EU corporate tax directives

Source: Authors' elaboration; graphic by Nadejda Kresnichka-Nikolchova, EPRS.

Tax Dispute Resolution Mechanisms Directive (DRM)

The DRM entered into force in November 2017 and applies to any complaint submitted from 1 July 2019 onwards relating to disputes concerning income or capital earned in a tax year commencing on or after 1 January 2018. The DRM aims to streamline the resolution of tax disputes concerning the interpretation and application of agreements and conventions providing for the elimination of double taxation of income and, where applicable, capital (Article 1). Specifically, the directive addresses double taxation issues arising from conflicting national rules or differing interpretations of tax treaties. The directive establishes clear deadlines for resolving tax disputes through the Mutual Agreement Procedure (MAP), including rules on the submission and admissibility of complaints and the time limits for reaching an agreement (Articles 3‑6). It also grants taxpayers access to national courts will competent authorities fail to take decisions on admissibility of a complaint and allows them to request a dispute resolution body is established (Articles 5(3), 6(1) and 7(1)).

European Commission evaluation of the Anti-Tax-Avoidance Directive

In July 2024, the Commission launched a call for evidence for its evaluation of the ATAD, which was open for feedback from stakeholders between July and September 2024. The consultation received 49 responses, predominantly from business stakeholders. Business associations accounted for approximately 39 % of all respondents, followed by individual companies and businesses (approximately 22 %), and EU citizens (14 %). The remaining responses were submitted by a range of other stakeholders including public authorities, research institutions, non-EU citizens, non-governmental organisations (NGOs) and academia. Responses were submitted by stakeholders from 12 Member States, two non-EU countries (the United Kingdom and the United States) and one overseas country and territory (Bonaire, Sint Eustatius and Saba). Stakeholders supported the ATAD objectives but highlighted the need to simplify and harmonise its provisions, particularly considering Pillar 2, pointing to divergent national implementation, excessive compliance costs and the impact of certain rules, notably the interest limitation rule, on investment and competitiveness.

Additionally, the evaluation drew on evidence collected through targeted consultation activities carried out in the context of a supporting study commissioned by the Commission. First, all 27 Member State tax authorities were consulted through a combination of in-depth interviews and an email survey to gather evidence on ATAD implementation and application and its performance against the evaluation criteria. Second, private stakeholders – including tax advisers, multinational enterprises, business federations, academics and NGOs – were consulted through interviews and a web-based survey to capture practical experience with the directive's application, its impact on taxpayer behaviour and compliance costs, and implementation challenges. Finally, the preliminary findings of the supporting study were presented and discussed at meetings of the Platform for Tax Good Governance and the Working Party IV.

The evaluation was published in June 2026, alongside the omnibus, and draws on the findings of the external study. The evaluation assessed the ATAD against the five Better Regulation criteria (effectiveness, efficiency, relevance, coherence and EU added value). It examined the ATAD's implementation across the Member States, including the policy choices made where the directive allows for flexibility. It also assessed the directive's effectiveness in addressing aggressive tax planning, whether its implementation has delivered added value compared with what could have been achieved by Member States acting individually, and its continued relevance, particularly considering the adoption of the Pillar 2 Directive.

Key findings of the evaluation highlight that, while ATAD successfully reduced fragmentation in anti-tax-avoidance rules in Member States, the flexibility provided to Member States on implementation options led to divergent national approaches, creating complexity and legal uncertainty for businesses. The ATAD interest limitation rule (Article 4) is identified as the most impactful, though stakeholders note it is insufficiently targeted and has become outdated. The evaluation found no significant impact of the exit taxation rule (Article 5) had minimal effect on tax-base protection, while though necessary, the GAAR (Article 6) introduces legal uncertainty due to vague scope and interpretation challenges. Additionally, the deterrent effect of the CFC rule (Articles 7‑8) is acknowledged, but its administrative burden is significant, particularly with the introduction of Pillar 2. Though effective when applied, the hybrid mismatch rule (Article 9) is complex, especially regarding imported mismatches.¹¹

However, while the ATAD has strengthened the protection of tax bases, its efficiency is constrained by significant compliance costs, limited evidence on benefits, and data gaps that prevent a robust cost-benefit assessment. The evaluation also finds that the ATAD remains highly relevant, as cross-border tax avoidance continues to pose significant challenges. In terms of EU added value, the directive has established legally binding minimum anti-avoidance standards across all Member States, reducing regulatory fragmentation and creating a more level playing field than could have been achieved through voluntary international standards alone. The ATAD is generally coherent with the broader EU and international tax framework. Nevertheless, differences in national implementation and emerging interactions with the Pillar 2 rules have increased legal complexity, pointing to a need for further harmonisation and simplification.

The evaluation concludes that legislative amendments and administrative guidance are needed to address the fragmentation witnessed following the ATAD's implementation, and to better balance costs and benefits. This could also support broader EU policy priorities, such as enhancing competitiveness by removing tax barriers to cross-border business activities.

