BUSINESSEUROPE

POSITION PAPER 29 July 2020 KEY MESSAGES The European Commission should have greater regard for how business processes work in its design of customs processes. Customs policy has an important impact on business competitiveness. Effective, business friendly customs processes can facilitate operations and ensure smooth transactions. Many changes in customs policy have already taken place with the introduction of the Union Customs Code (UCC), with more yet to occur with the continued implementation of the UCC. The European Commission should restore the balance between customs obligations and simplifications for business. In its implementation of the UCC, the Commission has thus far focused mainly on the obligations and requirements related to risk control. The simplifications outlined in the UCC should have equal priority in order to ensure that the balance between requirements and…

…processes, the EU’s customs policy can be an important tool for facilitating trade. WHAT DOES BUSINESSEUROPE AIM FOR? 1. Further simplifications for Authorised Economic Operators (AEO) 2. The implementation of Self-Assessment 3. The implementation of Centralised Customs Clearance 4. The creation of a ‘Single Window’ system as a one stop shop for businesses 5. Eliminating the mandatory 6-digit HS code for the entry summary declaration and transit procedure 6. Updating customs valuation rules 7. Negotiating retrospective claims of origin and data confidentiality in origin verification 8. Ensuring that customs policy supports the closest possible EU-UK relationship 9. Modernising certain Harmonised Systems (HS) codes 10. Modernising the EU-Turkey Customs Union 11. Stepping up efforts against counterfeit goods 12.

Systems (HS) codes 10. Modernising the EU-Turkey Customs Union 11. Stepping up efforts against counterfeit goods 12. Supporting the implementation of the Trade Facilitation Agreement (TFA) BusinessEurope’s priorities for EU customs policy 1 2 3 Ref. Ares(2022)6415293 - 16/09/2022 POSITION PAPER *** Disclaimer: this draft position paper does not reflect agreed positions of BUSINESSEUROPE or of its member federations*** The implementation of the Union Customs Code (UCC) in May 2016 was important step forward in creating a modern customs environment for government and business. However, most of the possible innovative solutions were not taken into account during the implementation of the accompanying rules of the UCC, namely the Implementing and the Delegating Act.

…account during the implementation of the accompanying rules of the UCC, namely the Implementing and the Delegating Act. There is presently a big imbalance between risk controls on one hand and innovative and future oriented solutions on the other hand. The balance between the benefits and requirements for business therefore needs to be restored through the implementation of key benefits for business. This balance has unfortunately been lost due to the delay in implementing the simplifications outlined in the UCC. Authorities should also carefully consider the need and purpose of data requirements they impose on business. The underlying principle should always be to minimise data collection to the necessary minimum.

…impose on business. The underlying principle should always be to minimise data collection to the necessary minimum. The delay in the implementation of IT systems from 2020 to 2025 has also resulted in a delay in some of the key benefits in customs processes for governments and businesses alike. For businesses engaged in trade, the digitalisation of customs is essential to simplifying formalities. It is therefore important that the Commission avoids any further delay in IT implementation and shows leadership in implementing customs facilitations. The COVID-19 pandemic has also made it clear that digitalisation helps in order to maintain the flow of international trade. Digitalised certificates of origin are a case in point in this regard.

…to maintain the flow of international trade. Digitalised certificates of origin are a case in point in this regard. It is important that the EU works towards a broader acceptance of digital documents by third countries, since progress in this area will be of little use if third countries do not recognise digital solutions in trade documents. Tunisia, for instance, has shown to be unwilling to accept digital forms of certificates. Below are our key priorities and requests for the next years. Section 1: Customs and Simplifications 1. Authorised Economic Operators (AEO) Being an AEO means that the company is trustworthy from a customs perspective, remains subject to random spot checks and has taken all necessary measures to ensure correct customs clearance in line with EU law and regulations.

…checks and has taken all necessary measures to ensure correct customs clearance in line with EU law and regulations. AEO status in theory means that companies benefit from simplified procedures, as they do not require a transaction-based scrutiny which is necessary for non-AEO companies. For example, AEO status is supposed to be a factor of competitiveness, but many simplifications, such as self-assessment and centralised clearance, are not yet implemented. In addition to those simplifications not yet implemented, companies have to invest a lot of administrative and financial resources in order to obtain AEO status while accepting to having their business processes, partners and products checked regularly. For European companies, it is therefore important to begin reflecting on whether the benefits justify the costs.

