EU Inc could simplify start-up taxation, but a common tax regime faces the unanimity rule

The current EU Inc proposal is built primarily as an optional European company-law regime and contains only limited tax interventions, especially for employee stock options. Parliament wants to leave open the construction of a much broader tax module, but the FISC debate with national parliaments highlighted the decisive issue: tax harmonisation has different legal bases and different voting rules from internal-market legislation.

Transforming EU Inc from a simplified company-law regime into a system that would also reduce tax fragmentation returned to the debate in the European Parliament at the interparliamentary meeting organised on 12 October by the Subcommittee on Tax Matters (FISC). For start-ups, the advantage of a single framework would be to reduce the different obligations a company must manage when expanding across several states. The problem is that the Commission’s current legislative proposal goes only a limited way on taxation, while a broader common tax regime would enter an area in which the treaties preserve a decisive role for the Member States and, in many cases, unanimity in the Council.

In brief

1.The EU Inc proposal creates an optional, digital company-law regime, parallel to national legal forms. File 2026/0074(COD) is still in the ordinary legislative procedure.

2.The tax component of the Commission’s text is limited. For the European employee stock-option plan, taxation would be deferred until the shares are sold, while states retain the freedom to determine the classification of the income and the tax rate.

3.In July, Parliament called for a possible subsequent tax module, with a consolidated corporate-tax base, standardised returns, simplified VAT rules, the reduction of double taxation and coordinated treatment of stock options.

4.Article 114 of the Treaty on the Functioning of the EU, the legal basis of the current EU Inc proposal, excludes tax provisions from the ordinary procedure for harmonising the internal market. Article 115 provides for unanimity in the Council for the approximation of national laws relevant to the internal market.

5.The October meeting did not produce a new tax agreement. The dispute now concerns how simplification can be extended without circumventing national tax competences and without turning the regime into a tax-shopping instrument.

The proposal presented by the Commission on 18 March does not create a complete 28th system of corporate taxation. EU Inc is, in its current legislative form, an optional European company-law framework that firms could use instead of one of the national legal forms. The objective is for incorporation, governance, capital operations and a large part of the interaction with commercial registers to operate under common rules and in digital format. The proposal is based on Article 114 TFEU and is being examined under the ordinary legislative procedure.

Taxation appears in this architecture in a much more limited form. The most concrete example is the European employee stock-option plan, EU-ESO. According to Article 79 of the proposal, income would not become taxable when the option is granted, when the right is definitively acquired or when it is exercised. The taxable event would be deferred until the employee sells the shares obtained through exercising the option. The tax base would be the difference between the market value at sale and the purchase price. However, Member States would continue to decide how they classify that income in their own tax system and what rate they apply to it.

This solution attempts to address a concrete problem for start-ups and their employees. When taxation arises before the shares are sold, the beneficiary may have a tax liability without having yet obtained liquidity from that holding. A common taxation point would make it easier to use the same stock-option plan for employees located in different states. The Commission nevertheless specifies that these provisions are ancillary to the main company-law objective and do not seek general harmonisation of taxation or national rates.

Parliament went further in the resolution adopted on 9 July by 366 votes in favour, 192 against and 39 abstentions. The text drafted by Ľudovít Ódor proposes a modular structure: the current EU Inc would represent the first layer, dedicated to company law, and a tax module could subsequently be added. For participating companies, Parliament points to a consolidated corporate-tax base, cross-border loss relief, standardised tax returns, the prevention of double taxation, the simplification of withholding taxes and a more centralised VAT infrastructure, including a single VAT number and a digital one-stop shop. States would continue to set their own corporate-tax rates.

The difference is also significant for stock options. The Commission proposal harmonises the timing of taxation but leaves the classification of income to the states. Parliament’s resolution proposes that, in a future tax module, gains from a European stock-option system be treated as capital income, not employment income. Such a rule would have much broader tax and social implications and explains why the discussion can no longer be treated solely as an administrative simplification.

This is where the legal obstacle discussed in FISC arises. Article 114 allows Parliament and the Council to adopt, through the ordinary legislative procedure, measures for the functioning of the internal market, but paragraph 2 explicitly states that this legal basis does not apply to tax provisions. Article 115 provides, for the approximation of national laws that directly affect the internal market, a special procedure in which the Council acts unanimously after consulting Parliament. There are also specific treaty rules for indirect taxes. Consequently, a European module that would effectively harmonise substantial elements of taxation cannot automatically be assumed to be an extension of the current company-law file.

This delineation does not mean that the limited tax provision already introduced by the Commission in the EU Inc proposal has been declared incompatible with the treaties. The Commission presents it as an ancillary measure necessary for the functioning of the cross-border company-law regime. The political and legal discussion concerns precisely how far this logic can go. At the October meeting, national and European parliamentarians raised the risk that a tax expansion of EU Inc could circumvent the unanimity rule, while other interventions argued that a regime without a sufficient tax component would leave unresolved one of the main sources of cost for firms operating in multiple jurisdictions.

Parliament anticipated this difficulty in its own resolution. The text states that, if the applicable legislative procedure does not allow the desired tax module to be constructed, an opt-in structure or, as a last resort, enhanced cooperation between a group of Member States could be considered. The resolution also insists on real economic activity in the EU, precisely so that access to the regime does not encourage companies without economic substance, “letterbox” companies, tax arbitrage or the artificial selection of the most favourable regime.

The study commissioned by FISC before these debates reaches a similar conclusion: a 28th tax regime can be designed as an optional, parallel and modular instrument, without replacing national systems. The authors identify corporate taxation, cross-border losses, withholding taxes, research and development incentives, VAT and share-based remuneration as possible areas for simplification. The advantage would be to reduce costs and uncertainty for firms expanding across several states; however, the design must be adapted to the legal limits and preserve the states’ tax competences.

There is also a less obvious risk. An optional regime does not automatically eliminate fragmentation. If the 27 national systems continue to exist and EU Inc adds an additional option, companies may end up comparing not only company-law rules but also competing tax regimes. In its position, Parliament warns that the new system must not produce additional legal distortions, tax shopping or a way of avoiding worker protection. At the same time, choosing a common regime may be valuable precisely if it removes the obligation for a firm to reconstruct the same administrative architecture every time it enters another Member State.

For now, the two levels must be kept separate. EU Inc, legislative file 2026/0074(COD), remains a proposal under consideration, not a regime applicable to companies. The broad tax module described by Parliament is a political position adopted through an own-initiative report, not an already approved part of the regulation. The October FISC meeting showed where one of the most difficult subsequent negotiations will lie: how far European tax simplification can go without altering the balance of competences and voting rules established by the treaties.

https://2eu.brussels/ro/news/eu-inc-poate-simplifica-taxarea-start-up-urilor-dar-un-regim-fiscal-comun-se-loveste-de-regula-unanimitatii