COMMISSION STAFF WORKING DOCUMENT Subsidiarity Grid Accompanying the document Proposal for a COUNCIL DIRECTIVE amending Directives 2003/49/EC, 2009/133/EC, 2011/96/EU, (EU) 2016/1164, (EU)2017/1852, (EU) 2025/50 as regards the simplification of the Union framework on direct taxation and supporting growth and competitiveness of the EU
Date: 2026-06-24
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: European tax cooperation, approximation of laws, competitiveness, cross-border cooperation, direct tax, double taxation, economic growth, single market, tax law, tax system

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 24.6.2026  SWD(2026) 560 final  COMMISSION STAFF WORKING DOCUMENT Subsidiarity Grid Accompanying the document Proposal for a COUNCIL DIRECTIVE amending Directives 2003/49/EC, 2009/133/EC, 2011/96/EU, (EU) 2016/1164, (EU)2017/1852, (EU) 2025/50 as regards the simplification of the Union framework on direct taxation and supporting growth and competitiveness of the EU {COM(2026) 560 final} - {SEC(2026) 560 final} - {SWD(2026) 561 final} - {SWD(2026) 562 final}  
 
 
Subsidiarity Grid 

1.  Can the Union act? What is the legal basis and competence of the Unions’ intended action? 

1.1 Which article(s) of the Treaty are used to support the legislative proposal or policy initiative? 

Article 115 of the Treaty on the Functioning of the European Union (TFEU) constitutes the 
legal base for legislative initiatives in the field of direct taxation. Although there is no explicit 
mention of direct taxation, Article 115 refers to issuing directives for the approximation of 
national laws as those that directly affect the establishment or functioning of the internal 
market. This is why it is essential that all initiatives proposed under this legal base bear a 
cross-border element and have an impact on the functioning of  the internal market. The 
form of the current initiative as an Omnibus legal instrument, which amends existing rules 
laid down in Directives proposed under the legal base of Article 115 TFEU, does not leave a 
doubt  that  the  legal  base  should  be  the one  that  was  also  used  for  the  directives  under 
amendment.  

1.2 Is the Union competence represented by this Treaty article exclusive, shared or supporting in 
nature? 

In  the  case  of  direct  taxation  and,  as  far  as  the  proposals  relate  to the  establishment or 
functioning of the internal market, the Union’s competence is shared. 

Subsidiarity does not apply for policy areas where the Union has exclusive competence as defined 
in Article 3 TFEU1. It is the specific legal basis which determines whether the proposal falls under 
the subsidiarity control mechanism. Article 4 TFEU2 sets out the areas where competence is shared 
between the Union and the Member States. Article 6 TFEU3 sets out the areas for which the Unions 
has competence only to support the actions of the Member States. 

2.  Subsidiarity Principle: Why should the EU act? 

2.1 Does the proposal fulfil the procedural requirements of Protocol No. 24: 

-  Has there been a wide consultation before proposing the act? 
- 

Is there a detailed statement with qualitative and, where possible, quantitative 
indicators allowing an appraisal of whether the action can best be achieved at Union 
level? 

The proposal fulfils the procedural requirement of Protocol No. 2, as shown below. 
In general, there  has been an extensive  consultation in preparation of the proposal. The 
following steps have been pursued in order to determine the best way forward:  
-  Call for Evidence, published on 16 February 2026, open for consultation until 30 March 
2026,  which  received  117  contributions,  from  business  associations  and  companies, 
citizens, academic institutions, non-governmental organisations, and trade unions;  
-  Numerous  consultations  of  all  EU  Member  States,  through  bilateral  meetings,  joint 
dedicated meetings of the Commission Working Party IV (direct taxation) and within the 
Council High-Level Working Party (HLWP);  

-  Bilateral  consultations  in  the  form  of  interviews  were  conducted  with  over  75  key 
stakeholders, including businesses of different sizes operating in different sectors;  

1 https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:12008E003&from=EN  
2 https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:12008E004&from=EN  
3 https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:12008E006:EN:HTML  
4 https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:12016E/PRO/02&from=EN  

1 

 
 
 
- 

- 

The  Platform  on  Tax Good  Governance  was  used  for  discussions  in  an expert  group 
composed of Member States, business and the civil society;  
Input from various other sources. Among others, the Commission has relied on publicly 
available  information  and  OECD  reports  and  on  the  expertise  of  its  Joint  Research 
Centre, which used the CORTAX model to study the possible impacts of the initiative.  