For European companies, it is therefore important to begin reflecting on whether the benefits justify the costs. In addition, as AEO status increasingly becomes a basic requirement, even SMEs must obtain the status in order to remain integrated within their supply chains. It is therefore essential to ensure the costs and benefits of becoming an AEO are adequately balanced. BusinessEurope therefore urges the Commission to move forward with real simplifications for AEO status holders. This would simplify and reduce the workload for 3 both customs and companies and allow authorities to concentrate scarce resources on companies that represent a higher risk. Examples of simplifications for AEO that business is looking for are: a) Self-assessment (see section 2).

…higher risk. Examples of simplifications for AEO that business is looking for are: a) Self-assessment (see section 2). b) A waiver for entry summary declarations or pre-departure declarations c) “General” prior risk analysis and “general” declarations to be based on the products, processes and observation tools of the economic operator. 2. Self-Assessment When the UCC was introduced, BusinessEurope expected innovative solutions for self- assessment, doing away with the transaction-based processing that unfortunately still exists today. The single clearance orientated controls must be turned into system and process oriented controls. At present, self-assessment is not a reality and we would like the European Commission to work on concrete solutions to apply the UCC and introduce this simplification.

…we would like the European Commission to work on concrete solutions to apply the UCC and introduce this simplification. The benefits of self-assessment would be as follows: Achieving self-assessment and simplifying import declarations In the strongest form of simplification, goods would be labelled with an identification number upon arrival in the EU. The owner of an authorisation for self-assessment would merely need to indicate that it is certified to self-assess the imported good. Once this has been verified by Customs, the goods would be automatically released. Instead of making an import declaration at the time of import, the entry should be registered in the operating records of the company. The company should then be able to periodically file customs declarations periodically as a means of simplification.

The company should then be able to periodically file customs declarations periodically as a means of simplification. Instead of filing a separate import declaration for each shipment received, the company, which is AEO-certified or otherwise authorised to make use of simplifications, could, through self-assessment, compile a summary declaration and duty payment for a fixed period of time (such as once per month). In principle, the method would be the same as for Value Added Tax (VAT). Periodic customs declarations ought to be submitted with data summarised to the greatest extent possible. Such simplification would reduce the administrative burden on the companies involved and the faster clearance at the border would alleviate the pressure on customs staff and infrastructure.

…involved and the faster clearance at the border would alleviate the pressure on customs staff and infrastructure. However, there may still be the need for physical checks of imported goods for safety, sanitary or veterinary purposes. The goal of self-assessment is to move away from transaction-based declarations and checks to a process-oriented approach. 4 a) In case a company would change its process in a way that involves a change of the customs procedure, no administrative changes would be necessary. At present this would imply, among other things, a change of the customs declaration. b) It would reduce the workload for all parties involved. It would decrease the number of messages and reduce (IT) costs for all. c) Authorised Economic Operators (AEO) have already undergone checks of their business processes in order to obtain this status.

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…1 3 April 2023 VAT in the Digital Age: BusinessEurope’s reply to the European Commission’s Public Consultation We are pleased to provide written comments on the European Commission’s Public Consultation on VAT in the Digital Age (ViDA). BusinessEurope is the leading advocate for growth and competitiveness at the European level, standing up for companies across the continent and campaigning on the issues that most influence their performance. A recognised social partner, we speak for all-sized enterprises in 35 European countries whose national business federations are our direct members. Key Messages With the proliferation of technology and digitalisation, businesses have been able to operate cross-border quicker and in a more agile manner.

…of technology and digitalisation, businesses have been able to operate cross-border quicker and in a more agile manner. A majority of EU Member States have already introduced or are planning to introduce their own digital reporting requirements in an attempt to increase VAT collection and combating VAT fraud. But, given the lack of common VAT compliance requirements, the current VAT system in the EU has become highly fragmented, complex, and less resilient to fraud. The resulting effect on the majority of companies operating in the EU is that they have to comply with an increasingly difficult tax compliance environment and a patchwork of obligations across the EU Member States. BusinessEurope welcomes the Commission’s initiative aimed at updating the current VAT rules and continues to support the Commission’s initiatives aimed at combatting VAT fraud and reducing the EU’s VAT Gap.

…and continues to support the Commission’s initiatives aimed at combatting VAT fraud and reducing the EU’s VAT Gap. In this context, the ViDA proposal package is expected to introduce extensive and radical changes to businesses’ current systems and operational processes. This will entail a significant implementation cost for a large number of businesses operating in the EU and businesses will need to respond and react quickly in order to meet the proposed commitments set forward by the Commission. On this basis, and in order to ensure growth and competitiveness of the Single Market, there needs to be more consideration and analysis given to certain parts of the proposal in order to ensure a clear and balanced proposal for all stakeholders involved.

