Cutting Complexity, Driving Competitiveness in EU Corporate Taxation

POSITION | TAX POLICY | TAX OMNIBUS

Cutting Complexity, Driving Competitiveness in EU Corporate Taxation Initial Assessment of the Commission’s Proposals from the Perspective of German Industry

June 2026 Seize the Momentum from Brussels – Simplify EU Corporate Taxation and Promote Investment With the Tax Omnibus of 24 June 2026, the European Commission has taken up key requests from the business community and presented a long-overdue proposal to simplify EU tax law. The overall approach is the right one: reducing administrative burdens, enhancing legal certainty, and improving the framework for cross-border investment will strengthen the Single Market and Europe’s competitiveness. It is now up to the Member States to advance the proposal with ambition and to avoid diluting its substance.

International corporate taxation has evolved into an increasingly unmanageable patchwork. A succession of new regulatory initiatives – often introduced hastily and designed with excessive technical complexity – has resulted in significant administrative burdens, growing legal uncertainty, and a decline in Europe’s attractiveness as a business location. The business community has been highlighting these developments for years. While transparency in tax matters is essential, excessive compliance obligations place a substantial strain on companies and must be decisively scaled back to a proportionate and workable level.

ELIMINATE DUPLICATE REGULATION EU corporate tax law has, in large parts, not yet been aligned with the introduction of the OECD’s global minimum tax (Pillar Two). Large corporate groups are currently required to apply several complex and overlapping frameworks in parallel (e. g. CFC rules under the Anti-Tax Avoidance Directive – ATAD, reporting obligations for cross-border tax arrangements – DAC6, and Pillar Two). This results in avoidable duplication and significant administrative burdens – without any discernible additional benefit for tax administrations. The European Commission’s proposal to exempt Pillar Two groups from overlapping rules is therefore both consistent and necessary. It should be implemented without dilution.

F AC I L I T A T E I N V E S T M E N T A N D S I M P LI FY P RO CE DU RE S Withholding taxes on interest, royalty, and dividend payments significantly burden companies’ liquidity – even where refunds are granted at a later stage – and represent a major obstacle to investment. The extension of withholding tax relief under the Interest and Royalties Directive and the Parent-Subsidiary Directive, together with the reduction of related procedural barriers within the EU, are key steps by the European Commission to strengthen the Single Market. Companies investing within Europe require reliable financing conditions. In this context, the Commission’s proposal to exclude non-abusive third-

Federation of German Industries (BDI) | Legal Affairs and Tax Department | steuerpolitik@bdi.eu | www.bdi.eu

EU Tax Omnibus: Towards a More Competitive and Less Bureaucratic EU Corporate Tax System

party debt financing from the scope of interest limitation rules sends the right signal. However, what is crucial is a practical design that treats modern financing structures – such as cash pooling and the on-lending of funds within a tax group – as non-detrimental, at least in purely domestic situations.

S T RE N GT H E N L E G A L C E R T A I NT Y Procedures designed to prevent or eliminate double taxation are often lengthy, administratively burdensome, and hampered by insufficient information exchange between tax authorities. As a result, risks of double taxation persist over extended periods or are ultimately accepted by taxpayers. This negatively affects investment decisions. The European Commission’s proposals to improve dispute resolution mechanisms are a step in the right direction. However, they could be more ambitious – for example, by extending their scope to cover the global minimum tax – with the clear objective of making the EU framework the simplest, fastest, most reliable, and most accessible dispute resolution system.

NO NATIONAL GOLD-PLATING Beyond the proposals themselves, implementation is key. National deviations, additional audit mechanisms, or new documentation requirements must not undermine European simplification efforts. Germany has long implemented EU requirements more strictly than the international average 1 – resulting in additional burdens for businesses. This practice must come to an end. In this context, Member States’ optionality in implementing EU directives should be limited, and existing gold-plating should be systematically rolled back. In 2024, the German Federal Ministry of Finance’s expert commission presented numerous proposals to reduce gold-plating of EU legislation, including in relation to the ATAD and other proposals2.

NO NEW BURDENS IN ECONOMICALLY CHALLENGING TIMES Reducing bureaucracy also means refraining from introducing new burdens. The European economy urgently requires positive signals. New measures such as an EU-wide digital tax or additional corporate levies (e.g. CORE) would send the wrong message.

Conclusion The European Commission’s proposals represent a genuine opportunity for simplification, to enhance competitiveness and stimulate investment in Europe. At the same time, they constitute a litmus test for German tax policy. The Governments must actively and ambitiously shape the negotiations in the Council in the interest of the EU´s industry – not slow them down. Half-hearted compromises or national deviations would squander the positive momentum from Brussels and further weaken Europe’s competitiveness.

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ZEW, University Mannheim, EY, Discussion Paper, No. 26-002, Rethinking Anti-Tax Avoidance Measures in the European Union.

2 Final Report of the Expert Commission „Vereinfachte Unternehmensteuer“ of the German Federal Ministry of Finance, 2024 (in German): Mitigation of exit taxation under Section 6 AStG (from p. 147); Controlled Foreign Company rules (from p. 136); interest limitation rules (from p. 146); and the Tax Haven Defense Act (from p. 139).

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EU Tax Omnibus: Towards a More Competitive and Less Bureaucratic EU Corporate Tax System

Imprint Federation of German Industries (BDI) Breite Straße 29 10178 Berlin www.bdi.eu T: +49 30 2028-0 German Lobby Register No.: R000534 EU Transparency Register No.: 1771817758-48 Editorial Team Dr. Monika Wünnemann Co-Head of Legal Affairs and Tax Department m.wuennemann@bdi.eu Nadine Fetzer Senior Representative International Tax Policy n.fetzer@bdi.eu BDI Document No.: 2325

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