Stakeholders  converged on the necessity for EU action during the  consultations.  Overall, 
stakeholders fully supported the initiative to simplify existing EU tax rules with a view to 
improving the functioning of the internal market and ensuring Europe’s attractiveness as a 
place to invest and do business. There is some divergence of views on how simplification 
could best be achieved in terms of specific initiatives.  

The  Impact  Assessment  report  accompanying  the  proposal  considers  all  contributions 
received. It includes  a synopsis report of the stakeholder consultation in Annex  2, which 
details the profiles of the respondents and the input received.  

2.2 Does the explanatory memorandum (and any impact assessment) accompanying the 

Commission’s proposal contain an adequate justification regarding the conformity with the 
principle of subsidiarity? 

The explanatory memorandum and the impact assessment contain adequate justification 
regarding the conformity of the proposal with the principle of subsidiarity.  

The proposal complies with the principle of subsidiarity as set out in Article 5 of the Treaty 
on  European  Union  (TEU).  The  proposal  amends  existing  EU  directives  in  the  field  of  EU 
direct taxation, which apply to intra-EU cross-border activity. The cross-border nature of the 
problems at stake calls for common initiatives across the internal market, which requires 
amending existing EU direct tax directives. By definition, this is only possible by way of a 
Commission proposal for a Council directive.  

In addition, by reason of the scale or effects of the proposed action, the objective pursued 
can be better achieved at an EU level. The proposal will remove overlapping or superfluous 
EU rules, streamline and simplify procedures, further reduce instances of double taxation 
and mitigate market distortions, enhance legal certainty, eliminate outdated provisions, and 
address the inconsistent or divergent application of rules across Member States. It will thus 
be less costly for businesses to operate across multiple Member States. This will boost EU 
competitiveness, by making it a more attractive place to establish businesses and invest. For 
tax administrations, clearer EU-wide rules would simplify compliance checks and tax audits, 
reduce disputes and lower administrative burden.  

2.3 Based on the answers to the questions below, can the objectives of the proposed action be 

achieved sufficiently by the Member States acting alone (necessity for EU action)? 

The objectives of the proposal cannot sufficiently be achieved by the Member States acting 
alone  because  the  initiative  aims  to  simplify  and  clarify  existing  EU  directives,  in  order 
address  identified  challenges,  and  in  accordance  with  the  Treaties  only  an  EU  legislative 
proposal can amend the EU direct tax acquis. Beyond the purely legal aspect which is a direct 
reflection of the supremacy of EU law, individual action by Member States at national level 
would  not  only  fail  to  meet  the  objectives  of  the  initiative  but  would  additionally 
compromise  what  has  so  far  been  achieved  through  initiatives  at  EU  level,  as  it  would 
fragment the landscape and give rise to inconsistencies.  

2 

 
 
 
 
 
 
 
These initiatives are therefore in line with the principle of subsidiarity, as laid down in Article 
5(3) TEU, considering that their objectives cannot be achieved by each Member State alone, 
and  a  common  approach  for  all  Member  States  would  have  the  highest  chances  for  a 
successful outcome.  

(a)  Are there significant/appreciable transnational/cross-border aspects to the problems 

being tackled? Have these been quantified? 

All Member States have their own domestic tax systems which are determined by different 
economic  approaches,  financial  needs  and  policy  choices.  However,  today’s  business 
models increasingly involve economically integrated groups that operate globally, including 
across more than one Member State within the EU.  