Stakeholder consultation

In February 2026, the Commission launched a call for evidence for an impact assessment¹² of the omnibus proposal, which ran from February to March 2026 and received 117 replies from stakeholders from 18 Member States and 5 contributions from stakeholders in Albania, India, Kenya, the United Kingdom and the United States. Respondents included business associations (46 %), private businesses (23 %), EU citizens (9 %), and NGOs (5 %). The remaining responses were submitted by other entities, including public authorities, research institutions, and non-EU citizens. Stakeholder replies showed a broad consensus that the omnibus should not only focus on removing isolated reporting obligations, but also improve the coherence, proportionality and practical usability of the EU's direct taxation acquis. Approximately 77 % of stakeholders who replied called for enhanced harmonisation and reduced national discretion in the directives' implementation. Around 50 % suggested standardising procedures, including the use of digital tools, and 60 % emphasised the importance of simplifying rules for SMEs.

Across respondents, there were consistent calls for fewer overlaps, greater alignment between directives, less flexibility for Member States to apply provisions offering exemptions or relief, more predictable procedures and better coordination with the EU's Pillar 2 framework. Specifically, concerning the IRD and PSD, 67 % of stakeholders highlighted the need to simplify the withholding tax framework, to address complexity, strict eligibility requirements, and inconsistent application. Additionally, stakeholders noted the ATAD's complexity and suggested addressing its parallel application with Pillar 2. Regarding the TMD, 38 % of stakeholders called to extend and update its scope, and to align the directive with EU company law and modern business practices. Finally, 38 % of stakeholders found dispute resolution under the DRM slow and complex, suggesting enhancements such as stricter timelines, a permanent arbitration body, and extending the scope to Pillar 2 disputes.

The Commission did not organise an open public consultation as part of the impact assessment. It relied on targeted stakeholder consultations involving Member States through the Council Working Party on Tax Questions, tax administrations, business organisations, professional associations, tax practitioners and academic experts, complemented by an in-depth study on ATAD. These consultations focused on identifying practical implementation issues, sources of administrative burden and opportunities to simplify existing EU corporate tax directives. The Commission also drew extensively on evidence from previous consultations, evaluations and implementation experience relating to the existing directives, particularly the ATAD, the DRM and the recently adopted FASTER Directive. Additional evidence was drawn from economic analysis and statistical data.

Proposal on 'simplifying EU rules on direct taxation – omnibus'

On 24 June 2026, the Commission published its taxation omnibus. The proposal aims to modernise and streamline the EU's direct tax framework to reduce compliance burdens, enhance legal certainty, and support cross-border investment. This would be achieved by amending the IRD, TMD, PSD, ATAD, DRM and FASTER tax directives. The proposed changes are summarised in Figure 2.

Parliamentary resolutions

During the previous (9th) legislative term, the European Parliament adopted several resolutions that highlight the importance of a fair and efficient tax system, alongside coordinated and simplified corporate taxation rules to ensure a level playing field for businesses across the EU.

In December 2023, the Parliament adopted a resolution on 'Further reform of corporate taxation rules' which emphasises the need for a common approach to tax policies to address harmful tax competition and tax avoidance. It also stresses the importance of reducing the administrative burden on businesses, particularly SMEs, and promoting a fair and efficient tax system. In this context, it refers to the main elements of the existing EU corporate tax acquis, including the ATAD, the PSD, the DRM and the IRD, and calls for the continued review and coherent implementation of existing corporate tax framework to identify opportunities for simplification, reduce administrative burdens, and improve the functioning of the Single Market.

In March 2022, the Parliament adopted a resolution on 'Fair and simple taxation supporting the recovery strategy', emphasising the need for a fair, efficient, and simple tax system to support the EU's economic recovery following COVID‑19. The resolution stresses the importance of a coordinated approach to taxation at EU level, where Member States work together to address tax challenges. The resolution recognises the significance of the ATAD as a key tool in the fight against tax avoidance and aggressive tax planning and calls the Commission to report on its implementation and to relaunch the revision of the IRD. Furthermore, the resolution welcomes the DRM as a tool for resolving tax disputes between EU Member States, calling on the Commission to report on its implementation and effectiveness.

In October 2021, the European Parliament adopted a resolution entitled 'Reforming the EU policy on harmful tax practices (including the reform of the Code of Conduct Group)', calling for a reform of Code of Conduct on business taxation (CoC). The CoC is currently a soft-law instrument aimed at preventing harmful tax competition, but the Parliament believes it needs to be strengthened. In its resolution, the Parliament references several key EU directives, including ATAD, IRD, and PSD. The Parliament welcomes the OECD/G20 agreement on a global minimum tax rate of at least 15 % and calls for the EU to implement the OECD's Pillar 2 proposal on minimum effective taxation. The Parliament also recommends revising the CoC to include a minimum effective tax rate criterion.

