The Omnibus introduces several notable measures to modernise the EU's direct tax framework:

• Removal of minimum holding requirements for cross-border intra-EU payments - The Omnibus Directive proposes to remove the minimum holding requirement under both the Interest and Royalty Directive (IRD) and the Parent-Subsidiary Directive (PSD). Consequently, withholding taxes on dividends, interest and royalties between EU companies would be removed regardless of the level of participation, extending the exemption beyond group payments to those between unrelated parties. The scope of the PSD would also be extended to pension funds. Notably, EU Member States would no longer be able to require prior authorisation to verify exemption conditions; instead, taxpayers would self-assess their eligibility, subject to ex post controls and anti-abuse rules.
• New EU-wide R&D allowance - The Omnibus Directive proposes the introduction of a new EU-wide R&D allowance as a minimum standard to ensure the deductibility of qualifying R&D expenditure. This allowance would equal the amount of qualifying expenditure and could be deducted from the taxable base.
• Mandatory CFC model under ATAD. The Omnibus Directive would remove the current choice between Model A (targeting specific categories of passive income) and Model B (based on whether the CFC engages in genuine economic activity). Model B would be abolished, making Model A the sole mandatory approach across all Member States. This eliminates an option rooted in the CJEU’s landmark Cadbury Schweppes  judgment (C-196/04), which held that CFC rules cannot apply to subsidiaries with genuine economic substance.
• Modernised ATAD interest limitation rules. The Omnibus Directive would require EU Member States to allow the deduction of exceeding borrowing costs up to 30 per cent of a company’s EBITDA, removing the current freedom to set a lower threshold. Third-party loans would be excluded from the scope of the interest limitation rule where funds are used to finance the borrower’s own activities. A mandatory safe harbour of EUR 3 million would be introduced and automatically indexed for inflation.
• Elimination of the imported hybrid mismatch rule. The Omnibus Directive proposes to eliminate the imported hybrid mismatch rule under ATAD 2. This rule currently applies where a deductible payment in an EU jurisdiction indirectly funds expenses giving rise to a hybrid mismatch outcome between two other jurisdictions, where the mismatch has not been neutralised by local rules. The removal has been broadly welcomed, as this provision has proven particularly challenging for both taxpayers and tax administrations.
• Strengthened tax dispute resolution. Procedural shortcomings that have previously delayed or prevented the settlement of cross-border disputes will be addressed.
• Expanded Tax Merger Directive. Tax neutrality will be extended to new forms of cross-border reorganisation not currently covered, specifically the “simplified merger” and the “division by separation”, aligning the Directive’s scope with Directive (EU) 2017/1132 (as amended by the Mobility Directive).

The DAC recast focusses on reducing reporting burdens and improving administrative cooperation:

• Removal of DAC6 reporting for Pillar Two groups. Approximately 3,000 multinational enterprise groups already subject to the 15 per cent global minimum tax will no longer be required to report cross-border tax arrangements, generating estimated annual savings of EUR 300 million.
• Elimination of low-value reporting for all companies. Reporting requirements relating to certain cross-border arrangements that have demonstrated limited added value to tax administrations will be removed, reducing overall reporting volumes by 35 per cent and saving EUR 40 million annually.
• Raised threshold for online sales reporting. The reporting threshold for online sales of goods will be increased, removing reporting obligations for over 10 million sellers, predominantly private sellers of second-hand goods, with estimated savings of EUR 678 million.
• Single notification obligation. A consolidated notification will replace separate filings for country-by-country reporting and top-up tax information returns, saving businesses over EUR 260 million annually.
• New taxpayer identification verification tool. A verification mechanism will be introduced to improve taxpayer identification across Member States.
• Mandatory exchange of all income and capital categories. The recast makes it obligatory to exchange information on all categories of income and capital, extending the framework's coverage.

The package forms part of the European Commission's broader simplification agenda, which targets a reduction in administrative burdens of at least 25 per cent (35 per cent for SMEs) by 2029. However, since the Omnibus Directive requires unanimous adoption by all EU Member States, its prospects in its current form remain uncertain. The Directive restricts flexibility for Member States wishing to maintain higher taxation by imposing mandatory rules, while simultaneously eliminating the flexibility that enabled more business-friendly approaches in other Member States. Given these tensions, significant negotiations or amendments are likely before any consensus can be reached.

European Commission’s news article can be found here.