…given to certain parts of the proposal in order to ensure a clear and balanced proposal for all stakeholders involved. Whilst ViDA should set the foundations for increased simplification of the VAT rules, it is important to have political commitment of all Member States to this agenda and consultation with all stakeholders involved in order to ensure that small and large businesses alike can easily comply with the VAT framework in the EU. Against this background and in order for ViDA to achieve a fair and efficient VAT system, BusinessEurope recommends that: (i) A more realistic timeframe is considered. Some of the proposed rules are designed to take effect eight months after the finalisation of this public consultation (from 1 Ref. Ares(2023)2405335 - 03/04/2023 2 January 2024).

…months after the finalisation of this public consultation (from 1 Ref. Ares(2023)2405335 - 03/04/2023 2 January 2024). Given the unanimous approval required from all Member States, we recommend a minimum of twenty-four months from the date ViDA is approved before the first measures start being implemented. Additional lead time will be needed for small and medium-sized businesses and for the introduction of the more complex proposals, such as the introduction of mandatory electronic invoicing, that requires fundamental changes to ERP systems and underlying business processes, or rules on the platform economy. (ii) The reform of the existing VAT rules is guided by the principles of proportionality, effectiveness, and simplicity. Digitalisation has the potential of simplifying many complexities that exist in the VAT system.

…and simplicity. Digitalisation has the potential of simplifying many complexities that exist in the VAT system. However, digital reporting should only be introduced in a harmonised manner to avoid further fragmentation. In addition, a thorough analysis of the effectiveness of the proposed reforms should be carried out to ensure that no unnecessary complexities are introduced for those companies that run their business in an honest and fair manner. In this context, the proposed two-day timelines to issue and report invoices, the additional data points required on invoices as well as the elimination of summary invoices need to be reconsidered and reassessed against the overall aim of the ViDA proposal before they are adopted.

…invoices need to be reconsidered and reassessed against the overall aim of the ViDA proposal before they are adopted. (iii) Given the significant investment required by businesses to adjust their existing processes to new capability requirements, measures and incentives such as faster VAT refunds, faster audits and reduced enquiries from tax authorities, improvement of relief for bad debts, VAT deduction on the cost of implementing these proposals for VAT exempted businesses, combining the use of data for more efficient reporting (for example for Intrastat and EC sales), a relaxation of the Kittel ‘knew or should have known’ test in cases of correctly and timely reported transactions, and other investment incentives from a direct tax perspective should be considered in order to incentivise the optimal implementation of ViDA for businesses.

…direct tax perspective should be considered in order to incentivise the optimal implementation of ViDA for businesses. It will be key that the rules result in less onerous obligations on businesses, simplified reporting obligations and more targeted and qualitative checks in order for honest taxpayers to benefit from more tax certainty. (iv) Whilst we wholeheartedly support the Commission’s initiative to fight any form of VAT fraud (including any form of carousel fraud such as Missing Trader Intra- Community fraud), careful consideration should be given to the appropriateness of introducing more administrative obligations designed to tackle the flaws in the current VAT system, as these may still not result in a reduction of the VAT gap but will nonetheless have adverse implications on the majority of businesses operating in the Single Market.

VAT gap but will nonetheless have adverse implications on the majority of businesses operating in the Single Market. In this respect, the fight against fraud should not come at the expense of the large majority of companies that are trying their best to comply with the current complexities and fragmentations of the EU VAT legislative framework. (v) The exchange of data between Member States’ tax authorities through electronic invoicing and reporting, directly or indirectly via platforms, will need to be protected. We expect that a large amount of strategic, commercially sensitive and personal data will be shared thereby allowing a mapping of the commercial flows within the EU. Any leakage, misuse or destruction of this data would be highly detrimental to 3 European businesses.

…within the EU. Any leakage, misuse or destruction of this data would be highly detrimental to 3 European businesses. As such, ViDA should be accompanied by a robust process aimed at detecting and preventing misuse of information and/or cyber-attacks in order to safeguard the proper functioning of the proposed digital reporting rules. (vi) Whilst we support the Commission’s first steps taken in the ViDA proposal to align the VAT treatment of goods and services by introducing the B-to-B domestic reverse charge mechanism for goods and services alike when supplied by a non- established business, the Commission should have taken this opportunity to standardise the VAT treatment of goods and services as the distinction has become increasingly blurred with the use of digital tools.

VAT treatment of goods and services as the distinction has become increasingly blurred with the use of digital tools. Different interpretations by the Member States lead to natural mismatches that, in turn, lead to difficulties when analysing and matching invoice data. The same VAT treatment of goods and services would therefore not only make the VAT system less complicated and more modern, but also more robust against VAT fraud. (vii) The ViDA proposal should work in practice for businesses and tax authorities alike. Therefore, the ‘central VIES’ system that will be created must be able to handle bulk validations as well as subscriptions for businesses to status updates of trading partners in order to streamline the process. Furthermore, real-time upgrades should be reliable in terms of data quality and stability of the system.

