The landscape of EU direct tax directives is evolving rapidly, impacting businesses and individuals across Member States. These directives aim to harmonise tax policies, reduce tax evasion, and ensure fair competition within the EU. Understanding these changes is crucial for staying compliant and optimising tax strategies. In this edition, we delve into the latest updates and their implications for various stakeholders.
The Polish presidency is set to continue the efforts of its predecessor Hungary, with a strong emphasis on enhancing tax cooperation and digitalisation to streamline tax processes and improve compliance.
Since the publication of the Draghi report (a 2024 report on the future of European competitiveness) there has been increased scrutiny on the overall competitiveness of the European Union.
The European Commission has published its 2025 work programme. Simplification seems to be the word of choice with no new tax proposals put forward. The focus will be on simplifying the existing legislation and reducing the current administrative burden. That said, none of the current tax proposals discussed below have been withdrawn despite the fact that some have made little progress since first being introduced.
At the Ecofin meeting on March 11 2025, the Council adopted conclusions around a tax simplification and decluttering agenda with the aim of contributing to EU competitiveness. These conclusions ask the European Commission to review regulations that achieve similar objectives and reduce the reporting and administrative burdens. The Council conclusions further note that future legislative proposals should be developed within the principles of simplification and decluttering and in cooperation with Member States.
The Commission has also released its Clean Industrial Deal Communication which highlights corporate tax policies as key measures to reaching its objective “to turn decarbonisation into a driver of growth for European industries”.
Our goal is to provide clear and concise insights into these developments. Whether you're a tax professional, business owner, or simply interested in EU tax policies, our newsletter will keep you informed about the key developments and practical steps you can take to adapt. Stay tuned for expert analysis and actionable advice on navigating the EU's direct tax landscape.
Following the publication of the G20/OECD inclusive framework on BEPS' Global Anti-Base Erosion Model Rules (Pillar Two) which is aimed at establishing a global minimum level of taxation for multinational groups (with a minimum effective tax rate of 15%), the European Commission (EU Commission) introduced a draft directive on December 22, 2021.
This directive aims to implement the OECD inclusive framework model rules across European Union (EU) member states. The EU Commission's proposal aligns with the EU's commitment to rapid action, positioning itself among the first to adopt the political consensus arising from the OECD/G20 inclusive framework on Pillar Two.
138 countries worldwide have agreed to implement Pillar 2 rules in their national legislation, with a significant number having introduced domestic legislation enacting Pillar 2.
On October 3, 2024, the European Commission referred Cyprus, Poland, Portugal, and Spain to the Court of Justice of the European Union (CJEU) for failing to transpose the Directive into domestic legislation within the deadline set by the Directive.
A number of EU Member States (including Belgium, Denmark, France, Germany, Ireland, Luxembourg, and Sweden) have already completed or are currently in the process of amending their minimum tax legislation to incorporate additional elements of the Administrative Guidance (e.g., Safe Harbour provisions, anti-hybrid arbitrage rules, elections, etc.) and/or to correct elements from the previously adopted rules.
On January 15, 2025, the OECD Inclusive Framework published a list of jurisdictions that adopted qualifying domestic top-up tax rules.
On January 20, 2025, President Donald Trump, on his first day back in office, issued an Executive Order stating that the “Global Tax Deal” holds no legal standing in the United States.
Grant Thornton is an international network with global Pillar 2 specialists available to assist you with both the implementation of Pillar 2 and all your Pillar 2 compliance obligations.
On 21 December 2021, the Commission submitted a proposal for a Council Directive (the “Unshell” proposal) aimed at preventing the misuse of shell entities for tax purposes and amending Directive 2011/16/EU. Also known as ATAD3, the proposal aims to combat 'shell companies' and includes a 'filtering' system for EU companies, which will have to pass three gateways. These gateways relate to passive income, cross-border activities, and outsourced management and administration. This proposal aims to get sufficient 'substance' at the level of the EU company. Certain types of entities are carved out, including listed entities, insurance companies, and pension funds.
EU companies deemed to be lacking in substance are presumed to be 'shell companies'. Consequently, if the presumed shell is unable to rebut this presumption or cannot obtain an exemption, it will lose certain tax advantages granted through bilateral tax treaties or EU directives.
The most recent proposal suggests limiting the scope of Unshell to an exchange of information regarding shell companies.