Consequently, groups have to comply with (up to) 27 different corporate tax systems in the 
EU.  This  often  creates  impediments  to  business  activity  in  the  internal  market,  as 
compliance with different country-specific rules implies costs for businesses that operate 
cross-border. This may involve a large administrative burden coupled with tax uncertainty, 
which can  discourage cross-border commercial activity, in  particular for SMEs, which  are 
more acutely affected by tax compliance costs in proportion to other businesses.  

Accordingly, in some cases, it has become apparent that EU action is necessary to ensure 
the functioning of the internal market and the effectiveness of the fundamental freedoms. 
This is, for example, the case with the Interest & Royalties Directive (IRD) and the Parent-
Subsidiary Directive (PSD) which were adopted to ensure equal tax treatment of dividends, 
royalties and interests when these payments are carried out between taxpayers in different 
Member States. In the same vein, the Tax Merger Directive (TMD) provides for a tax deferral 
and thereby ensures that tax rules applicable to cross-border intra-EU business operations, 
like mergers, divisions, transfers of assets, and exchange of shares, concerning taxpayers of 
different Member States are neutral to business decisions in the internal market. The Anti-
Tax  Avoidance  Directive  (ATAD)  introduced  a  set  of  common  anti-tax  avoidance  rules  to 
address certain aggressive tax planning practices leading to base erosion and profit shifting. 
These  are  often caused or  aggravated  by mismatches  or  fragmentation  between  the  tax 
systems  of  the  Member  States.  The  Directive  on  Dispute  Resolution  Mechanisms  (DRM) 
establishes rules for resolving disputes that arise from the interpretation and application of 
double tax treaties among EU Member States. 

The  impact  assessment  report  attempts  to  quantify  and  describe  this.  For  instance, 
reference is made to a comprehensive survey-based study which presents extensive analysis 
of the administrative costs for compliance with tax obligations (tax compliance costs). The 
study  has  been  carried  out  on  behalf  the  European  Commission  (2022,  see  Impact 
Assessment): on average, EU businesses incur annual costs in meeting their tax compliance 
obligations equivalent to almost 2% of their total turnover.  

(b)  Would national action or the absence of the EU level action conflict with core objectives of 

the Treaty5 or significantly damage the interests of other Member States? 

National  actions  would  not  be  sufficient  to  address  the  problems  as  their  origin,  to  a 
significant extent, stems from individual uncoordinated implementation and interpretation 
of the EU direct tax acquis by the Member States, as well as outdated or overlapping rules 
in the EU direct tax legislation. Amending EU law which, all the more so, deals with tackling 

5 https://europa.eu/european-union/about-eu/eu-in-brief_en  

3 

 
 
 
 
 
 
problems of cross-border nature, requires coordinated action from the EU as a whole. Only 
an EU legislative proposal can amend the existing EU direct tax acquis in accordance with 
the  Treaties,  to  simplify  and  clarify  the  common  rules  as  well  as  address  identified 
challenges.  As  a  result,  the  objectives  of  the  Tax  Omnibus  cannot  be  achieved  by  the 
Member States acting alone. 

(c)  To what extent do Member States have the ability or possibility to enact appropriate 

measures? 

In the first place, it is the responsibility and competence of the Member States to simplify 
their domestic tax rules. However, insofar as the issues are related to the existing EU direct 
acquis or have a cross-border nature that cannot be sufficiently addressed at national level, 
as explained above, only action at EU level can bring a positive outcome (through enacting 
appropriate measures).  

In  such  cases,  the  outcome  of  individual  actions  by  the  Member  States  would  not  be 
relevant  or  would  constitute  another  layer  in  the  fragmented  EU  tax  environment  and 
cannot improve the business tax environment in the internal market.  

(d)  How does the problem and its causes (e.g. negative externalities, spill-over effects) vary 

across the national, regional and local levels of the EU? 