…the process. Furthermore, real-time upgrades should be reliable in terms of data quality and stability of the system. (viii) Rules on deemed supply should ensure that the principle of VAT neutrality is respected and a level playing field is maintained and should not disregard existing rules in Member States that confer specific exemptions. A uniform definition of an ‘intermediary’ in the context of the Platform Economy is required together with common presumptions for when platforms are acting in their own name in order to provide legal and tax certainty. (ix) The Commission should continue working with the Member States to examine how ViDA can be implemented optimally for small and medium sized businesses, and to improve current cooperation between the different national tax administrations to establish greater levels of trust and efficiency.

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…1 POSITION PAPER 24 October 2023 EU Customs are subject to increasing pressures from enormous e-commerce volumes to ever-growing non-financial measures. The UCC reform is therefore more urgent than ever. BusinessEurope fully supports this reform, which is crucially needed. Thus, we urge the Commission to work on an even shorter implementation timeframe than foreseen in its reform proposal, provided businesses are given at least 18 months lead time to prepare. Customs policy plays a major role in the competitiveness of European businesses, and ensuring the right balance between trade controls and the facilitation of legitimate trade is extremely important. Regular business consultation and pilot testing will be key requirements for a successful implementation ensuring that businesses are ready in time for implementation.

…will be key requirements for a successful implementation ensuring that businesses are ready in time for implementation. BusinessEurope has requested the implementation of simplifications, including self- assessment, for Authorised Economic Operators for years. The Trust & Checked trader program should be foreseen in a much shorter timeframe. Before having the Trust & Checked trader scheme in place, real simplifications and trade facilitations, including self-assessment, should be implemented for the economic operators that currently hold the AEO status. The UCC reform should foresee the use of the latest available technology such as artificial intelligence for customs simplifications and trade facilitation. The security of data, especially business sensitive information, should be a key priority of the EU Customs Data Hub.

The security of data, especially business sensitive information, should be a key priority of the EU Customs Data Hub. The EU Customs Authority should not entail another layer of bureaucracy for businesses. The Authority should steer, coordinate, and support national customs authorities to ensure harmonized customs procedures, especially with regards to the implementation of the UCC across the EU. Going forward, many important details of the future UCC will be defined via delegated and implementing acts. It is very important that the European Commission taps into the expertise of business in order to get those details right. In particular, the customs legislation should build on the processes of businesses as much as possible to allow for the foreseen simplifications to take full effect. Continued consultation and engagement with businesses is key.

…the foreseen simplifications to take full effect. Continued consultation and engagement with businesses is key. A regular structured/formalised dialogue should be established, and appropriate consultations carried out with business e.g. through DG TAXUD’s Trade Contact Group. KEY MESSAGES Union Customs Code Reform – BusinessEurope’s views 1 2 3 4 5 Ref. Ares(2023)7339253 - 27/10/2023 2 POSITION PAPER Introduction The Customs Union is one of the main assets of the EU. Customs are essential to protect the EU Single Market as well as EU companies against unfair competition. They are also crucial to facilitate trade by managing enormous trade volumes, which are increasing dramatically, notably driven by the extraordinary growth of e-commerce.

…enormous trade volumes, which are increasing dramatically, notably driven by the extraordinary growth of e-commerce. EU legislation setting very ambitious standards in areas such as the environment, health, safety, security and digital, has significantly increased in recent years in line with the EU Green and Digital transitions. Many of these legislations have a direct impact on Customs, which are now burdened with an ever-growing range of tasks, having to check a large number of non-fiscal measures. Currently, goods need to comply with hundreds of pieces of EU legislation that customs have a duty to enforce in order to ensure a level playing field, protect the EU Single Market and contribute to implement the various EU policy objectives.

…a level playing field, protect the EU Single Market and contribute to implement the various EU policy objectives. But this has also had a direct impact on European companies, which have had to make the necessary investments and quickly adapt to this new reality of having to comply with a rapid surge in legislation, which goes much beyond tariffs. This trend is set to continue in future and substantially increase the bureaucratic burden for EU businesses. These challenges are exacerbated by the recent shifts in the geopolitical landscape. We have seen disruptions in global supply chains in recent years and we are witnessing reconfigurations of value chains led by concerns linked to security and the reduction of strategic dependencies, among others.