The Working Party on Tax Questions (WPTQ) met on November 26, 2024, and noted the need for clarity on how the Unshell initiative aligns with the Directive of Administrative Cooperation (DAC). Despite ongoing discussions, nearly three years since its introduction, the proposal remains under negotiation, with no finalised application date yet.
The December 2024 ECOFIN report highlights the Hungarian Presidency’s progress on the Unshell proposal, building on the Belgian Presidency's draft. Key areas under discussion include scope, reporting obligations, information exchange, and administrative actions. A key concern is ensuring that the Unshell proposal does not create undue administrative burdens for businesses or tax authorities.
Wopke Hoekstra - Commissioner for Climate, Net-Zero, and Clean Growth (and Taxation) - expressed willingness to push forward various pending tax files, including the Unshell proposal.
Since the Polish Presidency's work program does not explicitly list the Unshell proposal as a priority, it remains unclear whether any progress will be achieved on this file during their term (first half of 2025).
Taxpayers operating in the EU should closely monitor developments, as the proposal's implementation timeline and substance indicators may evolve. It is also important to stay updated on national tax administration trends and court decisions related to beneficial ownership, substance requirements, and anti-treaty shopping measures across the EU.
The SAFE proposal aims to combat the role that enablers can play in facilitating schemes that can lead to tax evasion or aggressive tax planning within the EU. The objective of the SAFE proposal will be to prevent enablers from setting up such structures in non-EU countries when used to erode the tax bases of the EU Member States.
The Policy options considered are:
The timeline remains unclear and subject to progress on the Unshell proposal.’
The Commission has stated that an agreement needs to be reached on the Unshell Directive before progressing with a proposal on the SAFE initiative. To date, there has been no formal wording for this SAFE proposal. The timeline therefore remains unclear as the Commission has not announced when the SAFE initiative will be tabled for further discussion.
The European Commission launched the BEFIT proposal on 12 September 2023. The proposal introduces a single set of rules to determine the tax base for large businesses that operate out of more than one Member State. The new rules will be mandatory for groups with a combined global annual revenue of at least €750m and the ultimate parent holding at least 75% of ownership rights. BEFIT groups would comprise the same group as Pillar Two but would be limited to EU entities.
For groups headquartered outside the EU, their Union subgroup will only apply BEFIT rules where they achieve €50m combined revenues in at least 2 out of four previous fiscal years or 5% of the total group revenues.
The rules are discretionary for smaller groups, provided they prepare consolidated financial statements.
As of early 2024, several EU Member States raised concerns about the BEFIT proposal, particularly regarding potential conflicts with national sovereignty over direct taxation, possible impacts on future tax revenues, and the administrative burden for businesses and tax authorities. These concerns were echoed in the June 2024 ECOFIN report, which acknowledged the goals of simplifying tax rules but highlighted issues with the proposal’s interaction with existing tax frameworks, such as national corporate tax rules and Pillar Two rules.
The December 2024 ECOFIN report noted continued technical discussions under the Hungarian Presidency, focusing on issues such as tax depreciation, tax base allocation, and administrative procedures. Some Member States have called for more political discussions, but it appears that further technical work is needed before the next steps can be determined.
Commissioner Hoekstra at the European Parliament’s Subcommittee on Tax Matters noted the intention to continue to work on current proposals such as BEFIT that aim to enhance EU competitiveness.
It will likely take some time to negotiate the BEFIT proposal. Unanimous approval from all Member States will be required before adoption.
An implementation date of 1 July 2028 has been proposed.
The BEFIT initiative does not seem to be a priority for the Polish Presidency of the EU Council in the first half of 2025 as its work program does not specifically mention the initiative. However, we recommend to closely monitor this development.
Video - BEFIT, One Stop Shop?: Sasha Kerins, International Tax Partner at Grant Thornton Ireland, and Monique Pisters, Head of Tax at Grant Thornton Netherlands, discuss BEFIT, the proposed directive that was issued by the EU Commission.
As part of the BEFIT proposal issued in September, a proposal for a Head Office Tax (HOT) system for SMEs was also published.
This proposal would allow certain SMEs to calculate their tax liability based on the tax rules of the Member State where their head office is located and file a single tax return in that Member State. The tax return and tax revenues will be shared with the Member States in which the permanent establishments are located.
