Jurisdiction overviewTax in European Union
Last reviewed: · by TaxProsRated editorial
Key points
The European Union does not impose direct tax on individuals or companies — that competence rests with each of the 27 member states. EU-level law harmonises VAT (Directive 2006/112/EC, minimum 15% standard rate), mandates Pillar Two transposition (Directive 2022/2523 — 15% global minimum tax for MNEs with EUR 750M+ revenue), and creates anti-avoidance frameworks via ATAD I and II. The DAC sequence (DAC2–DAC8) governs administrative cooperation and automatic exchange of information. The Carbon Border Adjustment Mechanism (CBAM) phases to full operation from 2026. DG TAXUD (Directorate-General for Taxation and Customs Union) coordinates EU tax policy.
Not a sovereign tax system — what this page covers
The EU is a sui generis supranational entity. ISO 3166-1 reserves the code EU for the Union, but the EU does not appear on tax returns. Each resident taxpayer files with their member state's authority.
This page covers what the EU itself does in the tax field: Directives that bind member states, institutions that coordinate policy, and frameworks that apply across all 27 countries. For per-country rates, filing deadlines, and practitioner searches, visit the relevant member-state page.
DG TAXUD (Directorate-General for Taxation and Customs Union) under the European Commission drafts EU tax legislation. ECOFIN (the Economic and Financial Affairs Council) votes on it — direct-tax Directives require unanimity under TFEU Article 115. The European Court of Justice (ECJ) interprets EU tax law and can strike down national measures that violate fundamental freedoms.
The 27 member states — who is in
The EU has 27 member states following the United Kingdom's departure on 31 January 2020.
VAT framework — harmonised across the EU
Council Directive 2006/112/EC is the foundation of EU VAT. It binds all 27 member states to a common VAT structure while allowing flexibility in rates within Directive limits.
| Rule | Directive requirement | 2026 range across members |
|---|---|---|
| Standard rate minimum | 15% floor — Directive Art. 97 | 17% (LU) to 27% (HU) |
| Reduced rates | Min 5% on listed goods; zero-rate permitted on select items from 2022 | 5% to 15% reduced bands |
| Zero-rate (exports) | Mandatory for intra-EU supplies and exports outside EU | Universal |
| Reverse charge | B2B cross-border services — buyer accounts for VAT | Universal (mandatory) |
The most common standard rates among the larger economies: Germany 19%, France 20%, Italy 22%, Spain 21%, Netherlands 21%, Belgium 21%, Poland 23%, Sweden 25%, Denmark 25%. Ireland is a notable exception at 23%, low by western-EU norms.
VAT One-Stop-Shop — cross-border B2C simplified
The EU VAT OSS (One-Stop-Shop) regime, expanded in July 2021, allows businesses to account for all EU B2C VAT through a single registration in one member state. Prior to OSS, a seller supplying customers in multiple EU countries had to register separately in each.
Three schemes: Union OSS, Non-Union OSS, Import OSS (IOSS)
Union OSS: EU-established businesses report all EU-wide B2C VAT in one quarterly return. Non-Union OSS: non-EU businesses supplying digital services register once. IOSS: covers low-value imports under EUR 150 — suppliers collect VAT at checkout instead of customs clearance. The EUR 10,000 de-minimis threshold triggers OSS obligation for cross-border B2C sales to EU consumers.
ATAD I and II — anti-avoidance minimum standards
The Anti-Tax Avoidance Directives establish binding minimum standards that every member state must match or exceed.
Net interest deductibility capped at 30% of EBITDA. Carry-forward of unused capacity and disallowed interest permitted subject to conditions. Applies to all corporate taxpayers above the EUR 3M threshold.
Member states must disregard arrangements that are non-genuine and whose principal purpose is obtaining a tax advantage. Minimum standard — members may implement stricter domestic GAARs.
Controlled Foreign Company rules require taxpayers to include undistributed low-taxed passive income of controlled subsidiaries in their own tax base. EU CFC rules apply to subsidiaries with an effective tax rate below 50% of the parent-state rate.