The identified problems do not bear any regional or local characteristics, which would give 
rise  to  variations  within  a  single  Member  State.  They  arise  from  the  transposition, 
interpretation and application of EU rules, which takes place at national level. 
Yet,  while  specific  problems  may  therefore  vary  depending  on  the  national  approach  of 
specific Member States, its causes are of a general nature as they are related to the state of 
the EU direct tax acquis, which leaves options and some uncertainty and obstacles for cross-
border business activity.   

(e)  Is the problem widespread across the EU or limited to a few Member States? 

By definition, as the identified problems are related to the existing common EU legislation, 
it is inevitable that these are widespread across the EU and albeit in different ways, affect 
taxpayers in all Member States.  

(f)  Are Member States overstretched in achieving the objectives of the planned measure? 

The proposal only seeks to amend the existing EU direct tax acquis where this is necessary 
to achieve the envisaged objectives. The proposal thus simply builds on existing rules and 
policies. Member States will have to implement some legislative amendments, which will 
eventually mean that tax systems would become more efficient, and both taxpayers and tax 
administrations would have lighter compliance and administrative burdens respectively. 

(g)  How do the views/preferred courses of action of national, regional and local authorities 

differ across the EU? 

Member  States  were  consulted  at  a  bilateral  level,  as  well  as  in  dedicated  meetings  at 
technical level in Working Party IV and at the High-Level Working Party (HLWP). It can be 
concluded that, while views differ primarily amongst Member States on the specific design 
of  the  main  features  of  the  initiative,  there  is  a  broad  consensus  on  the  problems  and 
convergence  on  the  need  for  EU  action  to  simplify  the  EU  direct  tax  environment.  The 

4 

 
 
 
collected  views  reflect  the  state  of  play  at  national  level  and  there  is  no  indication  that 
within a single Member State, there is divergence of approach, depending on the region. 

2.4 Based on the answer to the questions below, can the objectives of the proposed action be 

better achieved at Union level by reason of scale or effects of that action (EU added value)? 

Action  at  EU 
level  would  bring  significant  benefits  to  both  businesses  and  tax 
administrations.  The  Omnibus  on  Taxation  will  be  designed  to  tackle  problems  in  the 
existing Directives in the field of direct taxation.  

The proposal will remove overlapping or superfluous already existing EU rules, streamline 
and simplify procedures, further reduce instances of double taxation and mitigate market 
distortions,  enhance  legal  certainty,  eliminate  outdated  provisions,  and  address  the 
inconsistent or divergent application of rules across Member States. It will thus be less costly 
for  businesses  to  operate  across  multiple  Member  States.  This  will  boost  EU 
competitiveness, by making it a more attractive place to establish businesses and invest. For 
tax administrations, clearer EU-wide rules will simplify compliance checks and tax audits, 
reduce disputes and lower administrative burden.  

It follows that if such action had to be undertaken independently by each Member State, 
the outcome would not fully achieve the objective, as individual action would not effectively 
tackle the identified problems of fragmentation and divergent interpretation/application. 

The Omnibus on Taxation proposal should also be seen in conjunction with the DAC Recast, 
which entails simplification of certain reporting obligations and procedures. Altogether, the 
initiatives would entail coordinated and comprehensive actions ensuring that both material 
tax rules and the exchange of information framework are up-to-date and fit for purpose. 

(a)  Are there clear benefits from EU level action?  

The impact assessment includes a cost-benefit analysis of the initiative, which is expected 
to  be  positive.  The  benefits  mainly  arise  from  the  simplifications  that  the  initiative  will 
introduce which can significantly reduce tax compliance costs for EU taxpayers. Concretely, 
as explained in the impact assessment report, this involves a direct reduction of tax-related 
compliance  costs  for  cross-border  operating  companies,  cost  savings  in  legal  advice  and 
litigation  procedures  concerning  dispute  resolution  and  business  reorganisations,  EU 
competitiveness through exemption from WHT on intra-EU cross-border interest,  royalty 
and dividend payments and through simpler, common and more beneficial tax depreciation 
treatment for investments in the area of research and development (R&D). 