…of value chains led by concerns linked to security and the reduction of strategic dependencies, among others. This is also putting pressure on Customs, which are key to ensuring a level playing field and the security of supply chains as well as on companies which may have to plan and reconfigure their supply chains. While we are conscious of these growing challenges and the need to control a large variety of risks, we should not lose sight of the major importance of Customs policy for the competitiveness of European businesses. Customs policy plays a crucial role in the facilitation of legitimate trade, and keeping smooth and open trade flows is key for European business, which are amongst the most dependent on trade globally. It is therefore extremely important to ensure the right balance between trade controls and the facilitation of legitimate trade.

…extremely important to ensure the right balance between trade controls and the facilitation of legitimate trade. Against this background, taking the Customs Union to the next level is more urgent than ever. BusinessEurope supports the reform of the UCC with the suggestions provided below to the Commission proposal. In general, we consider that the timeline foreseen in the UCC is very long and will lead us to lose momentum and sight on the reform. With the growing trade volumes and the increasing non-fiscal requirements at the border, we need the reformed UCC in a shorter timeframe and ensure that the foreseen changes are implemented according to the foreseen timeline. The world moves at a fast pace, and we can only expect it will be very different in the timeframe foreseen in the Commission’s reform proposal.

…pace, and we can only expect it will be very different in the timeframe foreseen in the Commission’s reform proposal. For the future UCC to deliver and truly stand the test of time, we not only need to get the reform right, but implement it in a shorter timeline. 3 POSITION PAPER BusinessEurope’s views on the Commission’s proposal for UCC reform Digitalization and Technology are crucial For the reformed UCC to succeed, it should be centred around digitalisation and take into account that technology evolves incredibly fast. The proposal should consider the latest available technology and be flexible enough to keep up with the fast pace of technological advancements. This has been widely recognized before.

…be flexible enough to keep up with the fast pace of technological advancements. This has been widely recognized before. For example, the Foresight Report on EU Customs, included as one of its main recommendations “leveraging technological advancements and making the most effective use of customs’ also for trade facilitation1. The Wise Persons Group Report2 had similar recommendations. We commend that the UCC proposal takes into account the need to leverage technology, but we are concerned it does not go far enough focusing mainly on the use of technology for controls and risk assessment. This is the case, for example, of artificial intelligence, which is mentioned (e.g. Article 29(1)d)) as an enabler of risk analysis (as well as economic analysis and data analysis), but not of trade facilitation and simplifications.

…of risk analysis (as well as economic analysis and data analysis), but not of trade facilitation and simplifications. ➢ The UCC reform should foresee the use of the latest available technology such as artificial intelligence for customs simplifications and trade facilitation e.g. allowing customs authorities to supervise the requirements for self-assessment. ➢ The UCC should also include provisions that would allow rapid changes in the legislation to take account of new technologies. This would ensure that the reformed UCC will be future-proof and able to effectively adapt to a quickly changing world. The Trust & Check Trader and the Authorised Economic Operator The proposal introduces the new concept of the “Trust and Check trader”, which builds on the existing notion of Authorised Economic Operators (AEO) and other concepts such as “self-assessment” and “process-based approach”.

…of Authorised Economic Operators (AEO) and other concepts such as “self-assessment” and “process-based approach”. The Trust and Check (T&C) traders will enjoy certain benefits and simplifications but will also be subject to several obligations, among which they should provide customs with full access to their systems, records and operations. For BusinessEurope the concept of “self-assessment” and the change of approach from “transaction-based” to a “process-oriented” system has been a top priority for many years. Despite “self-assessment” being included in the current UCC (Article 185), it was never implemented. This has led to significant frustrations for traders that invested important administrative and financial resources to obtain and maintain the AEO status.

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______________________________________________________________________________________________________________________________________________________________________________________________ AV. DE CORTENBERGH 168 BUSINESSEUROPE a.i.s.b.l. TEL +32(0)2 237 65 11 BE-1000 BRUSSELS FAX +32(0)2 231 14 45 BELGIUM WWW.BUSINESSEUROPE.EU E-MAIL: [email protected] VAT BE 0863 418 279 Follow us on Twitter @BUSINESSEUROPE EU Transparency register 3978240953-79 11 September 2024 BusinessEurope’s response to the Call for Evidence for an Evaluation / Fitness Check on the Anti-Tax Avoidance Directive – Council Directive (EU) 2016/11641 of 12 July 2016, as amended by Council Directive (EU) 2017/9522 of 29 May 2017. Introductory Comments BusinessEurope welcomes the European Commission’s initiative to evaluate the Anti-Tax Avoidance Directive (ATAD).

