing and €1 million overall for both related-party and third-party financing, above which a variable threshold up to 30% of tax-adjusted EBITDA applies.

“Under the Commission’s proposal, the mandatory safe harbour would increase to €3 million, subject to annual indexation. This would represent a significant relaxation of the current Romanian regime, allowing businesses to deduct a greater proportion of their borrowing costs annually, while also having potential implications for the domestic corporate tax base.”, mentioned Lucian Dumitru, Tax Partner, Forvis Mazars in Romania.

Beyond the increase in the safe harbour, the proposal would also require further changes to Romanian tax legislation. In particular, Romania does not currently apply a group escape rule, which would become mandatory under the proposed framework. In addition, the introduction of mandatory exclusions for certain low-risk third-party loans, long-term public benefit projects and defence-related financing would require amendments to the existing interest limitation rules.

“The Omnibus proposal refines the EU dispute resolution framework by clarifying procedures and removing practical barriers, with the objective of making cross border tax dispute mechanisms, including double taxation and transfer pricing cases involving Romanian entities, more predictable and easier for taxpayers to access.”, said Liviu Gheorghiu, Tax Partner, Forvis Mazars in Romania.

DAC recast: simplifying tax transparency obligations

Alongside the Tax Omnibus Directive, the European Commission has proposed a comprehensive recast of the Directive on Administrative Cooperation (DAC), the framework governing tax transparency and the exchange of information between EU tax authorities.

Since its introduction in 2011, DAC has expanded significantly through successive amendments (DAC1 to DAC9), creating a broad set of reporting and information-exchange requirements. The recast aims to consolidate these rules into a single legal instrument and make the framework easier to navigate for both taxpayers and tax administrations.

Key objectives of the proposal include:

• Consolidating the existing DAC framework into a single directive.
• Simplifying reporting and administrative requirements.
• Improving the quality and usability of exchanged tax information.
• Enhancing consistency across Member States while maintaining high standards of tax transparency.

The proposal seeks to reduce fragmentation and improve legal certainty without changing the EU’s overall commitment to tax transparency and administrative cooperation.

Liviu Gheorghiu added: “For Romanian taxpayers, the DAC recast would consolidate all existing DAC rules into a single directive, introducing key simplifications such as a single group notification for DAC4/DAC9, reduced DAC6 reporting, including exemptions for groups within the scope of Pillar 2, extended reporting deadlines and improved data quality through TIN validation tools.”

Who could be affected?

The proposals are relevant to any business operating across multiple EU Member States, particularly those with cross-border financing arrangements, withholding tax obligations, restructuring activities or significant tax reporting requirements. While the measures are intended to reduce complexity, businesses should monitor developments closely as the proposed changes could affect existing compliance, reporting and governance processes.

Preparing for what’s next

The publication of the EU tax simplification package marks the start of the legislative process. The proposed Tax Omnibus Directive and DAC recast must now be negotiated and approved by EU Member States with unanimity required before adoption.

As a result, implementation is unlikely before 2027. However, the proposals signal a clear direction of travel towards a simpler and more competitive EU tax framework. Businesses with cross-border operations should monitor developments closely and begin considering how future changes could affect their tax compliance, reporting and governance processes.

For more information about the EU tax simplification package and its potential implications for your business, please access the materials prepared by our tax experts here.