The impact  assessment  report  sets  out the potential cost  savings for businesses and the 
economy in the EU as a result of potential reductions of current tax compliance costs, as 
well as in the context of the broader, longer-term macro-economic impact. It concludes that 
the preferred option is the Comprehensive Omnibus. This option is roughly estimated to 
reduce  compliance  and  financial  costs  by  about  EUR  6.6  billion  per  year,  out  of  which 
recurrent costs related to cutting down on administrative burden is EUR 2 billion per year. 
Some  of  its  individual  measures  are  estimated  to  increase  EU  GDP  by  roughly  0.04% 
(exemption from withholding tax) and 0.2% (immediate expensing of certain R&D assets) in 
the long run.  

(b)  Are there economies of scale? Can the objectives be met more efficiently at EU level 

(larger benefits per unit cost)? Will the functioning of the internal market be improved? 

5 

 
 
 
 
 
 
By decreasing compliance costs and tax obstacles, the initiatives will in turn foster foreign 
and domestic investment as well as capital mobility in the EU, both for large groups and 
SMEs with cross-border presence or plans to expand abroad. Thus, businesses operating in 
different Member States will be able fully benefit from the freedom of establishment and 
the free movement of capital without being hindered by tax regulatory obstacles.  

In addition, as explained as part of the impact assessment, studies show that investment 
within  the  EU  internal market  is  usually more  efficient  than  purely  domestic  investment 
because  market  integration  improves  capital  allocation,  increases  competition,  enables 
economies of scale, and facilitates knowledge spillovers, thereby raising productivity and 
returns on investment. The proposal specifically aims to support such investments across 
EU borders and cross-border business activity across the internal market, by simplifying and 
improving the applicable EU-wide tax framework.  

Hence, it is expected that there will be economies of scale and that the objectives can be 
met more efficiently at EU level.  

(c)  What are the benefits in replacing different national policies and rules with a more 

homogenous policy approach? 

Overall,  the  proposal  does  not  replace  different  national  policies  and  rules  with  a  more 
homogenous policy approach, given that the proposal amends existing EU law. Instead, the 
proposal  aims  to  materialise  a  more  consistent  interpretation  and  application  of  the 
common rules as well as provide legal certainty to taxpayers across the internal market. The 
envisaged revisions will facilitate cross-border investment by increasing tax certainty and 
reducing compliance costs and disputes both for taxpayers and tax administrations. This will 
allow the EU’s economy to grow and be more competitive vis-à-vis other big markets, while 
maintaining high tax standards and continuing the fully respect national tax sovereignty. 

(d)  Do the benefits of EU-level action outweigh the loss of competence of the Member States 
and the local and regional authorities (beyond the costs and benefits of acting at national, 
regional and local levels)? 

The proposal aims to amend the EU direct tax acquis by simplifying or clarifying existing tax 
rules at EU level. There is no aim of adding new fields to the EU acquis in direct taxation. It 
therefore follows that Member States’ (or local/regional) competences are not affected as 
a matter of principle.  

(e)  Will there be improved legal clarity for those having to implement the legislation? 

This  is  precisely  one  of  the  key  objectives  of  the  Simplification  initiative.  The  measures 
contained in the proposal will make the applicable EU tax rules, both substantive and related 
procedural requirements, simpler and clearer. Several rules will be updated or streamlined 
with other rules, to rectify overlaps and avoid confusion. The proposal specifically addresses 
issues related to diverging implementation or interpretation across EU Member States, by 
opting  for  a  single  EU  approach.  This  enhanced  clarity  is  expected  to  result  in  lower 
compliance and administrative burdens for taxpayers and tax administrations. 

3.  Proportionality: How the EU should act 

3.1  Does the explanatory memorandum (and any impact assessment) accompanying the 

Commission’s proposal contain an adequate justification regarding the proportionality of the 

6 

 
 
 
 
proposal and a statement allowing appraisal of the compliance of the proposal with the 
principle of proportionality? 