…welcomes the European Commission’s initiative to evaluate the Anti-Tax Avoidance Directive (ATAD). We support a cohesive long-term taxation strategy that re-evaluates and streamlines the EU’s existing anti-tax avoidance rules which have been introduced over recent years. Rather than adding new anti-avoidance measures and complexities (examples include a third iteration of ATAD and a directive on Securing the Activity Framework of Enablers), the Commission’s goal should be to enhance the EU’s attractiveness. To achieve this, streamlined tax rules are essential for reducing the administrative burden on companies operating within the EU, fostering a more business-friendly environment that encourages investment and growth.

…operating within the EU, fostering a more business-friendly environment that encourages investment and growth. The ATAD, designed to combat aggressive and undesirable tax practices, has significantly impacted the tax landscape within the European Union (EU) as a result of the minimum standards and options granted in the Directive. As such, the practical positive impact of the ATAD rules requires further assessment. In addition, with the OECD/G20 Inclusive Framework’s Pillar II rules now targeting similar policy objectives, it is timely and appropriate to critically assess the necessity and effectiveness of the existing ATAD provisions. Specific Comments This paper outlines the key concerns of EU-based businesses and proposes areas for simplification or amendment.

…paper outlines the key concerns of EU-based businesses and proposes areas for simplification or amendment. The goal is to ensure that tax regulations remain aligned with economic realities and do not impose unnecessary burdens on businesses. Any changes to the existing rules should be based on a quantitative assessment of the behavioural changes that ATAD has achieved in each Member State since its implementation. A. Controlled Foreign Company (CFC) rules Overlap between CFC rules and Pillar II The overlap between CFC rules and the Pillar II framework is a primary concern. Pillar II acts as a form of ‘super-CFC’, targeting profit shifting and ensuring a minimum level of taxation globally. Ref. Ares(2024)6429038 - 11/09/2024 2 Businesses subject to both regimes face dual compliance burdens, having to navigate both CFC rules and the new global minimum tax framework.

…both regimes face dual compliance burdens, having to navigate both CFC rules and the new global minimum tax framework. This raises the question of whether CFC rules remain necessary for businesses already in scope of Pillar II. Although CFC rules and Pillar II may differ in their approach, a reassessment of the continued relevance of CFC rules is warranted. Complexity and Uncertainty The minimum level of harmonization of the ATAD rules across Member States presents specific challenges for businesses, such as: - CFC rules can vary significantly between EU Member States and are not well-designed to interact with each other or with other ATAD anti-abuse rules, such as interest limitation or anti-hybrid mismatch rules. This creates complexity and can lead to double taxation issues.

…as interest limitation or anti-hybrid mismatch rules. This creates complexity and can lead to double taxation issues. - The complexity of the ATAD rules also complicates risk assessment in cross-border acquisitions, potentially disadvantaging businesses subject to more rigid ATAD rules when compared to their international competitors. - The definition of embedded royalties under CFC rules is unclear in certain Member States (for example, Denmark), making compliance extremely difficult. The requirement to manually produce baseline data for calculations, often based on assumptions and hard- to-access information, adds no value to businesses but significantly increases their compliance burden. Recommendation On this basis, we recommend a thorough assessment of the effectiveness and efficiency of CFC rules across EU Member States.

…basis, we recommend a thorough assessment of the effectiveness and efficiency of CFC rules across EU Member States. This evaluation should not focus solely on revenue generation, as CFC rules are primarily behavioural in nature. It should also consider how well they achieve their policy goals. Based on this assessment, policymakers should consider deactivating CFC rules for groups already subject to Pillar II rules (such as the Qualified Domestic Minimum Top- Up Tax or Income Inclusion Rule), with a General Anti-Avoidance Rule (GAAR) serving as a safety net. B. Interest Deduction Limitation Rules The rules limiting the deductibility of interest expenses have increasingly become a hindrance to business growth and economic recovery, particularly in the current economic climate marked by inflation and rising interest rates.

…and economic recovery, particularly in the current economic climate marked by inflation and rising interest rates. The economic conditions under which these rules were introduced have drastically changed with refinancing interest rates increasing sharply. This sharp rise in the cost of debt, coupled with the fixed cap on deductible interest expenses has significantly constrained businesses’ ability to invest, particularly in substantial and long-term projects such as the green and digital transitions. 3 A key point often overlooked in the discussion of interest deduction limitations is the taxation of interest income. In situations involving equity capital investment, particularly within groups, dividends are typically not deductible, but often remain untaxed for the recipient.

…particularly within groups, dividends are typically not deductible, but often remain untaxed for the recipient. This contrasts with interest, which is taxed, even when its deduction is disallowed, creating a non-neutral and unnecessarily costly situation for businesses. Recommendation To address these challenges, we propose increasing the ceiling for deductible expenses periodically to help align the rules with the reality of inflation and the rising cost of debt, supporting business investment and economic growth without undermining the original intent of the rules. In addition, in cases where non-deductible interest arises from excess leverage, a tax exemption for the corresponding interest income should be assessed.