Tax on unrealised gains arises when assets or business activities move out of a member state's taxing jurisdiction. Taxpayers may elect to pay in five annual instalments when moving within the EU/EEA.
Prevent double non-taxation arising from hybrid financial instruments, hybrid entities, or reverse hybrids. ATAD II extended the rules beyond the EU to cover mismatches with third countries.
Pillar Two Directive — 15% global minimum tax
Council Directive (EU) 2022/2523 transposes the OECD GloBE (Global Anti-Base Erosion) rules into EU law. All 27 member states were required to implement it by 31 December 2023, with effect from fiscal years beginning on or after 31 December 2023.
Consolidated group revenue threshold. Groups below this are out of scope even if they operate in multiple EU member states.
Effective tax rate (ETR) per jurisdiction. If a constituent entity's ETR falls below 15%, a top-up tax (Qualified Domestic Minimum Top-up Tax or IIR) closes the gap.
The two primary charging rules are the Income Inclusion Rule (IIR) — the parent entity accounts for a top-up on low-taxed subsidiaries — and the Undertaxed Profits Rule (UTPR) — a backstop applied when the IIR is not effective. Member states may also elect a Qualified Domestic Minimum Top-up Tax (QDMTT) so top-up stays domestic rather than going to the parent state.
DAC sequence — administrative cooperation and information exchange
The Directive on Administrative Cooperation (DAC) series gives EU member states tools to share tax information automatically. Each amendment covers a new data domain.
| Directive | Coverage | Effective |
|---|---|---|
| DAC2 | CRS — automatic exchange of financial account information | 2017 |
| DAC4 | Country-by-Country Reporting (CbCR) — BEPS Action 13 | 2017 |
| DAC6 | Mandatory disclosure of cross-border arrangements (MDR) — hallmarked structures | 2020 |
| DAC7 | Digital platform operators report seller data — active from reporting year 2023 | 2023 |
| DAC8 | Cryptoasset reporting (CARF-aligned) — reporting year 2026 first exchange | 2026 |
DAC6 is particularly significant for practitioners. Intermediaries — lawyers, accountants, tax consultants — who design or advise on cross-border arrangements bearing any of the EU hallmarks are required to disclose those arrangements to their national authority within 30 days of the arrangement becoming available, implemented, or ready to implement. Failure triggers penalties that vary by member state but can reach EUR 100,000 or more.
CBAM — Carbon Border Adjustment Mechanism
Regulation (EU) 2023/956 introduces the Carbon Border Adjustment Mechanism. CBAM puts a carbon price on imports of certain goods from countries with lower or no carbon pricing, preventing carbon leakage.
Sectors: cement · iron and steel · aluminium · fertilizers · electricity · hydrogen
During the transitional phase (Oct 2023 – Dec 2025), EU importers must report embedded carbon in CBAM goods but do not yet pay certificates. From 1 January 2026, importers must purchase CBAM certificates equal to the carbon price they would have paid under the EU ETS. This is a direct cost for non-EU suppliers selling into the EU.
Public Country-by-Country Reporting — Directive 2021/2101
From financial years starting on or after 22 June 2024, EU-based multinationals and non-EU groups with EU subsidiaries or branches — where consolidated revenue exceeds EUR 750 million — must publicly disclose tax data on a country-by-country basis.
Revenue, profit/loss before income tax, income tax accrued, income tax paid, employees, retained earnings, and tangible assets — per jurisdiction. Granular EU-member-state breakdown is mandatory.
The report is filed with the relevant member-state authority and published on the company's website (or a registrar) within 12 months of the balance-sheet date. It must remain publicly available for at least 5 years.
Private CbCR (DAC4 / BEPS Action 13) shares data only between tax authorities. Public CBCR (Directive 2021/2101) puts the data in the public domain — available to investors, press, NGOs, and competitors.
Treaty networks — the EU does not sign DTAs
Double Tax Agreements remain a member-state competence. The EU itself does not enter into DTAs. Germany (~95 treaties), France (~120), Netherlands (~100), and Ireland (~74) each maintain independent treaty networks.
