A proposed recast of the Directive on Administrative Cooperation (the “DAC”, the “DAC Recast”) has been presented as a central part of the EU’s tax simplification agenda.
Reports of early negotiations suggest that a number of debates have opened up between Member States on how best to achieve the desired simplification. Published on 24 June 2026, the proposal would consolidate the existing nine DACs into a single text, while making targeted changes to reporting obligations under the DAC framework.
The Irish Presidency of the Council of the EU is seeking agreement before the end of the year and has scheduled nine meetings to discuss the proposal. Two have already taken place, with early reports pointing to a number of areas of disagreement. Below, we have outlined the existing DAC framework, the key proposed changes to the framework and what has been reported so far on the progress of the negotiations.
Existing DAC framework
The DACs are a series of nine directives setting out a comprehensive programme for the exchange of tax-related information between EU Member States. The type of information that must be exchanged under the DACs varies from financial account information, to information in respect of transactions effected on online platforms, to information in relation to tax rulings issued by tax authorities of EU Member States, to country-by-country reporting information.
The purpose of the DAC Recast is to consolidate the existing nine DACs into a single text that is more user-friendly, while also making some effort to remove certain reporting requirements and reduce administrative burdens for stakeholders.
DAC6 – mandatory disclosure
The changes to DAC6 have so far proved the most controversial. DAC6 requires advisers and other intermediaries that facilitate cross-border transactions to report details of those transactions to the relevant EU tax authorities when the transactions feature identified “hallmarks”. Although the identified hallmarks are intended to detect transactions involving aggressive tax planning, the broad drafting of the original iteration has resulted in ordinary commercial transactions, particularly group reorganisations, being reportable.
Hallmarks and reporting timeline
While the proposed DAC Recast will remove some of the hallmarks, business will be disappointed that a hallmark which requires most group reorganisations to be reported will not be removed despite repeated requests. On the other hand, the timeline for reporting has been extended from a 30-day period to a 90-day period.
Pillar Two carve-out
A welcome change is the proposal to remove transactions from DAC6 reporting where the parties are members of groups within the scope of Pillar Two. This exclusion will also extend to transactions where the parties are members of groups benefiting from the side-by-side safe harbour, provided that those parties are located in jurisdictions that have implemented a qualified domestic top-up tax and have not received a refund or indirect financial benefit in relation to that tax.
The carve-out has dissatisfied a number of stakeholders. The difference in treatment between groups within the scope of the side-by-side safe harbour and those within the scope of Pillar Two is a point of discontent for US business. In particular, the additional requirement that groups within the scope of the side-by-side safe harbour must also confirm that they have not received a refund or indirect financial benefit in relation to a qualified domestic top-up tax is considered to undermine the equivalence recognised under the side-by-side safe harbour. US business has written to EU Member States to ask them to reconsider the partial carve-out. It has been reported that some EU Member States support this position while others are reported to have reservations about the Pillar Two carve-out itself.
Economic substance / Unshell
The negotiation of the so-called “Unshell” directive, initially proposed in 2021, was effectively abandoned in 2025 with a view to incorporating some of the principles of the draft directive into the DAC Recast. The purpose of the proposal was to enable EU Member States to identify “shell” companies and to permit EU Member States to deny treaty benefits, such as lower withholding tax rates, to those companies. EU Member States failed to reach political agreement on the proposal over a prolonged negotiation period.
The draft DAC Recast does not include a specific hallmark based on the former Unshell proposal, which had been mooted. Instead, the proposal requires the EU Council to adopt measures based on economic substance criteria. Those measures must be adopted within five years of the entry into force of the DAC Recast. It has already been reported that Member States have expressed strong reservations about the proposal, revealing that the political tensions that existed under the original Unshell proposal have not dissipated.
Some procedural changes rather than substantive simplification
An example of the type of administrative burden reduction provided for in the DAC Recast is the proposal that country-by-country reporting, required under DAC4, and Pillar Two filings, required under DAC9, will be combined into a single report. Some may question how meaningful that administrative burden reduction is if the same volume of information must be reported overall, albeit in a single report rather than two. Some Member States have reportedly asked whether groups within the scope of Pillar Two could be exempted entirely from filing a country-by-country report.
Changes to reporting for digital platforms
Another area of substantial reform under the DAC Recast is the rules that apply to digital platforms, which require platform operators to report details of transactions concluded on their platforms. Under the proposal:
- the requirement for digital platforms to report low-value occasional sellers will be removed. The monetary threshold above which reporting is required will be raised to €3,000;
- new provisions will be introduced to address non-compliant digital platforms based in third countries;
- the definition of “platform operator” is extended to capture ‘platform-on-platform’ arrangements; and
- transactions by related party sellers are removed from the reporting requirements.
The changes reflect those proposed at OECD level to the Model Rules for Reporting by Platform Operators and, provided changes are made under both regimes, should result in greater convergence.
Next Steps
The DAC Recast is an important attempt to make the EU’s tax transparency framework more coherent and easier to navigate. However, the early negotiations suggest that consolidation of the existing DACs into a single text may be the most straightforward part of the exercise. The more difficult questions concern the extent to which existing reporting obligations should be narrowed, how far economic substance rules should be revived following the stalled Unshell negotiations, and whether Member States can agree meaningful simplification.
The EU is seeking agreement before the end of the year, with the next Council discussion scheduled for 4 September. That timetable is ambitious, particularly given the requirement for unanimous approval by all Member States. Whether the DAC Recast ultimately delivers simplification in substance, rather than simplification in form, will depend on how those political and technical issues are resolved over the coming months.
For further information on this topic, please contact Olivia Long, any member of the Matheson Tax Department, or your usual Matheson contact.