…interest arises from excess leverage, a tax exemption for the corresponding interest income should be assessed. When the denial of interest deduction is justified, it is often because the excess leverage is seen as resembling equity capital (especially in the case of long-term debt) or because interest deduction is perceived as an ‘extra benefit’ facilitating cross-border profit shifting. In both cases, if interest deductions are disallowed, there is a strong case for exempting the taxation of the corresponding interest income to maintain tax neutrality and avoid penalizing companies. C. General Anti-Avoidance Rule (GAAR) A key component of the ATAD is the introduction of a GAAR, which targets non-genuine arrangements both domestically and cross-border.

…of the ATAD is the introduction of a GAAR, which targets non-genuine arrangements both domestically and cross-border. While the ATAD GAAR is similar in design to the GAAR in the Parent-Subsidiary Directive (PSD), its broader scope raises questions around the necessity of retaining the PSD GAAR within the European tax framework. Additionally, the ATAD GAAR lacks clear interpretation guidelines, leading to legal uncertainty for taxpayers and increasing the risk of inconsistent application among Member States. Recommendation To simplify tax legislation, we recommend the removal of the PSD GAAR and providing clearer guidance on the application of the ATAD GAAR to ensure consistent interpretation across the EU.

…and providing clearer guidance on the application of the ATAD GAAR to ensure consistent interpretation across the EU. Concluding thoughts As the global tax landscape continues to evolve, it is crucial that EU tax policy keeps pace by eliminating redundancies, reducing unnecessary burdens, and ensuring that tax rules support, rather than hinder, economic growth. The areas highlighted in this paper represent key concerns for EU-based businesses that, if addressed, could lead to a more streamlined and effective tax system. BusinessEurope remains available to engage with the European Commission to ensure this evaluation, and others, result in a simpler and more competitive EU tax framework.

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…1 10 February 2026 BusinessEurope contribution to the public consultation on the Recast of the Directive on Administrative Cooperation in the field of direct taxation (Directive 2011/16/EU) 1. Executive Summary BusinessEurope welcomes the Commission’s initiative to recast the Directive on Administrative Cooperation and supports the objective of achieving measurable reductions in administrative burden while strengthening eƯective, proportionate and risk- based tax administration. From a business perspective, the DAC framework has become increasingly fragmented following successive amendments (DAC1–DAC9), resulting in overlapping reporting obligations, legal uncertainty and disproportionate compliance costs, in particular under DAC6. The recast represents a unique opportunity to move beyond technical consolidation and deliver genuine simplification.

The recast represents a unique opportunity to move beyond technical consolidation and deliver genuine simplification. BusinessEurope therefore calls for a focused reform centred on three priorities:  Eliminating obsolete or low-value reporting obligations, notably under DAC6.  Streamlining duplicative obligations, particularly DAC4/DAC9 notification requirements.  Ensuring future measures are objective, harmonised and digitally eƯicient across Member States. In particular, BusinessEurope advocates:  The repeal or substantial narrowing of DAC6, including the removal of generic hallmarks and the Main Benefit Test, and the refocusing of reporting on genuinely aggressive tax arrangements.

…generic hallmarks and the Main Benefit Test, and the refocusing of reporting on genuinely aggressive tax arrangements.  The replacement of entity-level DAC4 and DAC9 notifications with a centralized group-level notification mechanism, whereby the Ultimate Parent Entity (UPE) established in the EU (or an EU-designated entity of non-EU parented groups) Ref. Ares(2026)1491519 - 10/02/2026 2 submits a single notification specifying the entities for which it will file the Country- by-Country Report and the Global Information Return, with that information exchanged between tax administrations.  A change-only notification approach, under which notifications remain valid unless and until the underlying information changes, supported by a mandatory and interoperable EU standard template.

…unless and until the underlying information changes, supported by a mandatory and interoperable EU standard template.  stronger alignment with OECD technical standards and the development of more proportionate, risk-based and digitally enabled reporting requirements across Member States. These measures would deliver tangible and measurable burden reductions for businesses, improve legal certainty and allow tax administrations to focus resources on genuinely high- risk cases.

