EU Tax Omnibus: key changes and impact for the Netherlands

On 24 June 2026, the European Commission published its proposal for the Tax Omnibus Directive, a comprehensive initiative to simplify and streamline the EU's direct tax framework. The proposal introduces amendments to six existing directives: the Anti-Tax Avoidance Directive (ATAD), the Parent-Subsidiary Directive (PSD), the Interest and Royalties Directive (IRD), the Tax Merger Directive (TMD), the Directive on Tax Dispute Resolution Mechanisms (DRM) and the FASTER Directive. The European Commission aims to reduce compliance costs for taxpayers, eliminate outdated and overlapping rules, and improve the competitiveness of the EU internal market.

In this article, we set out the key proposed changes per directive and discuss the potential impact for the Netherlands.

What does this mean for your organisation?

The Tax Omnibus proposal has the potential to significantly affect corporate structuring and cross-border operations within the EU. Signals from practice suggest that the proposal is broadly welcomed, in particular where it aims to reduce administrative burdens and streamline the EU direct tax framework.

If adopted, the removal of minimum shareholding requirements under the PSD and IRD would mean that all intra-EU dividends, interest payments and royalties could benefit from withholding tax exemptions regardless of the size of the participation. The prohibition of upfront authorisation procedures would eliminate the administrative burden currently imposed by several EU Member States, replacing it with a self-assessment model with ex-post verification

The proposed changes to the interest limitation rule, including the mandatory 30% EBITDA threshold and the exclusion of low-risk third-party loans, could materially affect the deductibility of financing costs for many groups operating in the EU.

That said, certain elements raise questions in practice. In particular, the differentiated treatment between Pillar Two groups and groups subject to Side‑by‑Side regimes such as U.S. headquartered multinationals may introduce some asymmetries, potentially giving rise to challenges and policy concerns

The Anti-Tax Avoidance Directive (ATAD)

The EC notes that since the adoption of ATAD, there have been significant developments at international level, in particular following the adoption of Pillar Two, which may overlap with certain ATAD rules. The EC acknowledges that certain ATAD provisions are no longer up-to-date or create disproportionate compliance burden, legal uncertainty and fragmentation. As a result, the proposal introduces a series of revisions/additions to the ATAD rules.

Interest Limitation Rule

The proposed amendments affect the core of the interest limitation rule. The 30% EBITDA threshold becomes mandatory, meaning that EU Member States will no longer be permitted to apply lower thresholds. This is particularly relevant for the Netherlands, which currently applies a 24.5% threshold, and would be required to increase this to 30%.

The EUR 3 million safe harbour also becomes mandatory, with automatic annual indexation based on inflation. The proposal introduces a mandatory exclusion for low-risk third-party loans, provided the loan is not from an associated enterprise and is used exclusively to finance the borrower's own activities. Using the loan for on-lending to related parties or for capital contributions to associated parties would disqualify it from this exclusion. In light of this new third-party loan exclusion, the EC considers the current standalone entity exception redundant and has therefore removed it in the proposal.

The group escape rule becomes mandatory, allowing full deduction of exceeding borrowing costs where the taxpayer's leverage is in line with that of its group. This is particularly relevant for capital-intensive sectors that are highly leveraged for legitimate reasons. The proposal also introduces a new counter-cyclical derogation: full deduction of exceeding borrowing costs is allowed where the taxpayer's EBITDA has dropped by at least 50% compared to the prior year.

Carry-forward of non-deductible exceeding borrowing costs and unused interest capacity becomes mandatory, and Member States may also allow carry-back for a maximum of three years.

A mandatory temporary exclusion is introduced for exceeding borrowing costs on loans to fund defence products in critical capability areas, applicable only to loans concluded during the first five tax periods following 1 January 2029. The scope of the optional long-term public infrastructure project exclusion is broadened to cover a wider range of public-benefit projects, including projects contributing to climate, digitalisation, energy security and social and affordable housing.

New: EU R&D Allowance

A new chapter is introduced in the ATAD establishing an EU-wide R&D allowance as a minimum standard. This allows for the full deduction of qualifying capital expenditure on plant, machinery and tangible assets used directly for R&D, either immediately in the year of acquisition or over any of the four subsequent tax periods. Qualifying expenditure must be used wholly and exclusively for R&D for at least three years, and recapture rules apply where the asset is disposed of, demolished or ceases to be used for R&D purposes. To preserve interest deductibility, the R&D allowance is added back when computing EBITDA for the interest limitation rule.

It should be noted that this R&D allowance is best understood as a targeted cost-recovery measure rather than a broad R&D incentive, as it is limited to tangible R&D assets and does not cover personnel costs or internally generated intangibles. EU Member States remain free to maintain or introduce more generous domestic R&D incentives.

Controlled Foreign Company (CFC) Rules

The proposal makes Model A (categorical passive-income approach) mandatory and removes Model B (transfer pricing approach), aiming to reduce fragmentation across EU Member States. A new exemption is introduced for taxpayers subject to Pillar Two with regard to their low-taxed CFCs, given the significant overlap between CFC rules and the Pillar Two income inclusion rule. This exemption does not apply where the group is headquartered in a jurisdiction operating a qualified side-by-side regime and the low-taxed CFC is not subject to a qualifying domestic top-up tax. Small and medium-sized groups are also exempted from CFC rules.

Hybrid Mismatch Rules

The proposal deletes the rules on imported mismatches. The EC considers these rules excessively complex and burdensome for both taxpayers and tax authorities.

