Palta - Service Sector Employers’ contribution to the public consultation on Omnibus on Taxation

1. Summary

Palta welcomes the Commission’s initiative to simplify and declutter tax legislation. Administrative burden is a major cost for companies operating in the EU and also a barrier when trying to enter the Single Market. A “home market” for an European company should always be the European Single Market.

Simplification efforts should always lead to concrete and measurable reductions in compliance costs and the time required for fulfilling tax obligations. Clearer and more streamlined legislation benefits both businesses and tax administrations by reducing unnecessary complexity and making obligations easier to manage.

Palta fully supports the Commission’s ambitious target to reduce administrative burdens by 25% for businesses and 35% for small and medium-sized enterprises. High per centage of our member companies are SMEs.

Palta – Service Sector Employers’ contribution in summary:

Introduce centralised EU reporting and one‑stop‑shop models to enable group‑level tax reporting through a single Member State.
Eliminate overlapping and unnecessary rules for companies covered by minimum taxation, including CFC rules, hybrid mismatch rules, DAC6, and withdrawing the DEBRA and unshell proposals.
Reform ATAD interest limitation rules to better support investment and financing within the EU. The limitation should be fully lifted for bank loans.
Taxation procedures would be simpler and more effective by using digital taxation tools, harmonising and digitalising the tax reporting & process.
Encourage cross‑border remote and mobile work by ensuring it does not trigger double taxation or permanent establishment risks, supported by clear EU‑level guidance.
Launch a dedicated VAT and indirect tax omnibus, including the abolition of Intrastat.
Leverage secure digital identity solutions, such as the European Business Wallet, to enable trusted taxpayer identification without introducing new identifiers.
Limit national discretion in implementation and strengthen the Commission’s role in monitoring, evaluating and guiding the practical application of EU tax legislation.
Embed simplicity in future rule‑making through strong impact assessments, early consultation, clearer drafting, safe harbours and proportionate transition measures.

2. Main challenges in EU tax compliance

2.1 Complexity and fragmentation of tax procedures

EU tax compliance remains overly complex and fragmented, creating high administrative burdens and legal uncertainty for businesses. Divergent national tax models, combined with overlapping EU and national rules and widespread gold‑plating, have resulted in parallel regulatory regimes and inconsistent implementation across Member States. All Member States have their own tax models and processes, for each tax (corporate income taxation, VAT, withholding taxation, personal income taxation etc.) Tax systems should be analysed and decluttered in their entirety.

EU directives set policy goals, but each Member State decides the exact measures.
Member States’ national legislation is stricter than the minimum level set in the directive, because EU legislation deliberately leaves flexibility in the level of harmonization: fully harmonized vs. minimum level with no ceiling.
Member States leave national legislation in place on matters regulated by EU law, creating a dual regulatory regime.

2.2 Role of the Commission

To achieve genuine simplification, the Commission should limit national discretion in implementation, actively assess how rules are applied in practice, and promote stronger harmonisation specifically in tax compliance.

Limiting national discretion in implementation
Evaluating the implementation of tax legislation
Evaluating how EU tax rules are applied in practice
Regarding tax compliance: propose simple, harmonised EU legislation and rules
Providing clearer guidance and model templates anto ensure consistency

3. Overarching simplification proposals

3.1 Centralised EU reporting and one‑stop‑shop models

It should be possible to do tax reporting centrally within a group through the authorities of a single country for all group companies.

A single EU‑level reporting portal would streamline the exchange of information between tax authorities and remove the need for taxpayers to navigate multiple national interfaces. This would also encourage the development of better reporting solutions, reducing fragmentation and ensuring that technical updates or schema changes are implemented consistently across the Union.

Similar centralised models already exist in other EU policy areas (e.g. customs) which demonstrate that unified digital entry points can significantly simplify compliance processes for both administrations and businesses. By adopting a comparable approach for tax reporting, the EU could reduce administrative burden, improve data quality and enable more efficient cross‑border cooperation.