On April 10, 2024, the European Parliament adopted a resolution on the proposed Head Office Tax (HOT) Directive. Notably, the resolution extends the scope of the directive to include subsidiaries, a change from the previous proposal which only covered associated companies.
The eligibility criteria remain to be focused on revenue comparisons, though the review period for turnover is now extended from 2 to 3 years. In addition, the duration of the HOT regime has been updated from 5 to 7 years for companies once admitted.
The deadline for implementing the directive was tabled for January 1, 2025, instead of January 1, 2026. As of February 2025, the directive has not yet been implemented. It remains to be seen whether January 1, 2026, is feasible. While these changes have been proposed, no further action has been taken yet, and the directive has not yet been implemented.
A proposal for a Directive on Transfer pricing is also now part of the BEFIT Package to harmonise transfer pricing rules across the EU. Currently, the EC considers that the operation of OECD guidelines differs between Member States, and whilst there is a common approach to basic principles, this is not fully aligned. The Directive essentially incorporates the arm’s-length principle and its interpretation in the OECD Transfer Pricing Guidelines (2022) into the legislation of all EU Member States.
The proposal contains anti-abuse rules and aims to increase tax certainty and reduce the risk of litigation and double taxation. The directive will reduce opportunities for aggressive tax planning using transfer pricing.
On April 10, 2024, the European Parliament adopted a resolution on the proposed Transfer Pricing (TP) Directive. Notably, the resolution does not include a dynamic reference to the OECD guidelines, opting instead to retain the 2022 version. It advises Member States to utilize the procedures under the Directive on Administrative Cooperation (DAC) for making corresponding adjustments.
Additionally, the resolution calls for the re-establishment of the EU Joint Transfer Pricing Forum, with a new European Forum on Transfer Pricing (EFTP) to be created. This forum will provide guidance on potential adjustments to the Directive.
With the lack of support for the proposed directive by the Member States and the fact that it seems to not be a priority for the Polish presidency for first half of 2025, progression for the directive may be limited in the coming months.
The proposal is to introduce a tax allowance on increases in company equity and a limitation on the tax deductibility of interest payments.
The equity allowance will be computed based on the difference between net equity at the end of the current tax year and net equity at the end of the previous tax year, multiplied by a notional interest rate, which can be deductible for 10 years.
The aim is to impose a limitation on interest deductibility, under which interest can only be deducted up to the amount of 85% of the taxpayer’s exceeding borrowing costs. The proposal is aimed at all taxpayers who are subject to corporate income tax in one or more Member States, including permanent establishments in one or more Member States of an entity that is resident for tax purposes in a third country. The proposal also contains numerous anti-tax avoidance rules to prevent misuse.
DEBRA has been on hold, and to date, there has not been much progression on the proposal.
DEBRA is mentioned in the Explanatory Memorandum of the BEFIT proposal suggesting that it is still potentially in play; certainly, BEFIT did not include aspects of DEBRA as was anticipated.
On 16th January 2024 the European Parliament adopted a resolution formally approving the council directive for DEBRA, also introducing amendments to the original EC proposal. Resolutions adopted by the European Parliament are not binding on the EC but do need to be considered by the EC and member States when adopting new rules.
The 2025 Commission work program does include DEBRA indicating that it is very much still on the table. More recently the Commission has indicated that it wants member states to make progress on DEBRA based on the current proposal. The recent push comes from the Commission’s aim to improve savings and investment within the EU.
FASTER is an initiative that aims to simplify the EU-wide system for withholding tax (WHT) on dividend and interest payments. It will also assist tax authorities in identifying and targeting the abuse of rights under tax treaties.
FASTER will introduce the following key measures:
The Council formally adopted the proposal on 10 December 2024 and the text was published in the Official Journal of the EU on 10 January 2025. On May 14, 2024, Council ministers reached a general consensus on the proposal.
Member States must transpose the directive into national legislation by 31 December 2028, but the national rules must become applicable on 1 January 2030.
Video - Faster directive revises the withholding tax regime in the EU: Monique Pisters outlines FASTER, a new directive to create a faster and simpler process for investors, financial intermediaries, and tax authorities.
The European Commission launched a ‘Call for Evidence’ regarding the functioning of the DAC in the period 2018-2022 (DAC7 and DAC8 are therefore excluded). This call for evidence includes an assessment of the relevance of the scope and the purpose of the directive, the effectiveness in achieving the objectives, and an efficiency/cost-benefit analysis. This Call for Evidence also includes a survey for Member States on the relevant hallmarks in DAC6. A public consultation was open from 7 May 2024 - 30 July 2024.
