General Court rules that full ownership cannot be an automatic condition for VAT groups
On 15 July 2026, the General Court of the European Union, in its judgement in Case T-268/25, ruled on the conditions under which Member States may permit the formation of VAT groups, consisting of both taxable persons and persons carrying out exempt or non-economic activities under article 11 of Directive 2006/112/EC (VAT Directive). The case concerned Danish legislation requiring that, in such a group, one member own, directly or indirectly, 100% of the capital of the other members, a condition which caused a Danish insurance company to lose its VAT group status with its administration subsidiary once two external pension funds each acquired a stake in that subsidiary. The Court held that the requirement of close financial, economic and organisational links under the first paragraph of article 11 cannot be equated with full ownership of capital, since such links may also exist below that threshold. Thus, the ECJ ruled that article 11 precludes a 100% ownership condition unless it constitutes a necessary and appropriate measure to combat tax evasion or avoidance. The Court found that a mere tax advantage arising from the VAT group mechanism does not in itself amount to evasion or avoidance, and left it to the referring Danish court to assess, in light of the principles of proportionality and fiscal neutrality, whether the condition meets that threshold. The Court also confirmed, consistent with its earlier ruling in its judgement in joint Cases C-108/14 and C-109/14, that article 11 does not have direct effect and cannot therefore be relied upon directly by taxable persons against a Member State.
DAC recast examined at European Parliament public hearing
On 14 July 2026, the Subcommittee on Tax Matters (FISC) held a public hearing on the European Commission's proposal to recast the Directive on Administrative Cooperation (DAC), the EU's framework for the automatic exchange of tax information between Member States, which has been amended eight times (DAC2-DAC9) since its original adoption. Presenting the proposal, Dr Benjamin Angel (DG TAXUD) said the Commission sought to clarify, simplify and deepen the framework by consolidating all eight amendments into a single text, highlighting that the legal professional privilege (LPP) definition has been amended to reflect recent European Court of Justice (ECJ) case-law, tax administration access to the future land registry to support beneficial ownership checks on real estate, a new TIN validation tool built on interconnected databases and a correction to DAC7 thresholds, which has previously overvalued the average value of platform operations are expected to cut annual reporting by around 11 million filings. Mr Angel also defended the proposed exemption of Pillar Two multinationals from DAC6 reporting, the EU's mandatory disclosure regime for aggressive tax planning, on the grounds that the Commission already holds the necessary information on these groups through their country-by-country (DAC4) and global minimum tax reports (DAC9), with the change estimated to save businesses around €300 million a year. Dr Miroslav Palanský (Tax Justice Network) challenged this reasoning, including the methodology in the Commission’s impact assessment, arguing that only companies running aggressive schemes stand to gain from the exemption, and that the Pillar Two reports proposed as a substitute disclose only the financial results of a scheme rather than its mechanics.
MEPs, business representatives and civil society debate Tax Omnibus proposal with the European Commission
The Subcommittee on Tax Matters (FISC) of the European Parliament held a public hearing on 14 July 2026 on the Commission's proposal for a direct Tax Omnibus. Presenting the proposal, Dr Benjamin Angel (DG TAXUD) outlined three objectives: boosting competitiveness, facilitating business financing and modernising the tax framework, and defended the carve-out for Pillar Two in-scope companies from the Anti-Tax Avoidance Directive’s (ATAD) Controlled Foreign Company (CFC) rules, arguing that both rules have the same objective of targeting under-taxation of foreign subsidiaries, but use different means to achieve the aforementioned objective. Maintaining both rules creates duplication and risks taxation. Dr Alison Schultz (Tax Justice Network) strongly opposed the CFC exemption for Pillar Two companies, arguing that removing CFC safeguards would primarily benefit aggressive US-headquartered multinationals and calling instead for unitary taxation with formulary apportionment. Business representatives, including Mariella Caruana (Business Europe) and Gerhard Huemer (SME Europe), broadly welcomed the package's simplification aims but criticised its slow implementation timetable, with several measures not taking effect until between 2032 and 2037, a delay Dr Angel attributed to Member States' short-term revenue concerns, planning needs and the requirement for unanimity. MEPs were similarly divided, with Fernando Navarrete Rojas (EPP, Spain) calling for faster and more extensive simplification, Matthias Ecke (S&D, Germany) questioning whether streamlining CFC and Pillar Two rules could weaken fraud prevention, and Jussi Saramo (The Left, Finland) raising distributional concerns and querying the proposed defence-sector exemption from interest limitation rules.
European Parliament committee sets out recommendations on the 28th regime
On 15 July 2026, Aurore Lalucq (S&D, France), Chair of the European Parliament's Committee on Economic and Monetary Affairs (ECON), sent a letter to Ilhan Kyuchyuk (Renew, Bulgaria), Chair of the Legal Affairs Committee (JURI), setting out ECON's recommendations on the Commission's proposal for a 28th regime, EU Inc., a new optional legal framework intended to make it easier for start-ups and scale-ups to raise finance and expand across the Union. The Committee backed easier access to public markets for EU Inc. companies, digital share registers compatible with both traditional and blockchain-based systems, and more flexible financing arrangements, including standard EU templates for convertible investments, while safeguarding founders, investors, creditors and minority shareholders. Its central proposal is an optional tax module for cross-border, growth-oriented companies with genuine EU activity, offering a single digital registration, tax number and filing system, alongside common rules for calculating taxable profits, simplified VAT and withholding tax procedures, and stronger protection against double taxation. The letter also called for employee share options to be taxed only when sold and treated as capital income, with common valuation rules and protections for staff moving between Member States, and for research and reinvestment incentives to stay coordinated with international minimum tax rules.
