European Commission Launches DAC Recast: Consolidating a Decade of Tax Transparency Rules into One Single Legal Framework

Summary

Consolidation of DAC1–DAC9 into a single legal instrument: The European Commission published a Call for Evidence in December 2025, initiating the process to recast the Directive on Administrative Cooperation (DAC) — the EU’s core legislation governing administrative cooperation and automatic exchange of information (AEOI) in direct taxation — by merging the original directive and its eight successive amendments (DAC1 through DAC9) into one coherent, user-friendly legal text.
Simplification of reporting obligations and reduction of administrative burden: The initiative directly responds to findings from the DAC evaluation, European Court of Auditors reports (2021 and 2024), and stakeholder consultations, which identified inconsistent application of DAC6 hallmarks, duplicative DAC4/DAC9 notification requirements, inefficient DAC7 thresholds, and incomplete DAC1 data exchanges — all contributing to unnecessary compliance costs, particularly for SMEs.
From Call for Evidence to adopted proposal: The public consultation closed on 10 February 2026 with 60 responses received, and on 24 June 2026, the Commission formally adopted the DAC Recast as part of its landmark Tax Simplification Package, estimated to save EU businesses approximately €7.9 billion annually in compliance costs. [ibfd.org], [taxation-c….europa.eu]

Article

A Decade of Patchwork Legislation

The Directive on Administrative Cooperation (DAC), originally adopted as Council Directive 2011/16/EU, is the cornerstone of EU tax transparency. It enables Member States’ tax authorities to exchange information and cooperate to combat tax fraud, evasion, and avoidance. However, since its inception, the DAC has been amended eight times in rapid succession — each amendment (DAC1 through DAC9) expanding the scope of automatic exchange of information (AEOI) to cover new categories:

Amendment	Scope
DAC1	Five categories of income/capital (employment, pensions, directors’ fees, life insurance, immovable property)
DAC2	Financial account information
DAC3	Cross-border tax rulings and advance pricing agreements
DAC4	Country-by-Country Reports (CbCR) for MNEs
DAC5	Access to anti-money laundering data
DAC6	Mandatory disclosure of cross-border tax arrangements
DAC7	Income from digital platforms
DAC8	Crypto-asset service providers and operators
DAC9	Information to operationalise the Pillar Two Directive

This legislative layering has created what stakeholders and the Commission itself acknowledge as a complex, fragmented, and at times inconsistent legal framework, with no consolidated legal text available. [ert.eu]

The Call for Evidence: Identifying the Problems

The Commission’s Call for Evidence, published on 16 December 2025 (Ref. Ares(2025)11249527), identified several key problems drawn from three sources: (1) the DAC evaluation, (2) simplification consultations, and (3) European Court of Auditors (ECA) special reports from https://op.europa.eu/webpub/eca/special-reports/tax-03-2021/en/ and https://www.eca.europa.eu/en/publications/SR-2024-27

DAC6 inconsistencies: Member States applied DAC6 hallmarks inconsistently, increasing the compliance burden for businesses without delivering proportionate benefits to tax administrations. Some hallmarks were considered no longer fit for purpose.
DAC4/DAC9 notification duplication: The non-alignment of Country-by-Country Reporting (DAC4) and Pillar Two (DAC9) notification and reporting requirements was flagged by business stakeholders as a source of increased compliance costs.
DAC7 threshold inefficiency: The existing reporting threshold for sale of goods on digital platforms was deemed both inefficient and ineffective relative to the benefits obtained.
DAC1 data incompleteness: The ECA’s 2021 report highlighted that the “readily available” standard and the absence of a mandatory requirement to exchange all DAC1 income categories resulted in incomplete data exchanges, allowing some income to escape taxation.
Taxpayer identification challenges: The evaluation found that identification of taxpayers remained an issue, limiting the efficiency and effectiveness of DAC data use.

Objectives and Policy Options

The initiative pursued a two-fold objective:

Simplification: Consolidate DAC1–DAC9 into a single, coherent legal instrument and eliminate duplicative, inconsistent, or inefficient reporting obligations.
Targeted improvements: Enhance the overall functioning of the DAC, including revising DAC6 hallmarks, improving taxpayer identification (potentially through a common identifier and TIN verification mechanism), adjusting DAC7 thresholds, and introducing mandatory requirements for DAC1 information exchange.

Public Consultation and Stakeholder Response

The public consultation ran in parallel with the Call for Evidence and closed on 10 February 2026, receiving 60 written responses from business associations, tax advisers, financial institutions, MNEs, and civil society organisations. [kpmg.com]

Key themes from stakeholder responses included:

KPMG emphasized the importance of streamlining DAC6 rules and simplifying DAC4/DAC9 notification obligations. [kpmg.com]
The European Round Table for Industry (ERT) called for a risk-based design principle across the DAC framework, focusing reporting on high-risk transactions, and questioned the substantiation of the claimed €6.8 billion DAC benefit figure. [ert.eu]
CFE Tax Advisers Europe advocated for harmonised penalties, codification of anti-abuse tests, and permanent Advisory Commissions under the Dispute Resolution Mechanism. [taxadviser…europe.org]
Accountancy Europe supported the consolidation exercise while emphasizing that the recast should go beyond mere codification to address substantive inconsistencies. [accountancyeurope.eu]

The Regulatory Scrutiny Board Weighs In

The Commission’s Regulatory Scrutiny Board (RSB) issued a positive opinion with reservations on the impact assessment in April 2026 (SEC(2026) 186). The RSB raised concerns that measures related to Tax Identification Numbers (TINs) and DAC1 automatic exchange were not always sufficiently specified, that the impacts on data protection and fundamental rights (including privacy) were not adequately assessed, and that coherence with the EU public Country-by-Country Reporting Directive was insufficiently analysed. [eur-lex.europa.eu]

From Proposal to Adoption: 24 June 2026

On 24 June 2026 — just yesterday — the European Commission formally adopted the DAC Recast as part of its broader Tax Simplification Package, alongside the Taxation Omnibus Directive. The package is estimated to save EU businesses approximately €7.9 billion annually. [taxation-c….europa.eu]

The key simplification measures in the adopted DAC Recast proposal include: [ibfd.org]

✅ Streamlined DAC4/DAC9 notifications: A single notification covering both CbCR and Pillar Two, submitted by one entity on behalf of the entire MNE group.
✅ DAC6 exemption for Pillar Two entities: Entities subject to the Minimum Taxation Directive are exempted from DAC6 reporting (subject to conditions); generic Hallmarks A are deleted; the reporting deadline is extended from 30 to 90 days, starting only when an arrangement is actually put into effect.
✅ DAC7 threshold increase: The monetary threshold for platform reporting is raised from €2,000 to €3,000; the activity threshold for goods sales is removed.
✅ DAC1 improvements: Mandatory exchange of all relevant income/capital categories; introduction of a TIN verification tool to improve data quality and automatic matching rates.
✅ Full codification: All nine DAC directives consolidated into a single, coherent legal instrument.

What’s Next?

The DAC Recast proposal will now be submitted to the European Parliament for consultation and will require unanimous approval by all Member States in the Council — a significant political hurdle given the budgetary implications and data protection concerns raised by the RSB. It is uncertain whether, or to what extent, all proposed amendments will be implemented in their current form. [bakermckenzie.com]

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Source European Commission

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