The Council of the EU moves forward on tax cooperation and digital VAT reforms

The EU Council has achieved remarkable progress on key tax issues at its meeting on 11 March 2025. It has agreed to boost cooperation and information exchange on minimum effective corporate taxation, adopted a package to modernise VAT rules for the digital economy, and endorsed a plan to simplify and declutter tax legislation.

EU Council paves the way for easier compliance with Pillar 2 rules

The EU Council has reached a political agreement on a further amendment of Directive 2011/16/EU on administrative cooperation in the field of taxation (DAC 9). DAC 9 will enhance cooperation and information exchange on minimum effective corporate taxation and will make easier for companies to fulfil their filing obligations under the Pillar 2 Directive.

Without the DAC 9, each constituent entity that forms part of a multinational enterprise group under the Pillar 2 rules would have to file a top-up tax information return in the country where it is based, which can be costly and time consuming. This being said, a constituent entity does not have any obligation to file a top-up tax return with its tax administration if such top-up tax return has been filed by the ultimate parent entity or by a designated filing entity of the Pillar 2 group located in a jurisdiction that has, for the reporting fiscal year, a qualifying competent authority agreement (i.e. an exchange of information agreement) in effect with the Member State in which the constituent entity is located. DAC 9 is designed to ensure that such condition is met within an EU context, i.e. DAC 9 would constitute a qualifying competent authority agreement in effect between Member States and hence enable a centralised top-up tax return filing within the European Union. In case where such centralised tax filing is performed, the constituent entities would have to notify their tax administrations in this respect by mentioning the identity of the filing entity.

In summary, DAC 9 aims to facilitate the fulfilment of tax filings obligations by constituent entities under the Pillar 2 Directive rules by introducing a centralised tax filing for multinational enterprises. DAC 9 is therefore highly welcome in the context of the ongoing Commission’s efforts to rationalise reporting obligations and to reduce burden on EU businesses. However, for multinational groups with constituent entities in third countries, Member States must conclude separate agreements to enable such centralised tax fiiling. The Multilateral Competent Authority Agreement on the Exchange of GloBE Information Returns, developed by the OECD and released in January 2025, aims to provide such a framework at the OECD level.

Next steps

The DAC 9 Directive will be formally adopted by the EU Council once the legal linguistic work has been completed. After that, it will be published in the Official Journal of the EU and will enter into force on the day following that of its publication. Member States will have to implement DAC 9 by 31 December 2025. Countries opting to delay the implementation of the "Pillar 2 Directive" are still required to transpose DAC 9 by the same deadline.

The first top-up tax information return will have to be filed by 30 June 2026, and the relevant tax authorities will have to exchange this information by 31 December 2026 at the latest.

EU Council adopts "VAT in the Digital Age" package

The EU Council has given its final green light on a set of laws to make the EU’s Value Added Tax (VAT) rules fit for the digital age. The package adopted covers a directive, a regulation and an implementing regulation. These new rules will:

• make VAT reporting obligations fully digital (including e-invoicing) for companies who sell goods and services to businesses in another EU Member State by 2030;
• require online platforms to collect and remit VAT on short-term accommodation rentals and passenger transport services in most cases where individual service providers are not VAT registered; and
• improve and expand online VAT one-stop-shops so that businesses do not have to go through costly registrations for VAT in every Member State in which they do business, but rather proceed to a single VAT registration.

Businesses with cross-border transactions will therefore have to amend their internal processes regarding invoicing and VAT reporting as well as verify whether their foreign VAT registrations would still be required.

Next steps

The VAT package will enter into force on the twentieth day following its publication in the Official Journal of the EU. The regulations will apply directly, while the directive will have to be transposed into national law.

EU Council sets tax decluttering and simplification agenda

The EU Council has also approved conclusions setting a tax decluttering and simplification agenda with a view to improving the EU’s competitiveness and reducing administrative, regulatory, and reporting burdens. The decluttering and simplification process will include a review of the DAC 6 (on reportable cross-border arrangements) and the ATAD (on anti-tax avoidance practices). Among other things, the conclusions call for a review of the existing EU legislative tax framework based on four principles:

• reducing the reporting, administrative and compliance burdens for Member States’ Administrations and taxpayers;
• eliminating outdated and overlapping tax rules;
• increasing the clarity of tax legislation (where relevant); and
• streamlining and improving the application of tax rules, procedures and reporting requirements.

The EU Council invites the Commission to consult relevant stakeholders and introduce an operational, pragmatic and ambitious action plan with a feasible timeline and a road map of the envisaged work before the end of the autumn 2025.

How can we help?

The tax partners at Ashurst are available to assess how these measures may impact your business and to provide tailored legal and operational guidance. Please feel free to reach out to us for further insights.