The main concerns of the respondents regarding the DAC6 evaluation are the following:
No alignment across EU Member States of the interpretation of the different DACs’ definitions;
No harmonization of penalties across EU Member States;
Limited information shared by tax authorities, including, for example, statistical filing information and the contents of the filings;
Trigger dates for reporting under DAC6 are not practical and unclear in most cases;
The application of the main benefit test should not be limited to a few hallmarks. Most respondents argue that the main benefit test should be extended to other hallmarks (like E3).
The 2020 proposal for the codification of the DAC has been withdrawn by the Commission work program. The withdrawal needs to be formally published in the EU Official Journal. A new codified proposal is expected from the Commission.
DAC7 introduced a requirement for Digital Platform Operators to collect information on reportable sellers utilising their platforms for Relevant Activities, and to report annually such information to the competent tax authority, who will share this with other relevant Member States.
Platform operators allow sellers to provide for the sale of goods and services and the rental of property through the platform (websites, mobile apps, etc.). In addition, platform operators must disclose to their sellers – that are active on their platform – what data they disclose to the local tax authorities.
The first reporting obligation for Platform Operators was due on 31 January 2024.
Sellers who were already active on the platform before 1 January 2023 (so-called 'existing sellers') do not have to be reported for the first time until January 2025.
Certain Member States have opted to provide short extensions to the reporting deadline under the domestic transposition of DAC 7; to date, these are Ireland, Cyprus, Italy, Luxembourg, Germany, Spain, and Greece.
On November 18, 2024, the European Commission introduced an initiative to establish standardised forms and digital formats for the exchange of statistical data between EU member states regarding DAC7, with the adoption of the initiative anticipated in the first quarter of 2025.
For businesses in scope, qualifying platform operators will need to keep track of the different reporting procedures in EU countries.
DAC8 implements new rules on reporting and exchange of information for tax purposes on e-money and crypto-assets and on the exchange of information on cross-border rulings concerning high-net-worth individuals (HNWI). It also introduces penalties and compliance measures for the various reporting obligations under the DAC framework. This DAC8 Directive is based on the OECD publication of 10 October 2022, which contained the OECD Crypto-Asset Reporting Framework (CARF) and amendments to the Common Reporting Standards (CRS).
DAC8 introduces a requirement for Member States to establish effective mechanisms to ensure that the information obtained through reporting and information exchange under the DAC is properly utilized.
DAC8 entered into force on 13 November 2023 and, for the most part, will come into effect for all EU Member States from 1 January 2026. Member States have until 31 December 2025 to transpose DAC8 into national domestic law.
The Council opposed the Commission's proposal to establish a standardized minimum financial penalty for late or incorrect filings under the DAC. Providers and operators of crypto-asset services catering to EU clients need to evaluate if they fall under the scope of DAC8. They should also review and adjust their data collection and reporting procedures to comply with the updated due diligence and reporting requirements.
Video - DAC8: EU reporting requirements for crypto and digital asset service providers. Monique Pisters (Head of Tax GT Netherlands) explains a bit more about the scope and key measures of DAC8.
The DAC 9 proposal is closely linked to the 2022 Pillar 2 Directive, which aims to establish a global minimum level of taxation for multinational enterprise groups (MNEs) and large-scale domestic groups (LSDGs) within the EU.
DAC9 complements the Pillar 2 Directive by streamlining the filing process for MNEs, making it easier for them to meet their reporting obligations under the Directive.
Under DAC9, MNEs will only need to file a single top-up tax return at the group level, simplifying the entire process and significantly reducing the administrative burden.
To achieve this, the proposal:
Additionally, the Commission will be able to update the form in line with any international changes, ensuring alignment with global standards.
This initiative supports the EU's goal of simplifying reporting requirements, ultimately making compliance more straightforward for businesses.
Once the EU Council adopts DAC9, EU member states will have until 31 December 2025 to implement it. For countries that have opted to delay the adoption of the Pillar 2 Directive, this same deadline will apply to their implementation of DAC9.
Multinational enterprises (MNEs) are required to submit their first top-up tax information return by 30 June 2026, as stipulated by the Pillar 2 Directive. The relevant tax authorities must then exchange this information with each other by no later than 31 December 2026.