3.2 Harmonised deadlines for reporting

Member States apply different reporting deadlines, and the underlying legislation also enters into force at varying times across countries. As a result, companies must have their reporting processes and tools ready as soon as the first relevant national legislation becomes applicable.

The differing deadlines further complicate compliance. In many cases, the timelines are not workable in practice and place disproportionate time pressure on businesses. Reporting schedules should also be aligned more closely with the complexity of the required assessment and the practical realities of business operations.

3.3 User-friendly guidance

Tax reporting guidance is often fragmented to multiple sources, highly technical in nature, and difficult for taxpayers to navigate. A streamlined and user‑friendly guidance framework would improve legal certainty, reduce compliance costs, and support a more uniform application of the rules across the EU.

For example, in several Member States taxpayers must currently consult legislation, administrative instructions, FAQs, and informal interpretations, all of which may differ in scope or wording. And then compare these with the similar set of guidance from other Member States where the group has to do reporting. This fragmentation not only increases the risk of errors but also leads to unnecessary time spent searching for authoritative instructions.

3.4 A standardised EU template when possible

The Commission should introduce a harmonised template for tax reporting to be used across all Member States whenever feasible. A harmonised EU‑wide reporting template for tax reporting would significantly improve internal coordination within MNEs, strengthen legal certainty and promote a consistent application of rules across all Member States. Such a template should be fully interoperable with national systems.

Where such a template is not yet available or cannot be used in every Member State, companies should be required to submit only information that is readily accessible without additional administrative effort.

3.5 Report only once

There should not be overlapping requests for information. This would require that tax obligations should be more closely aligned with existing compliance frameworks, e.g. OECD Pillar 2 GloBE, minimum taxation, CBCR and TP documentation, so that taxpayers can rely that information already submitted to tax authorities is available and avoid multiple reporting of the same data. However, taxpayers should be clearly informed of the purpose for which data is collected.

Furthermore, notifications should only be required when previously submitted information has changed. The reporting tool/portal could e.g. prefill the information to the report (like in Germany the amount of remaining/undepreciated depreciation base is prefilled to the tax return form). This would allow the company to evaluate if the information is still up to date and accurate.

3.6 The importance of technical design choices

Differences in reporting formats and technical requirements varying from country to country are costly and burdensome. Taxation procedures would be simpler and more effective by using digital taxation tools, harmonising and digitalising the tax reporting & process. Quick wins could be reached for example by harmonising the technical elements of reporting processes (some have already been mentioned above in more detail):

legislation coming into force at the same time in all Member States
non-binding but simple and easy to implement reporting templates
similar understanding of the content of the data points
always accepting reporting also in e.g. English and French, not only allowing local language
ensuring the same reporting format (XML, XBRL) to enable use of similar reporting tools

4. Targeted simplification of existing EU tax frameworks

4.1 Minimum taxation and Pillar 2 GloBE

Minimum taxation is addressing the same issues as previously implemented EU tax legislation. Therefore, unnecessary overlapping legislation should be eliminated for the companies covered by minimum taxation rules and simplify the legislation:

Controlled Foreign Corporation legislation
Hybrid mismatch rules
Interest deduction limitations
DAC6
Withdrawing and cancelling the DEBRA (debt-equity bias reduction allowance) directive proposal
Withdrawing and cancelling the unshell directive proposal
Making safe harbour rules based on CBCR data under Pillar 2 permanent or preparing other well-functioning permanent safe harbour rules
Introducing whitelisting jurisdictions

4.2 ATAD, CFC rules and interest deduction limitations

Interest deduction limitations set in the ATAD (Anti-Tax Avoidance Directive) restrict investments in the EU. The multiple crises worldwide have depleted companies’ equity, forcing them to rely more on loans for investments. On the other hand, industries with heavy tangible assets have no other option but to use loans. Obtaining reasonably priced loans for investments has become more challenging. The volatile interest rates are also causing increased and unpredictable interest costs. Due to the strict interest deduction limitations, companies’ financing costs are unreasonably high, even resulting to transferring financing functions outside of the EU.