General Anti-Abuse Rule (GAAR)

The wording of the GAAR is amended to broaden its scope to encompass all direct taxes to which companies are subject (with the intention to include withholding taxes and top-up taxes pursuant to the Pillar Two Directive.

The Interest and Royalties Directive (IRD)

The proposal removes the 25% minimum holding requirement from the definition of "associated company", meaning that all intra-EU interest and royalty payments would qualify for the withholding tax exemption regardless of the level of participation. Similarly, the option for EU Member States to require a minimum holding period of at least two years is repealed.

EU Member States will no longer be permitted to require prior authorisation or administrative procedures for verifying eligibility at the time of payment. Instead, eligibility will be self-assessed by the taxpayer, subject to ex-post controls and anti-abuse rules.

A new safeguard against double non-taxation is introduced: the source EU Member State must levy withholding tax or deny deductibility where the recipient is established in a non-EU jurisdiction that does not levy corporate income tax or applies a zero rate. This safeguard does not apply where the recipient is subject to Pillar Two rules, unless the group is headquartered in a jurisdiction with a qualified side-by-side regime.

The FASTER Directive is amended so that income from publicly traded securities qualifying for IRD exemptions can benefit from the FASTER fast-track refund procedures.

The Parent-Subsidiary Directive (PSD)

The 10% minimum holding requirement in the "parent company" definition is removed, meaning that all intra-EU dividends and other profit distributions would qualify for the withholding tax exemption and the participation exemption regardless of the level of participation. The scope of the Directive is extended to pension institutions irrespective of their legal form, by way of a derogation from the subject-to-tax condition.

The option for EU Member States to deny deduction of charges relating to the holding (management costs) is limited to participations of at least 10%. In line with the IRD, prior authorisation procedures will be prohibited, and the FASTER fast-track procedures are made available for publicly traded securities.

The proposal also includes an explicit provision that the PSD is "without prejudice" to national anti-abuse measures aimed at preventing the avoidance of wealth or income tax through the use of holding companies. This passage, which was not present in the earlier leaked draft, appears to respond to concerns that the removal of the minimum shareholding requirement could increase the attractiveness of holding portfolio investments through personal holding companies.

Tax Merger Directive (TMD)

The proposal modernises the TMD to ensure alignment with recent EU company law developments and to preserve tax-neutrality for cross-border reorganisations, broadly mirroring the simplification objectives pursued for the IRD and PSD. The definition of "merger" is updated to include "simplified mergers", and the definition of "division" now includes "divisions by separation". A new chapter introduces tax neutrality rules for cross-border conversions, expanding the scope beyond the previous coverage which was limited to European Companies (SE) and European Cooperative Societies (SCE). Under the new rules, capital gains arising from cross-border conversions would not be taxed in the departure EU Member State, provided the company remains tax resident there or retains a permanent establishment connected with the assets.

FASTER Directive

The proposal amends the FASTER Directive so that the withholding tax exemptions under the IRD and PSD are no longer excluded from the relief-at-source and quick-refund procedures. This ensures that, where the exemption cannot be applied upfront (in particular for publicly traded securities held through financial intermediaries or nominee accounts) taxpayers entitled to the IRD/PSD exemptions can still rely on the FASTER fast-track procedures.

What is the impact of the Tax Omnibus for The Netherlands?

The proposal, if adopted by the Council as currently proposed by the EC, would require the Netherlands to make several changes to its existing legislation.

With respect to the interest limitation rule (Article 15b Dutch CITA), the EBITDA percentage would need to be increased from 24.5% to 30%. Third-party loans would need to be excluded under certain conditions. The group escape rule would need to be legislated, which is particularly relevant for capital-intensive sectors that are highly leveraged for legitimate reasons.

The Dutch participation exemption (Article 13 Dutch CITA) currently applies from a 5% holding. Participations below this threshold are generally taxable. The Netherlands will need to revisit Article 13 and, in principle, extend relief to portfolio shareholdings below 5%. For outbound dividends, the withholding tax exemption is linked to the participation exemption and, under the proposal, would need to apply to EU-resident corporate shareholders irrespective of the size of the participation.

The removal of the minimum shareholding requirement may also increase the attractiveness of holding portfolio investments through a personal holding company. In such a structure, dividends may benefit from the participation exemption while taxation at shareholder level is deferred until realisation (Box 2). However, a newly introduced anti-abuse safeguard confirms that EU Member States retain the ability to address such arbitrage between Box 2 and Box 3 through targeted measures, without infringing the PSD.

The relevant PSD and IRD changes are currently foreseen to apply from 1 January 2037, reducing their short- to medium-term urgency. However, the changes are likely to have a structural impact on the design of the Dutch participation exemption and dividend withholding tax regime.

Next steps

The proposal requires unanimous approval by the Council of the European Union under Article 115 TFEU. The final text will therefore depend on political negotiations between the EU Member States and may differ materially from the European Commission's proposal. The European Parliament has an advisory role only, meaning the Council is not bound by its opinion.

The European Commission proposes that Member States must transpose the Omnibus into domestic law by 31 December 2028, with the new provisions applying from 1 January 2029. However, a number of key provisions are subject to deferred application dates. Most notably, the key changes to the IRD and PSD, including the removal of holding requirements and the introduction of streamlined relief procedures, would only apply from 1 January 2037. The mandatory EUR 3 million safe harbour under the interest limitation rule would apply from 1 January 2032.