The  proposal is limited to targeted amendments necessary to simplify existing Union tax 
legislation  and  improve  its  coherence  and  effectiveness.  It  does  not  go  beyond  what  is 
necessary  to  achieve  these  objectives.  In  particular,  it  preserves  the  core objectives  and 
safeguards  of  the  existing  directives  while  updating,  streamlining  or  simplifying  specific 
provisions that have been identified as generating unnecessary complexity, administrative 
burdens,  legal  uncertainty  or  disproportionate  compliance  costs.  It  therefore  strikes  an 
appropriate  balance  between  simplification,  legal  certainty  and  the  preservation  of  the 
original  objectives  of  the  revised  legal  instruments.  In  this  way,  it  is  ensured  that  the 
initiative  maintains  the  high  degree  of  protection  against  tax  avoidance  in  the  internal 
market, as this was attained over the last decade. 

3.2 Based on the answers to the questions below and information available from any impact 
assessment, the explanatory memorandum or other sources, is the proposed action an 
appropriate way to achieve the intended objectives? 

The proposal will focus on the simplification of existing EU rules that are linked to identified 
problems and can only be addressed through legislative action, exclusively at EU level. The 
consultations and the ATAD evaluation also identified problems e.g., related to beneficial 
ownership or the interaction between the General-Anti Abuse Rule (GAAR) in ATAD and the 
specific  anti-tax  abuse  rules  in  the  PSD/IRD/TMD,  which  could  be  addressed  by  soft  law 
initiatives, such as administrative guidance, in the future. As part of this initiative, EU action 
will thus be limited to what is necessary for the functioning of the internal market.  

(a)  Is the initiative limited to those aspects that Member States cannot achieve satisfactorily 

on their own, and where the Union can do better? 

Yes, the initiative is limited to amending the EU direct tax acquis, which by definition relates 
to objectives that Member States cannot achieve on their own, whereas the Union can do 
better by centrally simplifying, clarifying or in cases, extending or streamlining the existing 
EU framework. 

(b)  Is the form of Union action (choice of instrument) justified, as simple as possible, and 
coherent with the satisfactory achievement of, and ensuring compliance with the 
objectives pursued (e.g. choice between regulation, (framework) directive, 
recommendation, or alternative regulatory methods such as co-legislation, etc.)? 

Considering  the  legal  base  of  the  initiative  (i.e.  Article  115  TFEU)  and  the  fact  that  the 
proposal  will  be  an  act  amending  existing  EU  tax  directives,  the  only  permissible  legal 
instrument under the specific legal base is a Directive. 

(c)  Does the Union action leave as much scope for national decision as possible while 

achieving satisfactorily the objectives set? (e.g. is it possible to limit the European action to 
minimum standards or use a less stringent policy instrument of approach?) 

Although the proposal removes some of the minimum standards and replaces them with 
harmonised rules, these cases are all justified by empirical evidence which arose during the 
extensive consultation process. Namely, their feature of minimum standard compromised 
the effectiveness of these rules and gave rise to a fragmented landscape, which is the result 
of having various available options. These eventually created a barrier to trade. This point 
emerges recurrently and consistently in all interactions with stakeholders. 

7 

 
 
(d)  Does the initiative create financial or administrative cost for the Union, national 

governments, regional or local authorities, economic operators or citizens? Are these costs 
commensurate with the objective to be achieved? 

No financial or administrative cost is expected for the Union.  
Regarding  national  authorities,  the  impact  assessment  report  estimates  that  related 
financial  or  administrative  costs  will  be  none,  marginal  or  not  relevant.  For  certain 
measures,  it  is  expected  that  these  will  reduce  the  workload  for  tax  authorities,  but 
quantitative  projection  is  difficult,  given  that  there  is  no  empirical  data  to  assess  the 
potential  cost  implications  –  whether  strictly  from  an  IT  or  human  resource  (adaptation, 
personnel) point of view.  

(e)  While respecting the Union law, have special circumstances applying in individual Member 

States been taken into account? 

n/a 

8