Safe harbour clause regarding interest deductions should be expanded. The limitation should be fully lifted for bank loans, and the limit for corporate group loans should be significantly increased from the current 3 million euros. The safe harbour clause should be made obligatory for Member States (Article 4, paragraph 3).
Streamlining of balance sheet test rules: The balance sheet test should be made obligatory for Member States, and the conditions should be streamlined to prevent Member States from imposing additional conditions on applicability (Article 4, paragraph 5).
Definition of interest expenses: The definition of borrowing costs should be exclusive meaning that all costs covered by the rules must be explicitly stated in the directive. Furthermore, no reference should be made to the domestic definitions. These changes would harmonize the scope of the rules across Member State and enhance legal certainty (Article 2, point 1).
Obligatory ownership threshold: The 50 per cent threshold for the applicability of CFC rules could be made obligatory for Member States to narrow the scope these rules. For instance, Finland’s threshold of 25 per cent may hinder or complicate larger investments when investor seek to avoid the application of CFC rules (Article1, point a).

4.3 Simplification proposals for DAC4, DAC6 and DAC7

The recast of the DAC should prioritise measures that genuinely eliminate duplication, legal uncertainty and excessive administrative workload. Palta ry has presented it’s contribution to the public consultation on the Recast of the Directive on Administrative Cooperation in the field of direct taxation earlier.[1]

5. New ways of working – remote and mobile work

5.1 Remote and mobile work

International remote and mobile work within the EU should be actively encouraged, as it supports labour mobility, competitiveness and more flexible ways of working. From a tax simplification perspective, remote or mobile work within the EU should not result in double taxation for employees, nor should it in itself create a permanent establishment for an employer located in another Member State. To reduce legal uncertainty and administrative burden, the EU should play a stronger role in gathering, analysing and disseminating information, and in providing clear, non‑binding guidance on the applicable tax and social security frameworks for cross‑border remote and mobile work.

5.2 Permanent establishment risks

The OECD’s 2025 update to the Commentary on Article 5 of the OECD Model Tax Convention provides much‑needed clarification on the permanent establishment (PE) implications of cross‑border remote work. From a simplification perspective, this guidance is a welcome step towards reducing legal uncertainty, administrative burden, and unintended tax risks arising from modern and flexible working arrangements.

The updated Commentary confirms that, in most cases, remote work from a home or other non‑company location in another country does not create a fixed place of business or trigger a PE. In particular, the introduction of a clear benchmark—remote work for less than 50% of an employee’s working time over a 12‑month period—provides a practical and easily applicable threshold that enhances legal certainty for both businesses and tax administrations. This approach offers a useful model for the European Union’s broader efforts to modernise, simplify, and make taxation fit for increasingly digital and mobile forms of work.

5.3 Eliminating economic employer concept

The free movement of workers is a core principle of the EU. EU citizens have the right to reside and work in another EU country without a work permit and to be treated equally with the country’s own citizens. This principle is important for enhancing the EU’s competitiveness and attracting workers to the EU area. However, personal income tax legislation is overly complex.

The concept of an economic employer is used in many EU Member States, resulting in significant administrative costs and additional work. Due to this, group-level guidelines have been implemented, banning employees from traveling to countries with economic employer rules to mitigate risk of administrative burden and double taxation. Employees are also personally refusing to travel to such countries due to the same effects in their own personal income taxation.

The concept should be fully eliminated within the EU. At the very least concerning intra-group business trips. In large international groups, thousands of internal business trips are made annually, and the economic employer concept is requiring new reporting systems, internal guidelines, assessments (whether the legislation applies) ordered from consultants and causing expensive tax disputes.

