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The European Commission published its Tax Simplification Package on 24 June. The package contained a number of measures aimed at simplifying tax reporting, reducing compliance costs and promoting EU competitiveness.
The package consists of two parts: a direct taxation omnibus directive (discussed in a separate insight) and the Recast Directive, which contains proposals to simplify matters of administrative cooperation between member states on tax matters. Both measures remain subject to member state approval; however, the Irish Government aims to conclude negotiations on the Recast Directive within the term of its presidency of the EU Council, it is seeking consensus on the proposals before the end of 2026.
The Recast Directive will codify the Directive on Administrative Cooperation in the Field of Taxation (DAC) and its eight subsequent amendments into one single piece of legislation. The new directive will simplify reporting requirements by removing overlapping reporting requirements and certain low value reporting obligations.
The main areas of simplification, primarily in relation to the application of DAC4/DAC9, DAC6 and DAC7, are discussed below.
A. Changes to reporting rules for Country-by-Country Reporting (DAC4) and Pillat Two (DAC9)
DAC4 provides the reporting framework for Multi-National Enterprises (MNEs) within scope of Country-by-Country Reporting, while DAC9 provides the centralised compliance framework for MNEs within scope of Pillar Two. At present, groups subject to both reporting frameworks may be required to make two separate sets of filings, even though much of the information in those filings could be the same.
In addition, both reporting frameworks operate on different timelines. DAC4 dictates that the reporting deadline for country-by-country reporting is the last day of the fiscal year of the MNE group, whereas DAC9 has no prescribed deadline for submission of the central filing of Pillar Two top-up tax information - instead, member states have been allowed to implement different notification obligations.
The Recast Directive will give MNE groups the option of filing a single notification per group which will cover both DAC4 and DAC9. The notification timeline will be based on the existing timeline for country-by-country reporting (i.e. the last day of the fiscal year of the MNE group) and it will be done on a single common template.
B. Changes to rules on mandatory reporting of cross-border arrangements (DAC6)
DAC6 provides a mandatory reporting framework for certain cross-border arrangements which have an EU nexus. Key measures and reforms proposed by the Recast Directive to the existing DAC6 reporting framework include:
MNE groups within scope of Pillar Two will be exempted from reporting under DAC6 provided that the relevant cross-border arrangement does not result in a member of the relevant MNE group receiving a benefit, refund or indirect financial advantage. This would allow its effective tax rate to drop below the 15% minimum tax rate.
In expanding on the decision to exclude Pillar Two MNE groups from DAC6, the explanatory memorandum to the directive notes that (i) the 15% minimum tax under Pillar Two would be expected to neutralise any aggressive tax planning and (ii) groups within scope of Pillar Two already face close scrutiny from dedicated audit teams within tax authorities.
It is estimated that reports made by Pillar Two MNEs account for approximately 8%of DAC6 reports and that their removal from the DAC6 reporting framework should yield compliance cost savings of around €300m.
The definition of ‘reportable cross border arrangement’ will be streamlined to include only arrangements which are implementable, in line with the CJEU decision in Case C-623/22 (Belgian Association of Tax Lawyers and Others).
In addition, the definition of relevant taxpayer will be amended to include only the taxpayer who started the implementation of the reportable cross-border arrangement.
The Recast Directive also proposes removing certain generic hallmarks under Hallmark A, including reporting obligations for schemes involving:
(i) confidentiality clauses vis-à-vis tax authorities or other intermediaries
(ii) success fees linked to securing a tax advantage, or
(iii) the use of certain standardised documents.
An estimated 35% of all DAC6 reporting is made under Hallmark A. The Commission indicates that deleting these hallmarks is justified, as it will reduce the compliance burden on taxpayers, and reports under these are low value for tax administrations.
While a number of the DAC6 Hallmarks that are currently subject to the main benefit test (MBT) will be removed because of the changes to Hallmark A, it is proposed that specific guidance will also be provided to clarify the application of the MBT to the remaining Hallmarks.
The timelines for making reports under DAC6 will be extended from 30 to 90 days.
The point at which the reporting timeframe starts will also change. The complex rules requiring a DAC6 report:
(A) within 30 days of the earliest of:
(i) the arrangement being made available
(ii) the arrangement being ready for implementation, or
(iii) the first step in implementation being taken, or
(B) for service provider intermediaries, within 30 days of aid, assistance or advice being given, will be removed.
Instead, the reporting timeframe will be 90 days from the first step in implementation being taken, and ‘implementation’ will mean concrete steps have been taken to make the arrangement’s execution irreversible and legally binding, such as signing the contracts which enable implementation.
Clarification will be given on what arrangements fall within scope of the legal professional privilege (LPP) reporting exemption. In line with recent CJEU case law, the LPP exemption will apply only to legal professionals who practice under titles listed in Article 1(2)(a) of Directive 98/5/EC.
Lawyers who invoke LPP will no longer be required to notify other intermediaries but will still be required to notify their clients of their reporting obligations.
C. Changes to reporting obligations of platform operators (DAC7)
DAC7 requires digital platforms to report sales by users to tax authorities. To streamline reporting obligations, and promote the circular economy, the 30-transaction activity threshold for reporting will be removed and the income threshold will be increased from €2,000 to €3,000.
The Commission has indicated that these changes should remove reporting obligations on over 10 million private sellers, particularly those selling second-hand goods. The measure should also deliver compliance cost savings of €678m for digital platforms.
D. New centralised tin verification system
The Recast Directive will introduce a new centralised verification system for tax identification numbers (TIN). The new system will be accessible to both tax administrations in Member States and reporting entities, although the use of the tool will be optional for reporting entities.
E. Automatic exchange of information (DAC1) – Measures to improve completeness of information exchanged
DAC1 provides a framework for automatic exchange between members states of information relating to six categories of income and assets: employment income, pension income, director fees, income and ownership of immovable property, life insurance products and royalties. The Recast Directive will improve this framework by making the following amendments to DAC1:
The Recast Directive also places a greater emphasis on timely sharing of information, by requiring that information be exchanged under DAC1 ‘as soon as it becomes available and in any case no later than six months’ after the end of the relevant calendar year, rather than the previous requirement for information to be shared ‘within six months’ after year-end.
What the Recast Directive doesn’t do – the Unshell Directive
The Unshell Directive was proposed in December 2021 to combat tax avoidance and evasion by targeting EU entities lacking substantial economic activity, thereby preventing such entities from benefiting from tax advantages. Ultimately, Member State consensus could not be reached, with many member states expressing concern that the proposals would overlap with existing DAC6 reporting obligations. The EU Council formally dropped the Unshell Directive proposals in June 2025.
While, at the time, there were indications that substance-based hallmarks linked to the objectives of the Unshell Directive would be integrated into DAC6 by the Recast Directive, this has not happened. Instead, the Directive requires that the Council adopt an implementing act to expand and develop the existing substance-based hallmark at Hallmark D2. The Recast Directive gives the Council five years to adopt this implementing act.
If you have any questions on the decision or would like to discuss its implications for your business please reach out to James Somerville, Partner, or your usual Tax contact.
Date published: 10 September 2026
