{"id":101397,"date":"2026-06-26T12:21:59","date_gmt":"2026-06-26T12:21:59","guid":{"rendered":"https:\/\/londenholland.nl\/?p=101397"},"modified":"2026-06-26T18:26:55","modified_gmt":"2026-06-26T18:26:55","slug":"eu-commission-proposes-omnibus-tax-directive","status":"publish","type":"post","link":"https:\/\/londenholland.nl\/nl\/eu-commission-proposes-omnibus-tax-directive\/","title":{"rendered":"EU Commission proposes omnibus tax directive"},"content":{"rendered":"

EU Commission proposes amendments to ATAD1, PSD and IRD Directives to improve the EU investment climate.<\/span><\/p>\n

The<\/span> European Commission proposes sweeping changes to directives regarding direct tax matters such as the parent subsidiary directive and the anti-tax avoidance directive<\/span><\/p>\n

On 24 June 2026, the European Commission published a proposal for a directive amending the Parent Subsidiary Directive, the Interest & Royalty Directive, the Anti-Tax Avoidance Directive, the Merger Directive, the Dispute Resolution Directive and the FASTER Directive. This so called \u2018tax omnibus directive\u2019 proposes a number of sweeping changes aimed at improving the functioning of the internal market and making cross border investments more attractive.<\/span><\/p>\n

If unanimously adopted by the EU Member States, the changes shall apply in a staggered manner from 1 January 2029, from 1 January 2032 and from 1 January 2037. It is important to note that it is expected that implementation of these rules will have significant budgetary effects for the Member States in question, so it is not certain that the proposed changes will be adopted (in their current form). The highlights are as follows:<\/span><\/p>\n

Starting 1 January 2029, the following amendments apply:<\/span><\/p>\n

Anti-Tax Avoidance Directive: <\/span><\/p>\n

    \n
  1. 30% EBITDA Interest deduction limitation:<\/span>\n
      \n
    1. Currently, interest expenses are deductible up to 30% of the EBITDA. It is proposed to fix the percentage at 30% and no longer allow Member States to elect a lower percentage. The aim is to lay down a harmonized rule on interest deduction limitation and no longer a minimum standard. Concurrently, the de minimis amount of EUR 3 million of interest deduction that is optional, is proposed to be fixed the amount at EUR 3 million (starting 1 January 2032). This amount will be indexed annually. <\/span><\/li>\n
    2. Borrowing costs incurred in relation to certain loans may or must be excluded from the scope of the interest deduction limitation, such as those on low-risk third-party loans and loans for long-term public-benefit projects whereby no interests are paid to recipient outside of the European Union.<\/span><\/li>\n
    3. Where the taxpayer can demonstrate that the ratio of its equity divided by its assets is equivalent or higher than that of the group, it can deduct exceeding borrowing costs subject to certain conditions. This \u2018group-escape\u2019 was optional for member states to implement and now becomes mandatory to implement.<\/span><\/li>\n<\/ol>\n<\/li>\n
    4. The General Anti Abuse Rule (the main purpose test) is proposed to not only be limited to corporate income tax, but to apply to all direct taxes to which a company can be subject in a member state, specifically withholding taxes and the global minimum tax (Pillar 2).<\/span><\/li>\n
    5. The Controlled Foreign Company rule is amended so that only the Model A implementation option remains, whereby certain types of passive income of low taxed subsidiaries must be taxed in the hands of the taxpayer regardless of whether the income relates to non-genuine arrangements or not. Exemptions are introduced SME\u2019s and groups which are subject to the global minimum tax (Pillar 2).<\/span><\/li>\n
    6. A research and development allowance for qualifying expenditure is introduced. Qualifying expenditures are capex on certain tangible assets used for providing facilities for carrying out basic and\/or applied research or experimental development. Land is an excluded asset for the allowance. The allowance must be deducted in the year the expenses are incurred or in the four subsequent tax periods. Rules are included for reversing the allowance in case of disposal or loss of the assets in question.<\/span><\/li>\n<\/ol>\n