The economic employer concept hinders free movement, innovation, and investment. For example, an R&D expert traveling to another site would be required to file a tax return and pay taxes to that Member State, then apply for the removal of double taxation. A 60-90 days safe harbour could be introduced, as for example proposed in the EESC opionion paper.[2]

6. Withholding tax removal as a key simplification measure

Withholding taxes on intra‑EU dividend and interest payments remain one of the most significant and unnecessary sources of complexity in the EU tax framework. Fragmented and inefficient withholding tax procedures lead to double taxation, foregone relief and substantial economic costs across the EU. Moreover, the Commission’s own impact assessments have shown that the economic costs of current withholding tax procedures, including administrative expenses, foregone relief and opportunity costs run into billions of euros annually across the EU.[3]

Withholding tax removal or, at minimum, a significant narrowing of its scope would be fully aligned with the objective to simplify and declutter EU tax legislation. Despite recent progress through the FASTER Directive, withholding tax systems continue to generate high compliance costs for businesses, investors and tax administrations alike.

Palta invites the Commission to consider the following concrete actions:

Targeted removal of withholding tax on intra‑EU dividends and interest, combined with residence‑based taxation and reinforced information exchange.
Optional zero‑withholding regimes for Member States where taxation is ensured in the residence state and information exchange obligations are met.
Use the FASTER framework as a transition, not an end‑state.
Avoid new reporting layers if withholding taxes are retained.

EU Business Wallet would provide a reliable way to identify the payer and receiver of the payment subject to withholding tax.

7. EU Business Wallet to be leveraged in tax reporting

Reliable taxpayer identification remains one of the persistent challenges in tax exchanges. This was also mentioned in the Commission Staff Working Document on evaluation of the DAC[1]. Both the EU and the OECD have recognised that secure, interoperable digital identity solutions are essential for reducing errors, improving data matching and enabling more automated, close to real‑time tax processes. EUDI Wallets under eIDAS 2 and the forthcoming European Business Wallets would address this by providing secure, government‑verified and interoperable identity credentials that tax authorities can trust across borders. This would reduce mismatches, duplications and errors that currently arise from divergent national identifiers.

For businesses, a wallet‑based model would also streamline interactions with tax authorities: companies could authenticate themselves once, share verified licences or registration data digitally, and avoid repeated submissions in every Member State. Thus, the business wallet would enable identification when using one-stop-shop EU reporting. At the same time, this approach could avoid imposing new identifiers or additional burdens on companies, as wallets can build on existing national ID systems and integrate into Tax Administration 3.0 developments. The OECD’s Tax Administration 3.0 vision likewise emphasizes the role of trusted digital identity as a foundational building block for a frictionless tax system, enabling automated processes, better data matching and fewer manual interventions by taxpayers. An important element is, that the OECD eID work is currently planned to be interoperable with the eIDAS 2 -concept. The work is still ongoing.

The potential of digital identification for businesses and individuals should be leveraged to the fullest extent:

The possibility to provide business wallets must also be opened to private-sector providers.
The business wallet must be fit for use in companies’ own business operations. The model must not be designed solely around public authorities’ needs.
Administrative burden and tax reporting obligations for businesses must be reduced in practice (in a concrete, measurable way).
The European Business Wallet should follow EU regulation as uniformly and harmonised as possible across Member States. National models and deviations (in regulation or timelines) should be avoided.

Wallet‑based solutions also reflect practical business needs. Business wallets would be also be usable for B2G, B2B and cross‑border transactions. In order to be usable, business wallets must provide clear benefits such as streamlined B2B authentication, permit and licence management and secure document sharing. Rather than introducing a new EU tax identification number, which would be costly and disruptive, wallets could serve as an interoperable layer that links existing national identifiers through standardised, verifiable credentials. This approach would improve the accuracy of taxpayer identification and data exchange without increasing administrative obligations for companies.

