EU Gateway newsletter

Relevant for: Companies doing business in the EU

In a move that surprised few in Brussels – and some not at all – the European Commission has announced plans to withdraw four tax proposals that have long been stalled due to political deadlock. The casualties, outlined in the Commission’s 2026 Work Programme, include the Unshell Directive (ATAD3), aimed at tackling the misuse of shell entities; the Debt-Equity Bias Reduction Allowance (DEBRA), which sought to encourage equity financing over debt; the long-stalled Financial Transaction Tax (FTT); and the Transfer Pricing Directive, designed to harmonise transfer pricing rules across Member States.

EU Gateway observation

Not all reform efforts are being shelved. The flagship proposals—BEFIT (a single EU corporate tax base) and Head Office Tax (HOT, an optional system allowing permanent establishments to compute taxable profits according to the rules of their head office State)—remain on the table. This signals that corporate tax harmonisation in the EU is still under consideration, at least by the European Commission. The decision not to withdraw HOT is, to some, surprising given previous indications that negotiations had stalled.

Regarding Unshell, the Commission plans to incorporate some of its substance hallmarks into the upcoming Directive on Administrative Cooperation (DAC) recast, expected in 2026. This would shift the focus from standalone anti-abuse rules to enhanced administrative cooperation and information exchange.

How should this move be interpreted from a broader perspective? We believe tax is increasingly being viewed as a tool to advance sustainability, transparency, and simplification policy objectives—rather than solely as a means of raising income. However, this shift may increase the risk of geopolitical tensions with other economic powerhouses like the US and China. If the EU and the EU27 use taxes to pursue policy goals related to climate or digital companies, retaliation from the US, and possibly China, is conceivable.

At the same time, there appears to be resistance among EU Member States to surrender too much autonomy over direct taxes. Transparency rules would enable authorities and legislators to counter aggressive tax structuring but would not impose a mandatory obligation to do so. Notably, the European Court of Justice has clearly stated that EU Member States are obliged to effectively combat abuse.

Relevant for: companies importing CBAM-covered goods into the EU — specifically cement, iron and steel (including certain downstream products), aluminium, fertilisers, electricity, and hydrogen.

The simplifying changes to the Carbon Border Adjustment Mechanism (CBAM) have now been published in the EU Official Journal, following the June 2025 agreement under the Omnibus I legislative package. 

The regulation aims to ease compliance for importers while preserving the EU’s climate objectives. This publication marks the final step in the formal adoption process.

A key change is the introduction of a ‘de minimis’ threshold of 50 tonnes per importer per year, which removes about 90 percent of companies from scope while keeping 99 percent of embedded emissions covered. Notably, the threshold does not apply to hydrogen and electricity. Additionally, EU Importers are granted transitional lenience at the start of 2026: those who apply for registration before 31 March 2026 may continue importing CBAM goods while awaiting approval. Other amendments simplify authorisation, data collection, and emission verification, and clarify financial liability, penalties, and indirect customs representation.

EU Gateway observation

The simplification package strikes a balance between administrative relief with climate integrity. The 50-tonne threshold substantially reduces compliance pressure on smaller importers, while larger companies remain fully subject to CBAM obligations. From a broader perspective, these changes precede CBAM's full implementation in January 2026. At that point, EU importers must account for the carbon content of imported goods and will be required to purchase CBAM certificates to continue importing into the EU. The certificates will correspond to the embedded emissions of the CBAM products, effectively mirroring the EU ETS (Emissions Trading System) carbon price. Importers should note the financial implications: although the definitive phase starts in January 2026, the sale of CBAM certificates will be delayed until February 2027 (previously 1 January 2026, a change also adopted in the Omnibus I). This delay does not remove the financial obligation for 2026 imports; importers must still surrender certificates by 31 May 2027 to cover emissions from 2026 imports, meaning that full compliance will apply retroactively and should be provisionally accounted for in 2026.

• On 10 October 2025, the Council of the EU (ECOFIN) updated the EU list of non-cooperative tax jurisdictions. The EU blacklist remains unchanged and consists of: American Samoa, Anguilla, Fiji, Guam, Palau, Panama, Russian Federation, Samoa, Trinidad and Tobago, US Virgin Islands, and Vanuatu. Viet Nam has been removed from the EU grey list after implementing the OECD BEPS minimum standard on Country-by-Country Reporting. The EU grey list now consists of: Antigua and Barbuda, Belize, British Virgin Islands, Brunei Darussalam, Eswatini, Greenland, Jordan, Montenegro, Morocco, Seychelles, and Türkiye. Note that for EU Member States applying a static approach in implementing the EU blacklist for the purpose of domestic tax measures (e.g. withholding taxes, CFC rules, interest deduction limitations, denial of participation exemption), this is the final update for 2025 and may therefore be relevant for the application of these rules in 2026.

• At the ECOFIN meeting of 10 October 2025, the European Commission presented its proposal for five possible new own resources for the EU budget and held an exchange of views with EU Member States on the topic. The proposed new resources include: revenues from the EU Emissions Trading System (ETS), the Carbon Border Adjustment Mechanism (CBAM), an e-waste levy, a tobacco excise-based contribution, and the Corporate Resource for Europe (CORE) — a proposed annual levy on large companies operating in the EU. The CORE proposal has already faced significant opposition: it was rejected by Germany and criticised by the Netherlands. Adoption of the own resources package requires unanimous support from the EU Member States, achieving such consensus appears unlikely to happen any time soon.