The Parent-Subsidiary Directive (2011/96/EU) eliminates withholding tax on intra-EU dividend flows between qualifying group companies. The Interest and Royalties Directive (2003/49/EC) eliminates withholding on qualifying intra-EU interest and royalty payments. Both are EU-law equivalents of treaty benefits — but they only apply within the EU.
EU vs Eurozone — two different memberships
The distinction matters for currency, monetary policy, and certain compliance obligations.
Brexit — UK is now a third country
The United Kingdom formally left the European Union on 31 January 2020, ending the transition period on 31 December 2020. From 1 January 2021, EU tax Directives no longer apply to the UK.
- EU Parent-Subsidiary Directive no longer eliminates withholding on UK-EU dividend flows — bilateral DTA rates now govern.
- UK companies are no longer entitled to the Interest and Royalties Directive elimination of withholding on EU interest and royalty payments.
- UK traders supplying EU B2C customers must register for VAT OSS separately (as a Non-Union OSS registrant), or register in each EU member state.
- UK intermediaries advising on arrangements with EU hallmarks may still trigger DAC6 obligations in EU member states where the EU leg of the arrangement falls.
- The UK-EU Trade and Cooperation Agreement (TCA) covers goods, but not financial services equivalence or tax treaty relief — those remain bilateral.
EU enlargement — accession candidates must align tax acquis
Nine countries hold official EU candidate or potential-candidate status as of 2026. Each must align its national legislation with the EU's tax acquis (the body of EU tax law) before accession can complete.
Granted candidate status June 2022. Accession negotiations opened 2024. Significant legislative alignment in VAT and anti-avoidance required.
Candidate status June 2022. Accession negotiations opened 2024. VAT framework partially aligned with EU standards.
Candidate or potential candidate status. Stabilisation and Association Agreements require progressive alignment. Timelines vary from 2030 to 2040+ depending on reform pace.
Candidate status December 2023. EU Association Agreement in force since 2016, providing a partial alignment framework.
Candidate since 1999. Customs union with the EU since 1996. Accession negotiations stalled. The customs union covers goods but not services or agricultural products.
Common EU-level pitfalls for multinationals and cross-border operators
The EU framework creates a distinctive set of compliance traps that differ from purely national issues:
Every member state retains its own income tax, CIT rate, filing deadline, and residency rules. A business present in five EU countries files five national returns. The EU coordinates floors and anti-avoidance; it does not unify.
The EUR 10,000 cross-border B2C threshold is an aggregate — not per country. One sale to France and one to Germany can together trigger OSS registration obligation. Many SMEs hit it before realising.
The 30-day clock on DAC6 mandatory disclosure starts from the date an arrangement is made available, implemented, or ready to implement — not when the first tax benefit is actually realised. Intermediaries cannot wait for completion.
While the Directive set a 31 December 2023 transposition deadline, not all member states implemented on schedule. Groups must track the effective date per jurisdiction — the parent's IIR obligation may run ahead of a subsidiary's QDMTT protection.
CBAM's transitional reporting phase (2023-2025) carried no cash cost. From 2026, certificates are mandatory. Companies importing steel, cement, aluminium, fertilizers, electricity, or hydrogen into the EU without embedded-carbon data will face delays and financial exposure.
Pre-2021 intra-group arrangements relying on the Parent-Subsidiary or Interest and Royalties Directives for UK-EU flows are no longer exempt. Groups that haven't restructured since Brexit may be paying withholding tax they assumed was eliminated.
When to consult an EU-specialist tax professional
This page covers the EU-level frameworks. For individual situation guidance, the first question is: which member state's rules apply?