Possible use cases of eID wallets:

Establishing and operating an EU Inc. (28^th Regime) would be an excellent use case for an EU-wide trusted digital identity wallet
Authentication related to establishment of a company and its business operations
Tax and other regulatory reporting and dealings with authorities
Customs clearance
KYC (know your client), AML rules, sanctions compliance
Sector-specific permits, such as construction (incl. architects) (e.g., building and demolition permits), event industry, hospitality (e.g., alcohol licence), transport sector (e.g., permit to transport dangerous goods)
Environmental permits
Standards, certificates

8. OECD’s proposals for Simplicity to Foster Tax Certainty and Growth

The OECD has also written a report on how they see simplification could improve tax certainty and growth (September 2025). The report proposes a set of practical measures to simplify cross‑border business taxation and improve tax certainty, especially in multilateral settings.[4] Many of the proposals echo the same comments as the Finnish companies’.

What is already being done in the EU?

Rationalising and decluttering existing rules: focus on identifying overlaps, duplication and unnecessary reporting (including the broader objective of administrative burden reduction).
Consult earlier and more continuously with taxpayers and tax administrations across (1) problem definition, (2) technical drafting, and (3) final clarity review.
Considering simplifications and proportionality tools (e.g., safe harbours/threshold-type simplifications) as part of the broader simplification discussion.
Strengthen impact assessments before adopting new rules: explicitly quantify compliance burdens, administrative capacity constraints, and compare alternatives (including non-legislative guidance or doing nothing).

What additional measures the EU could consider?

Promoting simplification through clearer guidance and more consistent implementation support (e.g., templates/guidance to reduce fragmentation in practice).
Introduce a systematic “simplicity checklist” in EU tax rule-making, embedded in drafting instructions and impact assessment templates.
Improve model rules and drafting quality: clearer structure, consistent terminology, explicit underlying principles, and practical examples; conduct dedicated “clarity reviews”.
Use more objective and programmable rules where appropriate (formulaic approaches, safe harbours, thresholds; explore “rules-as-code” for reporting and compliance).
Provide stronger transition measures and simplifications: phased implementation, pilots, early-years penalty relief, and simplified regimes for low-risk taxpayers.

9. VAT and indirect taxation

While VAT and indirect taxation are not the primary focus of this contribution, the scale of existing complexity and administrative burden justifies addressing these issues through a dedicated VAT and indirect tax omnibus.

Current VAT and Intrastat reporting obligations create significant and inefficient compliance costs, particularly for SMEs.
Outdated obligations such as Intrastat should be abolished at the latest when ViDA enters into force.
VAT Directive should be simplified by harmonising place‑of‑supply rules and narrowing the scope of reduced VAT rates to improve legal certainty.
Although the ViDA digital reporting reforms are broadly supportable, their success depends on strict focus on burden reduction, limited national flexibility and early involvement of taxpayers and service providers.

10. Concluding Remarks

For companies, predictability and simplicity of taxation are important factors. Reporting and paying their fair share of taxes should not result in tax disputes, double taxation, excessive and administrative burdens, especially hitting the SMEs hardest as the relative administrative burden is heavier on them. The Omnibus-project of decluttering of tax legislation is very welcome and Palta supports this work. However, Tax Omnibus -project should not be limited to direct taxation and DAC recasting, but all EU’s tax legislation should be analysed and simplified, also VAT, indirect taxation and withholding taxation, as well as all tax matters related to free movement of employees.

Palta and its member companies remain at the Commission’s disposal for further dialogue on these issues.

Additional information:
Maria Volanen
Head of Tax and Trade Policy
Maria.volanen@palta.fi

[1] Contribution to the public consultation on DAC – Palta

[2] Taxation of cross-border teleworkers and their employers | EESC

[3] 06 2025 | A new plan for Europe’s sustainable prosperity and competitiveness | Faster and Safer Tax Excess Relief (FASTER)

[4] Enhancing Simplicity to Foster Tax Certainty and Growth (EN)