…for businesses, improve legal certainty and allow tax administrations to focus resources on genuinely high- risk cases. 2. Introductory Remarks BusinessEurope welcomes the opportunity to contribute to the European Commission’s public consultation on the recast of the Directive on Administrative Cooperation (DAC – Directive 2011/16/EU). We fully support the Commission’s objective of simplifying EU tax legislation and reducing administrative burdens by 25% for businesses and 35% for small and medium-sized enterprises, in line with the Commission’s long-term competitiveness agenda. However, simplification will only be meaningful if it results in tangible and measurable reductions in compliance costs and operational complexity. Recasting the DAC should therefore not be limited to technical consolidation or marginal adjustments, but should focus on measures that demonstrably reduce…

…of the proposal to ensure that simplification measures are grounded in practical implementation experience. 3. Core Simplification Priorities This section outlines the areas where simplification would deliver the most immediate and measurable reduction in compliance costs. 3 3.1. Streamlining Notification Requirements under DAC 4 and DAC 9 Both DAC4 and the EU Minimum Tax Directive (DAC9) require essentially the same core information: the identification of the MNE group and the designated entity responsible for filing the Country-by-Country Report or the Top-up Tax Information Return. However, while DAC4 requires annual notifications on a fixed date, DAC9 leaves the form and frequency of notifications to Member States’ discretion. This creates a risk of divergent national practices and unnecessary duplication for groups operating across several Member States.

…a risk of divergent national practices and unnecessary duplication for groups operating across several Member States. In practice, this duplication and fragmentation of notification obligations generate concrete and recurring compliance costs for businesses. While precise figures vary across groups, companies consistently report that these notifications require several additional full-time equivalent (FTE) days per year per jurisdiction, mainly due to internal coordination, validation processes and local filing requirements. These burdens are particularly significant for groups with fragmented legal structures and multiple constituent entities within the same Member State, where local notification obligations are multiplied without any corresponding increase in transparency.

Member State, where local notification obligations are multiplied without any corresponding increase in transparency. At the same time, duplicative and partially misaligned notification obligations increase the risk of sanctions triggered by minor or purely formal discrepancies (for example, diƯerences in timing, entity identification or reporting entity designation), rather than substantive non- compliance. Simplification would therefore improve proportionality in enforcement and enhance legal certainty for compliant taxpayers. To achieve genuine simplification, BusinessEurope considers that notification obligations should be centralized at group level, rather than replicated at entity level.

…considers that notification obligations should be centralized at group level, rather than replicated at entity level. Where the Ultimate Parent Entity (UPE) is established in the EU, or where a group headed by a non-EU UPE has subsidiaries in the EU, a single notification should be submitted by the EU UPE or by a designated EU entity to its tax administration specifying the entities for which it will file the Country-by-Country Report and the Global Information Return. That information could then be exchanged between tax administrations in a common format, in the same manner as the CbCR and Pillar Two exchanges themselves. Under such an approach, individual EU subsidiaries would be exempt from local notification obligations altogether. This would eliminate duplicative filings while preserving full transparency for tax administrations.

…altogether. This would eliminate duplicative filings while preserving full transparency for tax administrations. 4 For large groups with multiple EU subsidiaries, this centralized notification mechanism would reduce the notification-related administrative burden by almost entirely removing entity-level obligations, while ensuring consistency, legal certainty and proportionality in enforcement. To support this approach, a standardised EU template should be introduced and made mandatory and interoperable with national systems, in order to prevent Member State- specific formats from recreating fragmentation at technical level. In addition, notifications should be required only in the event of a change in the underlying information, with existing notifications remaining valid unless and until such a change occurs.

…change in the underlying information, with existing notifications remaining valid unless and until such a change occurs. This centralized, change-based approach would be fully consistent with the Commission’s objectives of simplification, digitalization and more eƯicient administrative cooperation, while delivering measurable and immediate reductions in compliance burdens for in-scope groups. 3.2. DAC 6: disproportionate burden with declining policy value DAC6 represents the single largest source of administrative burden within the DAC framework while delivering declining policy value. In light of recent international and EU tax developments, in particular the continued application of the full suite of the OECD/G20 Pillar Two rules in the EU, BusinessEurope considers that DAC6 has largely lost its policy relevance.

…of the OECD/G20 Pillar Two rules in the EU, BusinessEurope considers that DAC6 has largely lost its policy relevance. Potentially low-taxed structures are now comprehensively addressed through Pillar Two and related domestic minimum taxation measures. In addition, recent evaluations, including by the European Court of Auditors, national authorities and the Commission, have highlighted inconsistent application across Member States, limited usefulness of the information collected, and a disproportionate administrative burden for businesses. On this basis, BusinessEurope believes that DAC6 should be fully repealed or, at a minimum, subject to drastic scope reduction. This should be achieved through the deletion of generic hallmarks and the replacement of the Main Benefit Test with objective, self- standing criteria for the remaining hallmarks.

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