      Merger Directive<\/span><\/p>\n

      The Merger Directive is updated to ensure that new civil law possibilities such as the simplified merger and the cross border conversion are also tax neutral under certain conditions for the affected company and its shareholders.<\/span><\/p>\n

      Starting 1 January 2037, the following amendments to the parent subsidiary directive and interest and royalty directive apply:<\/span><\/p>\n

      Parent Subsidiary Directive:<\/span><\/p>\n

        \n
      1. The 10% ownership requirement and optional 2 year holding period in the parent subsidiary directive are removed. Any distribution of profit must be exempt from withholding tax at source and from corporate income tax in the hands of the recipient (or a credit must be provided).<\/span><\/li>\n
      2. The subject to tax and legal form requirement of the PSD \u2013 by way of derogation \u2013 no longer applies to shareholders that qualify as pension institutions (as referred to in EU directive 2016\/2341 or an institution operating a pension scheme that is a social security scheme as referred to in Regulation 883\/2004 and legal entities set up for investments in such schemes).<\/span><\/li>\n
      3. For shareholdings of 10% or more, the Member States shall have the option to disallow deduction of costs related to the shareholding.<\/span><\/li>\n<\/ol>\n

        Interest & Royalty Directive:<\/span><\/p>\n

          \n
        1. The 25% direct ownership requirement and the optional 2 year holding period requirement in the interest & royalty directive are removed. This means that interest and royalty payments between companies in the European Union, regardless of whether there is an ownership relation, must be exempt from taxation at source.<\/span><\/li>\n
        2. Anti abuse rules are introduced where interest or royalties paid to a recipient outside of the European Union are not subject to tax (either no corporate income tax is levied or a nominal rate of zero in relation to interest and royalty income). In that case, member states must either levy a source withholding tax or deny deduction of the interest \/ royalties in question.<\/span><\/li>\n<\/ol>\n

          \u00a0<\/span><\/p>\n

          Londen & Van Holland comments<\/span><\/p>\n

          The departure from the minimum standard doctrine in the Anti-Tax Avoidance Directive has the result that member states will no longer be able to \u2018gold plate\u2019 the anti abuse clauses such as the interest deduction limitation. This results in better harmonization of the interest deduction limitation at the higher of 30% of the EBITDA or EUR 3 million. Furthermore, the much anticipated \u2018group escape rule\u2019 is announced and exemptions from this interest deduction limitation are included for certain loans from third parties and loans used to fund public benefit projects. Although the implementation date is 1 January 2029, interest groups in the Netherlands have already called for accelerated implementation as the Netherlands has currently limited the deduction further than necessary (the higher of 24.5% of the EBITDA or EUR 1 million).<\/span><\/p>\n

          The proposed changes to the Parent Subsidiary Directive and Interest & Royalty Directive are significant changes for the benefit of investors within the European Union. As the changes are expected to have significant impact for both taxpayers and the budgets of member states, it remains to be seen whether these items will be included in this form in the final directive (if the European Commission will manage to successfully guide this proposal through the process of adoption). If adopted, it will take a decade before these become effective in 2037.<\/span><\/p>\n

          For pension institutions, the abolishment of the subject to tax and legal form requirement in the Parent Subsidiary Directive will be a welcome development that may result in significantly lower tax burden and making the investment of pension funds into other EU Member States more attractive. <\/span><\/p>\n

          The removal of the 10% threshold for share ownership to qualify for the exemption of the Parent Subsidiary Directive to apply has already garnered significant media attention in the Netherlands as it is expected that this will have the result that savings and investments will all be transferred to personal holding companies, potentially resulting in postponement of personal income tax levy. For domestic investors, additional rules are expected to mitigate some of these effects.<\/span><\/p>\n

          If you have any questions regarding the proposal and its potential impact, please contact Roland Meuwissen at <\/span>r.meuwissen@londenholland.nl<\/a><\/span> \/ +31 6 27 53 32 89 or your usual contact at Londen & Van Holland.<\/span><\/p>\n

           <\/p>\n

           <\/p>\n

           <\/p>\n

           <\/p>\n","protected":false},"excerpt":{"rendered":"

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