European Commission publishes its 2026 annual report on taxation
The European Commission has published its annual report on taxation (ART) 2026, finding that EU tax systems are under growing pressure from weaker economic growth, renewed inflation, an ageing population and the need to finance the green and digital transitions. Tax revenues rose to 39.4% of GDP in 2024, driven mainly by higher labour tax receipts, and are expected to stabilise around 40% of GDP in the coming years. Over the past decade, the EU tax mix has gradually shifted away from consumption taxes towards capital taxation, while revenues from environmental and property taxes have declined. The report finds that well-designed tax incentives, such as tax credits and accelerated depreciation, can strengthen work incentives, encourage clean investment and support decarbonisation, while cautioning that poorly targeted tax expenditures can reduce revenues without delivering their intended policy objectives. Recent reforms across Member States have focused on personal income tax, social contributions and investment incentives, while the Commission continues to support tax simplification, digitalisation and administrative modernisation through the tax simplification package, Technical Support Instrument and the Recovery and Resilience Facility.
Tax outcomes of the ECOFIN meeting on 10 July 2026
On 10 July 2026, EU Finance Ministers held the Economic and Financial Affairs Council (ECOFIN) meeting, the first under the Irish Presidency. The Presidency presented its work programme for the second half of 2026, structured around three overarching priorities of competitiveness, values and security, in line with the EU Strategic Agenda 2024-2029. In the area of taxation, Ireland identified the revision of Directive 2011/64/EU (Tobacco Tax Directive), the proposal to strengthen the Carbon Border Adjustment Mechanism (CBAM), the proposal for a recast of the Directive on Administrative Cooperation in the field of taxation (DAC), and the Tax Omnibus proposal as its priority taxation files for the remainder of its Presidency. The Council's main public discussions instead focused on non-tax financial services items, in particular the market integration and supervision package, part of the Savings and Investments Union and the "One Europe, One Market" roadmap, on which ministers gave a unanimous political commitment to reach a Council negotiating position by October 2026, mandating technical teams to intensify work towards that goal. The next ECOFIN Council meeting will be preceded by an informal ECOFIN in Dublin in September 2026, which the Presidency indicated will focus on banking competitiveness, financial innovation and artificial intelligence.
European Commission's July tax infringement decisions
On 8 July 2026, the European Commission published its monthly package of infringement decisions. In the area of taxation, the Commission sent letters of formal notice to Germany, France and Italy for failing to bring their legislation on the taxation of dividends received from subsidiaries in other Member States in line with Directive (EU) 2015/121 (Parent Subsidiary Directive). According to the Commission, the tax legislation of all three Member States leads to multiple taxation of dividends received by a parent company from subsidiaries resident in other Member States beyond what is permitted under the Directive, negatively affecting competitiveness and investment for companies operating across the Single Market. The Commission also sent reasoned opinions to Belgium, Bulgaria and Cyprus for failing to fully transpose Directive (EU) 2025/872 (DAC9), which requires Member States to standardise the collection and automatic exchange of the top-up tax information return under Directive (EU) 2022/2523 (Pillar Two Directive), noting that tax authorities across the EU should have been able to start exchanging information on in-scope multinational companies as from June 2026. Finally, the Commission sent a reasoned opinion to France for failing to provide all IT functionalities necessary to ensure the exchange of information between Member States required under Directive (EU) 2020/285 on the special VAT scheme for small enterprises. All Member States concerned now have two months to respond to the Commission's concerns, failing which the Commission may refer the cases to the Court of Justice of the European Union.
CJEU rules that Austria's VAT exemption for financial sector services constitutes unlawful State aid
On 9 July 2026, the Court of Justice of the European Union (CJEU) in its judgment in Case C-360/25 ruled that an exemption from value added tax (VAT) for services provided between undertakings primarily carrying out transactions in the banking, insurance or pension fund sector, which has no basis in Directive 2006/112/EC (VAT Directive), constitutes State aid within the meaning of Article 107(1) of the Treaty on the Functioning of the European Union (TFEU). The case concerned an Austrian VAT exemption under Paragraph 6(1)(28) of the Austrian Law on Turnover Tax, which exempted services provided between undertakings in the banking, insurance and pension fund sector, including services such as IT, consultancy, restaurant and childcare services, even where those services had no legal basis in Article 135 of the VAT Directive. The Court found that all four conditions for State aid were satisfied: the measure was imputable to the Austrian State, it conferred a selective advantage on the beneficiary undertakings, it was liable to distort competition, and it was liable to affect trade between Member States. The Court rejected the Austrian Government's request to limit the judgment's temporal effects, noting that the Government had not provided sufficient evidence of a risk of serious economic repercussions. The exemption had already been repealed by Austria with effect from 1 January 2025, with the Austrian legislature itself having highlighted the additional VAT revenue resulting from its repeal.
MEPs adopt own-initiative report setting out tax framework for EU Inc.
