Overhaul of EU framework for administrative cooperation

The EC aims for a more proportionate approach to administrative cooperation and tax compliance. This includes potential relief in areas where current reporting is perceived as overly broad or duplicative. At the same time, the recast aims to preserve the core transparency framework and increase its effectiveness by sharpening the quality and comparability of data available to tax authorities.

Specifically, if the proposal is adopted as it currently stands, some organisations will no longer fall in the scope of the directive. Under the current proposal, organisations that might be excluded are:.

• Multinational entities (MNEs) that fall under the Pillar Two rules, in relation to the mandatory disclosure rules of DAC6 (except, roughly speaking, if they are not effectively taxed at the Pillar Two minimum of 15%);

• Small platform operators; Platform Operators may be exempt from DAC7 where the annual aggregate number of transactions facilitated through their Platform is below a (currently unspecified) threshold. This relief appears aimed at limiting compliance costs for smaller and medium-sized businesses, particularly in light of the intermediary-seller proposal that may widen the scope of DAC7. 

In addition, in the current proposal, MNE groups are given the option to file one notification per group, both for Country-by-Country reporting (DAC4) purposes and for the purposes of central filing of Pillar Two's top-up tax information return (DAC9).

If your organisation currently falls under one or more of the DACs, we advise you to keep track of the DAC Recast, as the eventual changes in scope and effect of the EU's administrative cooperation might affect your organisation.

The proposal includes an anti-gold-plating clause. The clause would prevent Member States from introducing or maintaining additional, domestic reporting obligations which concern the same or substantially similar data as reportable under the DAC framework. Given that several Member States currently maintain rules that could potentially fall in scope of the gold-plating clause, the provision is likely to attract scrutiny as the DAC Recast proposal moves through the EU legislative process.

• Measure 1 – would ensure that DAC6 reporting obligations (cross-border arrangements) remain proportionate and effective while promoting a more harmonised application of the Main Benefit Test (MBT).

• Measure 2 – would amend DAC7 reporting rules to reduce low-value goods reporting and potentially bring certain intermediary-seller models within the platform-operator definition, while seeking alignment with the OECD’s Model Rules for Digital Platforms (MRDP).

• Measure 3 – would streamline notification obligations for MNE groups for the purposes of DAC4 (country-by-country reporting) and DAC9 (central filing of the Top-up Tax Information Return).

• Measure 4 – would improve the accuracy of reported Taxpayer Identification Numbers (TINs). 

• Measure 5 – would improving the completeness of information exchanged under DAC1 (certain categories of income and capital).

Excluding certain companies within the scope of Pillar Two

Such MNEs are already under scrutiny of tax authorities, and the EC expects the 15% minimum tax they face under Pillar Two to neutralise any aggressive tax planning. Where an Ultimate Parent Entity (UPE) is in a qualified side-by-side regime jurisdiction, the carve-out would only apply if the participants to the arrangement are subject to a qualified domestic top-up tax for the relevant tax period and would not apply where related financial benefits are granted.

Implementation ‘reportable cross border arrangements’

This term is to only include arrangements that are implementable. In line, ‘relevant taxpayer’ is to include only the taxpayer who is starting to implement the reportable cross-border arrangement. 

Reporting period

The reporting period is to start when the first step in the implementation has been made. The reporting deadline would be extended from 30 to 90 days.

Legal privilege

In line with recent CJEU judgements, legal professional privilege would be understood to apply only to lawyers and other professionals who are legally authorised to ensure legal representation. Intermediaries that are exempt from reporting due to their legal privilege and act under the official ‘lawyer’ title of their jurisdiction, would only have to inform their client (and not any other intermediaries).

Reporting on third country involvement

The proposal makes it clear that systematic reporting of the information that a third country jurisdiction is involved in the reportable arrangement, would remain necessary.

Hallmarks under A to be deleted

These general hallmarks are subject to the MBT and concern constructions for which the tax adviser is bound to secrecy or is paid on the basis of a tax advantage, or the construction is either standard or makes use of standardised documentation. According to the DAC Recast proposal, these hallmarks have limited value for the tax authorities.

Hallmark C1 (intercompany, deductible cross-border payments)

The reference to the OECD work on non-cooperative jurisdictions is to be replaced with a reference to the work of the Code of Conduct Group whereby Member States jointly assess third country jurisdictions against set criteria to deem them cooperative for tax purposes or not.

Hallmark D2 (untransparent ownership)

A new version of this ‘substance-hallmark’ would come in place of the withdrawn proposal for the Unshell Directive, as previously announced. It is to be further developed in a Council implementing act.

Main Benefit Test

In several places, the intention to issue guidance on the application of the MBT is mentioned. Yet, the DAC Recast proposal does not yet contain such guidance.

The DAC7 elements of the DAC Recast should be read alongside the OECD’s public consultation on targeted amendments to the Model Rules for Digital Platforms (MRDP; DAC7 in the EU), which remains open for comment until 14 August 2026. The EU and OECD texts are clearly moving in the same direction, reflecting the recast’s stated aim of keeping the new rules aligned with the OECD Model Rules.

Key takeaways 

• Removal of the 30-transaction activity threshold and raising the monetary cap from EUR 2,000 to EUR 3,000 to exclude occasional sellers of low-value goods.

• Expanding the Platform Operator definition to capture certain intermediary sellers, combined with specific due diligence procedures to identify and report on such intermediaries.

• Treating entities related to the Platform Operator as Excluded Sellers.

• The EU appears to be considering an SME carve-out for Platform Operators with an annual aggregate consideration below a certain (currently unspecified) threshold. 

Streamlining notification obligations for Country-by-Country reporting and central filing of the top-up tax information return

MNE groups are given the option to file one notification per group, both for Country-by-Country reporting purposes and for the purposes of central filing of the top-up tax information return. The notification timeline is based on the timeline of Country-by-Country reporting (last day of the fiscal year of the MNE group). For this purpose, a single common template is to be adopted by the EC, which would have to be filed at the latest on the last day of the reporting fiscal year of the MNE group.

Taxpayer Identification Number (TIN)

The EC will develop a new tool for digital and automated verification of the correctness of TIN. The use of the tool will be compulsory for tax administrations and optional for reporting entities.

Improving the completeness of information exchanged

‘Available information’ now includes information from all registers and databases of Member States authorities at national government level, not only the tax authorities. In addition, and in line with the ‘once-only’ principle, the proposal provides the legal basis for tax authorities to access relevant information held by other public authorities at national level. In particular, the proposal enhances access by tax authorities to registers established under AML legislation, notably the new interconnected register on real estate. Finally, legal basis is provided for tax authorities to access the registers on pensions that are held on the national level.

The EC states that the DAC Recast proposal is, among others, fully consistent with the Omnibus on direct legislation (published on the same day, refer to our article EU Tax Omnibus: key changes and impact for the Netherlands), as well as the Pillar Two and FASTER directives and the EU Inc proposal, including the latter's “once-only” principle for the submission of information. 

The proposal requires unanimous approval by the Council under Article 115 TFEU. The final text will therefore depend on political negotiations between the EU Member States and may differ materially from the EC’s proposal. In that context, Ireland will hold the Presidency of the Council from 1 July to 31 December 2026. Ireland has signalled that the DAC Recast has priority during its term. The proposal states that the EU member states are to have transposed the regulations before 2028, and to have these in effect as of 1 January 2028.