On July 9, 2026, the European Parliament adopted a Resolution that includes a series of tax policy proposals intended to improve the EU’s competitiveness, reduce compliance burdens, and encourage innovation. Even though the Resolution is not legally binding, it calls on the European Commission to develop a more integrated tax and business environment for companies operating across the EU, through the so-called 28th regime.

The 28th Regime and the EU's VAT System

The 28th regime, commonly referred to as EU Inc., is an EU initiative to establish an optional EU-wide legal framework that businesses could voluntarily adopt, enabling them to operate under a single set of rules across all EU countries instead of navigating 27 different national systems. The initiative focuses on innovative startups and scale-ups. More specifically, the initiative wants to make it easier for these businesses to expand throughout the EU while reducing incentives to relocate outside Europe.

The European Parliament recommended developing a legally secure tax module that EU Inc. companies could opt to include in their tax filings, and that would be automatically recognized by and accessible across the EU. One of the key VAT measures is the establishment of a centralized VAT registration system to simplify cross-border VAT compliance, replacing multiple national registrations with a more streamlined approach. Under this approach, businesses would use a single EU VAT identification number and a digital One-Stop Shop portal to manage VAT declarations and refund claims across all EU countries.

The Resolution further highlights the importance of interoperable digital solutions, including e-invoicing, to simplify VAT compliance, improve transparency, and lower administrative costs. Instead of harmonizing VAT rates, the focus is on streamlining VAT procedures and reducing complexity.

Additionally, the Parliament's Resolution proposes simplified transfer pricing rules using formula-based methods to reduce administrative complexity and disputes between tax authorities. In addition, the Parliament supports harmonized and targeted research and development (R&D) tax incentives across the EU

Conclusion

The European Parliament noted that, if adopted, these VAT measures, together with other tax measures, could reduce administrative costs by an estimated EUR 328 million to EUR 440 million over ten years. At the same time, these measures would create a more attractive and competitive business environment within the EU. As a result, EU startups and scale-ups would have easier access to EU capital markets. This would allow them to secure necessary funding while maintaining their presence in the EU.