On 9 July 2026, the European Parliament adopted an own-initiative report on the tax aspects of the 28th regime (EU Inc.) proposal in plenary, drafted by rapporteur Ľudovít Ódor (Renew, Slovakia), with 366 votes in favour, 192 against, and 39 abstentions. The report sets out possibilities for a potential tax module within the broader EU Inc. framework, following a modular approach whereby corporate law would come first, with taxation added at a later stage. On corporate income tax, it proposes a single consolidated corporate tax base allocated among Member States using a formula based on sales, labour, tangible assets and digital presence, with standardised tax returns and a single filing interface, while stressing that tax rates must remain within Member States' competence. On VAT, it calls for a single EU VAT number and a digital One-Stop Shop portal covering declarations and refunds across Member States. On employee taxation, it proposes that EU employee stock options be mandatory under the tax module, with gains treated as capital income rather than employment income. On transfer pricing, it calls for coordinated safe harbours for routine intra-group services and harmonised approaches for intellectual property licensing. The report also stresses that the tax module must not become a tool for tax avoidance or tax shopping, and that access should be limited to companies with genuine economic activity in the EU.
European Parliament calls for reform of financial sector taxation and VAT exemption
On 7 July 2026, during a plenary session, the European Parliament adopted a report on a coherent tax framework for the EU's financial sector, drafted by rapporteur Matthias Ecke (S&D, Germany) on behalf of the Committee on Economic and Monetary Affairs (ECON), with 418 votes in favour, 152 against and 85 abstentions. The rapporteur argues that the VAT exemption for financial services under article 135(1)(a)-(g) of Directive 2006/112/EC (VAT Directive), in place since 1977, has contributed to a fragmented tax landscape of 91 sector-specific taxes across the EU. The report calls on the Commission to review the impacts of the current VAT regime and to consider policy options to address its distortive impacts, including a possible reform or removal of the exemption, greater convergence in the application of VAT grouping across Member States, and a clarification of VAT rules for emerging financial instruments such as crypto-assets, decentralised finance and fintech services. It also calls on the European Commission to assess the feasibility of replacing national insurance premium taxes by fully integrating insurance services into the VAT system and calls on the Council to decide on the pending Commission proposal for a Head Office Tax system for SMEs.
MEPs table 100 amendments on draft report on the future of the VAT reverse-charge mechanism
On 9 July 2026, the European Parliament's Committee on Economic and Monetary Affairs (ECON) published 100 amendments to the draft own-initiative report on the VAT reverse-charge mechanism (RCM), prepared by rapporteur Pierre Pimpie (PfE, France), which examines whether Articles 199a and 199b of Directive 2006/112/EC (VAT Directive), allowing Member States to shift VAT liability to the customer in high-risk sectors, should be extended beyond their expiry on 31 December 2026. EPP shadow rapporteur Herbert Dorfmann (Italy) tabled 12 amendments backing a longer extension than currently proposed, though not endorsing Pimpie's four-year timeframe, and called for compliance costs to be documented separately for SMEs and larger operators. Bruno Gonçalves (S&D, Portugal) and fellow S&D members tabled 35 amendments seeking to frame any extension as transitional pending a harmonised EU VAT system, and called for qualified majority voting in certain areas of tax policy. The Greens/EFA pushed for a sunset clause and a Commission roadmap towards comprehensive VAT reform, Renew members proposed harmonising thresholds and sector definitions without making the RCM mandatory, and ECR members sought to preserve national flexibility over its application. EP ECON members are expected to debate the file on 7 September and to vote on it in mid-October.
Tax simplification package to be discussed at the European Parliament on 14 July 2026
On Tuesday 14 July 2026, the FISC Subcommittee of the European Parliament will hold two public hearings on the European Commission's tax simplification package, published on 24 June 2026. Based on the draft agenda, both hearings will examine whether the Commission's stated aim of lowering administrative burdens can be achieved without compromising the EU's core objective of combating tax evasion and avoidance. A briefing published ahead of the hearing explains the amendments in the proposal for a recast of the Directive on Administrative Cooperation in the field of taxation (DAC), and, drawing on the Commission's evaluation, notes that Directive (EU) 2018/822 (DAC6), covering the mandatory disclosure of cross-border tax planning arrangements by intermediaries, stands out as the most problematic component, and that persistent difficulties in matching taxpayer identification numbers (TIN) continue to limit the effectiveness of information exchange across the framework. A separate briefing explains the amendments in the Tax Omnibus proposal, and concludes that Directive (EU) 2016/1164 (Anti-Tax Avoidance Directive, ATAD) has generated the most extensive stakeholder feedback within the package, reflecting concerns about administrative complexity and possible duplication with Directive (EU) 2022/2523 (Pillar Two Directive).
AMLA introduces common EU approach to enforcing anti-money laundering rules
On 8 July 2026, the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA) published draft Regulatory Technical Standards (RTS) under Article 53(10) of Directive (EU) 2024/1640 (the sixth Anti-Money Laundering Directive, AMLD6), introducing a harmonised approach for supervisors when enforcing breaches of anti-money laundering and counter-terrorist-financing (AML/CFT) rules across the EU. The draft RTS set out common indicators for supervisors to assess the gravity of breaches, including duration, repetition, impact and conduct, and classify breaches into four categories of increasing severity. They also establish criteria for setting the level of pecuniary sanctions and for applying the most severe administrative measures, such as withdrawal or suspension of authorisation, restriction of business and changes to governance structure, as well as a procedural methodology for periodic penalty payments under Article 57 of the AMLD6. The standards apply to both the financial and non-financial sectors, following a public consultation held between 9 February and 9 March 2026 in which 88 valid responses were received, 70% from non-financial sector respondents. The draft RTS will now be submitted to the European Commission for adoption before publication in the Official Journal, with application from 10 July 2027, except for football clubs and agents, to which they will apply from 10 July 2029.