OECD finds that Global Minimum Tax raises tax rates on MNEs without harming investment
On 15 July 2026, the OECD published a working paper on “MNE Responses to the Global Minimum Tax” as part of the OECD Taxation Working Paper series. The paper responds to a gap in the debate around the Global Minimum Tax (GMT), which has so far relied largely on ex ante forecasts rather than evidence of how multinationals have behaved since the rules took effect in 2024. To address this, the paper compares MNEs just above and below the 750€ million revenue threshold that determines GMT scope, using group-level financial and ownership data from the Orbis database and a difference-in-differences approach to isolate the effect of the reform from broader economic trends. The analysis finds that previously low-taxed MNEs experienced a statistically significant increase in their consolidated effective tax rate of 1.7 percentage points in the first year after implementation, with an average increase of 1.4 percentage points across all in-scope MNEs, and that this was driven by higher tax payments rather than lower reported profits. The effect proved strongest among MNEs in sectors known for higher tax-planning intensity and those with higher profits relative to their physical presence in a jurisdiction, in line with the GMT's intended targeting. The paper finds no evidence that the reform reduced investment or employment in its first year, nor any sign that companies adjusted their behaviour in anticipation of the rules during 2022 and 2023. Based on the estimated increases in the Effective Tax Rate (ETR), the authors calculate that the GMT generated additional global corporate tax revenue of between 79€ billion and 109€ billion in 2024, equivalent to 2.4 to 3.4% of global corporate income tax revenue. The paper highlights that these are only short-run results based on a single year of data and may change as the substance-based carve-out is gradually reduced and as the Undertaxed Profits Rule (UTPR) and the Side-by-Side (SbS) package become fully operational in future years.
OECD assesses the economic impact of the Global Minimum Tax
The OECD presented the 2026 update to its Economic Impact Assessment of the Global Minimum Tax during a webinar held on 15 July 2026. The Global Minimum Tax (GMT) requires large multinational companies to pay at least 15% tax on their profits in each country where they operate, and the assessment looks at what difference this is making compared to a world where the tax had never been introduced, while noting that some effects may take longer to show up fully. On average, tax rates actually paid by companies in each country are estimated to rise by 2.8 to 3.7 percentage points, with the biggest increases, of 5.5 to 6.9 percentage points, seen in so-called “investment hubs”, countries that have traditionally offered very low tax rates to attract multinational business. This is also narrowing the gap between high-tax and low-tax countries by an estimated 19 to 25%, which the OECD says could help companies make investment decisions based on business reasons rather than tax advantages. The amount of profit that companies shift into low-tax jurisdictions purely for tax purposes is estimated to fall substantially, by 22.6 to 44.6%, and governments worldwide are expected to collect 3.2 to 5.4% more in corporate tax revenue each year as a result. Early real-world data from 2024, the first year the tax applied, already shows tax rates rising as predicted, with no sign so far that companies are cutting investment or jobs in response.
IMF research finds that European governments face a growing fiscal squeeze from ageing, defence and climate costs
On 13 July 2026, the International Monetary Fund (IMF) published a departmental paper warning that European governments are facing rapidly rising costs from ageing populations, the green transition and defence spending, which could push public spending up by close to 5% of GDP on average by 2040. If nothing changes, the IMF warns that public debt in the average European country would nearly double over the next 15 years, reaching around 130% of GDP by 2040. To avoid this, the paper argues governments need to act on three fronts: pushing through structural reforms (such as to pensions, labour markets and the EU single market), tightening budgets over the medium term, and, where that is not enough, rethinking what the state should still pay for. Even with a moderate set of reforms, the IMF estimates that nearly three-quarters of European countries would still need to consolidate their finances by around 3½% of GDP over five years, and that a quarter of countries would still face a funding gap large enough to force harder questions about the scope of public services. The paper stresses that any belt-tightening should be done fairly and without harming growth, favouring efficiency savings and broader tax bases over blunt cuts or higher rates.
AMLA consults on harmonised risk assessment methodology for the non-financial sector
On 13 July 2026, the Anti-Money Laundering Authority (AMLA) launched a public consultation on 13 July 2026 on draft Regulatory Technical Standards (RTS) under Article 40(2) of Directive (EU) 2024/1640 (AMLD6), which will determine how supervisors across the EU assess the money laundering and terrorist financing risk of obliged entities in the non-financial sector, including tax advisers, on a harmonised basis. The draft RTS applies tailored data points depending on the activity concerned, with Annex I setting out a reduced set of 12 data points for small firms and a fuller set of 34 for other firms, covering firm structure, customer base, services, geographical exposure and client interaction, from which supervisors would calculate an inherent risk score, while Annex II adds further questions on AML/CFT controls for all firms above the small-entity threshold, feeding into a residual risk score. Together, these scores would determine the intensity and frequency of supervision going forward. Whether a firm qualifies as small, and therefore faces reduced reporting obligations, depends on two cumulative thresholds: fewer than five full-time staff and turnover below 600,000€. AMLA is also organising a public hearing on the draft RTS on 10 September 2026, from 10:00 to 12:00 CEST, with the possibility to register online. The consultation closes on 27 September 2026 at 23:59 CEST, and the methodology is expected to apply from 31 December 2028.