It’s also important to note that the DAC9 proposal does not cover any local filing obligations aside from the Top-up Tax Information Return. Additionally, the Top-up Tax Information Return could undergo further revisions as the OECD continues to develop and release new Administrative Guidance.
On 12 March 2025 EU leaders agreed on a DAC9 compromise proposal that omits delegated powers granted to the commission, meaning any amendments to the DAC9 standard form would have to be achieved through a new council directive on administrative cooperation.
MiCA will introduce a new regulatory framework for European crypto-assets and will cover crypto-assets not already regulated by existing financial services legislation. The aim is to ensure that consumers are informed of the risks, costs, and charges linked to crypto assets. It will also aim to provide measures against market manipulation, money laundering, terrorist financing, and other criminal activities.
The new reporting requirements on crypto-assets, e-money, and central bank digital currencies (MICA) were published in the Official Journal of the European Union on 9 June and entered into force on 29 June 2023. The regulation applies as of 30 December 2024.
From 30 December 2024, Crypto Asset Service Providers (CASPs) must have a license to operate on the European market. For CASPs who are already currently registered with the local authorities, this requirement applies as of 30 June 2025.
Under the regulation, Crypto Asset Service Providers (CASP) will require authorisation from a Competent Authority to operate within the EU. This includes individuals or companies located outside the EU that promote or advertise their services to clients within the EU.
The TFR requires crypto companies (crypto asset service providers and financial institutions providing crypto asset services) to collect information from buyers and sellers in transactions and submit this information to local tax authorities. Thus, the TFR introduces traceability of transactions in crypto assets.
The TFR introduces new rules on the information on originators and beneficiaries on transfers of crypto assets. The new rules are to prevent, detect, and investigate money laundering and terrorist financing where at least one of the crypto-asset service providers involved in the transfer of crypto-assets is established in the EU. The TFR obliges crypto asset service providers to accompany transfers of crypto assets with information on the originator and the beneficiary to the local tax authorities.
Moreover, enhanced traceability of crypto asset transfers will make it more challenging for individuals and entities under restrictive measures to circumvent them. Additionally, crypto asset service providers must adopt internal policies, procedures, and controls to effectively mitigate the risks of tax evasion.
Transfer of Funds Regulation (TFR) was adopted on 16 May 2024 and applies as of 30 December 2024.
The CASP serving the beneficiary must establish robust procedures to identify any missing or incomplete information regarding the originator or beneficiary. These procedures should, when necessary, involve monitoring transactions during or after the transfer process.
CESOP is an integrated accounting system designed to streamline financial processes. As part of upcoming EU regulations, there will be a focus on monitoring payees involved in cross-border payments. In the future, banks, money instruments, and other regulated payment authorities will be responsible for reporting these transactions.
Under the new framework, any individual making more than 25 cross-border payments per quarter will be required to provide information, which will be collected and cross-checked with various EU databases. This data will be accessible to anti-fraud experts across EU member states, empowering them to detect and combat e-commerce VAT fraud.
While the system will gather valuable transaction data, strict data protection rules will be in place. Only the payment amounts will be disclosed—no personal customer information or transaction purposes will be revealed.
Since January 1, 2024, EU Payment Service Providers (PSPs) facilitating cross-border payments within the EU are required to collect and report transaction data to EU Member States under CESOP (Central Electronic System of Payment Information). While the EU has standardised the reporting format, individual Member States have varying implementations, creating a fragmented and complex reporting landscape.
Regarding reporting requirements, PSPs must submit CESOP reports individually in each EU Member State where they operate. These reports need to be filed electronically in an XML format specified by the respective national authorities. CESOP reports are due one month after the close of each quarter.
Several countries have already indicated that they will impose significant fines for non-compliance, potentially reaching several hundred thousand euros per quarter.
Given the wide range of tax policy initiatives proposed and the complexity levels involved, we recommend that entities begin assessing their current corporate structures to understand the potential consequences of any relevant EU initiative that may affect their business.
Grant Thornton’s international tax specialists can collaborate with you to review your group’s current EU structures. We can provide you with the latest information and insights and offer clear guidance on how best to address newly adopted and proposed EU legislation.
Video update EU proposals: Sasha Kerins, International Tax Partner at Grant Thornton Ireland, and Monique Pisters, Head of Tax at Grant Thornton Netherlands, discuss the latest update regarding the EU direct tax proposals.
