A central driver of the DAC Recast is the need to simplify reporting obligations under DAC6. Accordingly, the DAC Recast introduces a range of targeted simplifications that seek to enhance the overall efficiency and effectiveness of the framework. A key simplification is the removal from reporting obligations of around 3,000 multinational groups already subject to the 15% global minimum tax under Pillar Two, delivering estimated annual compliance savings of approximately €300 million.

Another notable feature of the proposal is the absence of new substance-based hallmarks to replace the Unshell Directive, which was withdrawn from Council in June 2025. It is believed that this is to ensure that the simplification proposal progresses and that discussions on substance-based hallmarks do not become the subject of protracted debate. The Irish Presidency has indicated in its Presidency Priorities that it will aim to significantly progress and conclude the negotiations on the DAC Recast by the end of the year.

Read our related briefing about the EU Tax Simplification Package adoption.

Key proposed changes to DAC6

Carve-out for Pillar Two entities

One of the most significant changes is the introduction of a carve-out from DAC6 reporting for entities within the scope of the Pillar Two Directive. This reflects two principal considerations. First, the 15% minimum rate is expected to neutralise aggressive tax planning. Second, existing reporting frameworks, including CbCR and the GloBE Information Return, already provide tax authorities with extensive information, thereby limiting the practical value of DAC6 disclosures.

The carve-out is narrow and targeted and applies only where there are no benefits given to any member of the Multinational Enterprise (“MNE”) group that would allow taxation to be lowered below 15%. Under the first scenario, the carve-out is available where each participant belongs to an in-scope MNE or large domestic group, unless the ultimate parent is located in a jurisdiction with a qualified side-by-side regime for the relevant period.

Secondly, where the ultimate parent is located in a qualifying side-by-side regime jurisdiction, the carve-out applies only if the participant is subject to a QDTT for the period and no associated tax benefit is granted. Accordingly, businesses should note that reporting obligations continue to apply where the MNE group is headquartered in a jurisdiction with a side-by-side regime and its EU entities engage in reportable cross-border arrangements with jurisdictions lacking a qualified domestic top-up tax, or where related benefits arise.

In practice, MNE groups within the scope of the Pillar Two Directive will no longer be obliged to report cross-border arrangements under DAC6, as risks are deemed to be covered by the global minimum tax rules.

Removal of Category A hallmarks

The generic Category A hallmarks have been deleted. Therefore, hallmarks relating to confidentiality conditions, contingent fees and standardised documentation have been removed in their entirety on the basis that, due to their generic nature, they have contributed little to tackling fraud, evasion and avoidance, but have resulted in disproportionate reporting. Taxpayers will benefit from this as it will contribute to reducing “defensive reporting” of standard commercial transactions.

Revised definitions

The definition of ‘reportable cross-border arrangements’ has been refined to include only arrangements that are actually capable of implementation. This refinement directly reflects the judgment of the Court of Justice of the European Union in Belgian Association of Tax Lawyers and Others (Case C-623/22). Similarly, the definition of ‘relevant taxpayer’ has been limited to the taxpayer that begins implementing the reportable cross-border arrangement.

Extended reporting deadline

The streamlining of the definitions is complemented by two changes to the reporting period. The reporting period now starts when the first step in the implementation of the arrangement has been made. This means a concrete and verifiable initial act that reflects the intention to implement the arrangement. It marks the point at which the arrangement becomes irreversible or legally binding, such as upon the signing of implementation contracts.

Secondly, the deadline for reporting by intermediaries has been extended from 30 to 90 days. This extension seeks to strengthen the quality and completeness of information reported to the tax authorities.

Legal professional privilege

Recent CJEU case law, including Case C-694/20 Orde van Vlaamse Balies and Case C-623/22 Belgian Association of Tax Lawyers, has clarified and narrowed the scope of legal professional privilege. Under the proposal, the waiver from filing information on a reportable cross-border arrangement is limited to lawyers and other professionals who are legally authorised under national law to provide legal representation.

In line with CJEU case law, lawyers acting as intermediaries under professional titles listed in Directive 98/5/EC, including solicitors and barristers in Ireland, are not required to notify other intermediaries of their reporting obligations where they are exempt from reporting on the basis of legal professional privilege. They must, however, notify their client of the client’s own reporting obligations.

Other professionals who are legally authorised to provide representation, but who do not practise under a professional title listed in Directive 98/5/EC, must still notify another intermediary, or, if there is no other intermediary, the client. The proposal therefore draws a clear distinction between qualified lawyers covered by Directive 98/5/EC and other professionals who, although nationally authorised representatives, fall outside these specific professional titles.

Hallmark C1 – Reference to EU Code of Conduct

The reference in Hallmark C1 to the OECD work on non-cooperative jurisdictions has been replaced with a reference to the EU Code of Conduct work, whereby Member States jointly assess third-country jurisdictions against set criteria to determine whether they are cooperative for tax purposes. This brings the hallmark into closer alignment with the EU’s own processes for identifying non-cooperative jurisdictions.

Guidance on the Main Benefit Test and Hallmark D2

Stakeholders have consistently called for clear and harmonised EU-level guidance to ensure the consistent interpretation and application of DAC6 across Member States, particularly in relation to the Main Benefit Test (“MBT”). The preferred policy option includes the issuance of guidance on the application of the MBT to hallmarks that remain subject to the test, without amending the test itself.

In order to ensure legal clarity and consistent application, the substance criteria in Hallmark D2 are to be further developed in a Council implementing act. Article 52 of the directive provides that the Council shall adopt such an act within five years from the date of entry into force of this directive. It is noteworthy that, while the Commission will make the proposal to establish the new substance criteria, it will be for the Council to make the final decision and pass the implementing act, in recognition of the impact on Member States’ executive and enforcement powers in the field of direct taxation and on their tax bases.

The practical effect is that, until the Council implementing act is adopted, the D2 hallmark will remain in force but without harmonised EU-level criteria for what constitutes sufficient “substance”.

Implementation timeline

Member States are expected to transpose the DAC6-related provisions by 31 December 2027, with those measures to apply from 1 January 2028.

Conclusion

By consolidating the DAC and its eight amendments into a single instrument, the DAC Recast improves usability and coherence, thereby seeking to strengthen legal certainty. Taken as a whole, these measures are projected to reduce annual compliance costs for EU businesses by more than €1 billion, while simultaneously ensuring that tax authorities remain adequately equipped to protect revenues and counter tax fraud, evasion and avoidance.

While this proposal contains significant changes to be debated at Council in the coming months under Ireland’s Presidency, further developments on critical aspects, such as the guidance on the MBT and a possible Council implementing act on substance criteria, will need to be monitored closely.