The European Commission’s tax simplification package, adopted on 24 June 2026, is the most significant reform of EU direct tax rules in years and one that businesses operating across borders have good reason to welcome.

The headline measure is the proposed abolition of withholding taxes on cross-border payments of dividends, interest, and royalties between EU companies. For multinational groups, this removes one of the most persistent friction points in intra-group financing and IP arrangements, and simplifies the structuring of intercompany transactions considerably.

For transfer pricing specifically, the harmonisation of CFC rules with the Pillar Two framework is long overdue. Groups that have spent the past two years navigating the interaction between domestic CFC regimes and the global minimum tax will appreciate a more coherent, unified approach — less duplication, fewer inconsistencies between Member States.

The modernisation of ATAD interest limitation rules, including a higher de minimis threshold and relief for market-based financing, also brings welcome clarity. Combined with the extension of tax-neutral treatment to a broader range of corporate reorganisations, the package lowers the compliance cost of routine group restructurings.

On the reporting side, the DAC recast delivers meaningful relief. Groups already within the Pillar Two framework lose their cross-border arrangement (DAC6) reporting obligations, a genuine simplification for clients who have found the overlap between DAC6 and Pillar Two documentation burdensome and redundant.

Of course, these are proposals, not law. The path through the European Parliament and Council takes time, and the detail will matter. Member States retain room to interpret and implement, and some of the promised simplification may look different once transposed into national rules.

That said, the direction of travel is clear. We will be monitoring developments closely and advising clients on how the changes affect their structures, documentation obligations, and compliance processes as the legislative process advances.

If you would like to discuss what the package means for your specific situation, please get in touch.