Situations where EU-level framing is specifically relevant:
- Selling goods or services to customers in more than one EU member state — VAT OSS threshold and registration choices
- Structuring intra-group dividends, interest, or royalties across EU members — Parent-Subsidiary and Interest and Royalties Directive eligibility
- Advising on or implementing cross-border arrangements bearing any EU DAC6 hallmarks
- Operating as a large group (EUR 750M+ revenue) — Pillar Two top-up tax across member-state jurisdictions
- Importing goods in CBAM scope — embedded-carbon reporting and certificate purchase obligations
- Post-Brexit restructuring where pre-2021 Directive-based exemptions no longer apply to UK entities
- Candidate country market entry — understanding which EU frameworks will apply post-accession and how to align early
This page is general information about EU-level tax frameworks. It is not guidance for any specific entity's situation. EU Directives are implemented differently in each member state, and implementation details change. Always verify with a practitioner qualified in the relevant member state before acting.
Frequently asked
Does the EU impose direct tax on individuals or companies?
No. Direct taxation — personal income tax, corporate income tax — remains a member-state competence. Each of the 27 EU member states sets its own rates, bands, and residency rules. The EU coordinates via Directives that set minimum standards in VAT, anti-avoidance, and information exchange, but does not levy tax directly on taxpayers.
What does the EU VAT Directive require?
Council Directive 2006/112/EC requires member states to apply a standard VAT rate of at least 15%. Member states set their own rates within the Directive's framework — current range is 17% (Luxembourg) to 27% (Hungary). Reduced rates apply to listed goods and services; exports are zero-rated. The EU OSS regime simplifies cross-border B2C VAT reporting.
What is the EU Pillar Two Directive?
Council Directive (EU) 2022/2523 transposes the OECD GloBE rules into EU law. It requires all 27 member states to impose a 15% minimum effective tax rate on large multinationals with consolidated revenue of EUR 750 million or more. Member states had to implement by 31 December 2023. Top-up taxes close the gap when a jurisdiction's effective rate falls below 15%.
What is DAC6 and who does it affect?
DAC6 (Council Directive 2018/822/EU) requires mandatory disclosure of cross-border tax arrangements that bear certain hallmarks indicating potential aggressive tax use. Intermediaries — accountants, lawyers, tax consultants — who design or implement such arrangements must report to their national authority within 30 days. The obligation may also fall on the taxpayer if no EU intermediary is involved.
What is CBAM and when does it take full effect?
The Carbon Border Adjustment Mechanism (Regulation EU 2023/956) applies a carbon price to imports of cement, iron and steel, aluminium, fertilizers, electricity, and hydrogen. The transitional phase (October 2023 to December 2025) requires reporting of embedded carbon only. From 1 January 2026, importers must purchase CBAM certificates matching the EU carbon price shortfall.
Which countries are EU member states in 2026?
The 27 EU member states are: AT BE BG HR CY CZ DK EE FI FR DE GR HU IE IT LV LT LU MT NL PL PT RO SK SI ES SE. The United Kingdom left on 31 January 2020 and is no longer subject to EU Directives. Croatia joined the Eurozone in January 2023, bringing the EUR currency area to 20 of the 27 members.
Does the EU sign double tax agreements?
No. Double Tax Agreements are a member-state competence. The EU itself does not sign DTAs. Germany, France, the Netherlands, and Ireland each maintain large independent treaty networks. The EU does negotiate free-trade agreements covering goods and trade, but those are not double tax conventions.
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The figures, dates, and rules on this page are sourced from the documents listed below. Where two sources disagree, both are listed.
- European Commission · accessed
- European Union · accessed
- European Union · accessed
- European Union · accessed
- European Union · accessed
Important disclaimer
Informational only — not tax advice. This page summarises publicly available information about tax in European Union as of June 2026. Tax laws change, individual circumstances vary, and the application of any rule depends on your specific facts.
TaxProsRated does not provide tax, legal, accounting, or financial advice. Before acting on anything you read here, consult a qualified tax professional licensed in your jurisdiction (in the US: CPA, Enrolled Agent, or attorney; in the UK: CIOT- or ATT-qualified adviser; in Australia: TPB-registered tax agent; elsewhere: a locally-licensed equivalent). TaxProsRated, its operators, and its contributors disclaim all liability for action taken in reliance on this page.