The European Parliament's Subcommittee on Tax Matters (FISC) has been entrusted with preparing Parliament's opinion on the proposed taxation omnibus. The opinion will serve as the basis for the Parliament's position to be adopted by the Committee on Economic and Monetary Affairs (ECON). The omnibus proposal is based on Article 115 TFEU, which allows harmonisation of national tax laws that create barriers to the free movement of goods, services, capital, or persons within the internal market. According to this article, the proposal should be adopted under the special legislative procedure, requiring unanimous vote in Council and consultation of the European Parliament and Economic and Social Committee.

Selection of parliamentary questions

A non-exhaustive selection of parliamentary questions from the 7th (2009-2014), 8th (2014-2019) and 9th (2019-2024) terms touch upon the ATAD, the PSD, and the TMD. No parliamentary questions related to the IRD, and the DRM have been identified during this period. The questions selected provide valuable insight into the priorities of Members of the European Parliament regarding these tax directives, highlighting the issues and challenges they raise and the responses the European Commission provided.

Adam Szejnfeld (EPP, Poland) asked whether the Commission would review the ATAD, arguing that some Member States had transposed it more broadly than necessary by extending its application to SMEs and, in some cases, natural persons, whereas he considered it primarily intended to address aggressive tax planning by multinational groups. He also asked how the Commission would address what he considers to be incorrect or excessive national implementation, particularly where it may restrict single market freedoms and create liquidity problems through taxation of unrealised gains (E-005468-18). In its written answer, the Commission replied that the ATAD applies only to corporate taxpayers and sets minimum anti-tax-avoidance standards, while allowing Member States to adopt stricter rules as long as they comply with EU law. It added it would evaluate the directive's implementation, maintained that the exit tax rules are consistent with the freedom of establishment and Court of Justice of the European Union case law, and noted that taxpayers can defer payment of exit taxes over five years when moving within the EU.

Ernest Urtasun (Greens/EFA, Spain) asked the Commission to investigate the CumEx tax fraud scandal, which involved financial institutions claiming tax refunds on dividend returns despite no tax being paid, and to review European rules on parent companies and subsidiaries to prevent such fraud (E-005350-18). In its written answer, the Commission noted it lacks the competence to investigate cross-border tax fraud, which is the responsibility of Member States. The Commission also stated that it does not consider a review of the directive as necessary but noted that it promotes cooperation between tax administrations and supports efforts to combat tax crimes.

A group of European People's Party Members questioned the Commission regarding alleged incompatibility between Article 177 (2) of the Italian Consolidated Tax Act and the TMD (E‑002041‑14), which aims to ensure tax neutrality for corporate reorganisations within the EU. In its written answer, the Commission responded that it lacks competence to assess the compatibility of direct tax provisions only applicable to domestic transactions with EU rules, and it did not see how the different regimes for domestic operations could restrict freedom of establishment or introduce discrimination against foreign companies established in Italy. The Commission concluded there was no violation of the principles laid down in the directive and therefore has no plans to address the alleged incompatibility between Italy's tax system and EU law.

European Economic and Social Committee

In 2025, the European Economic and Social Committee (EESC) adopted an opinion entitled 'Assessing tax reporting obligations in the EU: costs, benefits and effective use of information by tax authorities'. The opinion acknowledged the contribution of EU tax reporting obligations to transparency and the fight against tax avoidance, while noting the growing compliance costs and administrative burdens faced by businesses, particularly SMEs. The EESC identified overlapping reporting requirements, divergent implementation across Member States and inconsistent definitions as factors contributing to legal uncertainty and reduced efficiency of the EU tax framework. It therefore supported further simplification, harmonisation and digitalisation of EU tax rules, alongside systematic competitiveness assessments of future tax legislation.

The EESC further argued that the coherence of EU tax legislation could be improved by reducing duplication between reporting obligations, aligning definitions across directives and promoting a more consistent application of tax rules across Member States. It also highlighted the importance of greater legal certainty for taxpayers through clearer guidance and more effective mechanisms for preventing and resolving tax disputes. At the same time, the EESC stressed that simplification efforts should not undermine the EU's capacity to combat tax avoidance and harmful tax practices.

European Central Bank

In 2026, the European Central Bank (ECB) highlighted the role of tax barriers in hindering the integration of EU capital markets. The ECB noted that withholding tax procedures remain fragmented across Member States, creating administrative burdens, legal uncertainty and additional costs for cross-border investors. While welcoming the adoption of the FASTER Directive as a step towards streamlining withholding tax relief procedures, it argued that differences in national tax systems and cumbersome refund procedures continue to discourage cross-border investment and contribute to market fragmentation. The ECB therefore identified further simplification and harmonisation of tax procedures as important elements in supporting the savings and investment Union and improving the efficiency of EU capital markets.