EU Inc Taxes: How Taxation Would Work Under the 28th Regime

Company law is not tax law

The single most important thing to understand about EU Inc and tax is that they are two different layers. The 28th Regime harmonises company law: how you incorporate, the basic governance rules, shares, and insolvency. It does not touch tax law, which in the EU remains a national competence, decided by each member state, not Brussels.

So EU Inc would give you one EU-wide legal entity, but not one EU-wide tax rate. Tax follows where the company is resident and active, just as it does for a German GmbH or an Estonian OÜ today.

There is a legal reason for the split. The proposal is built on Article 114 TFEU, which expressly excludes fiscal provisions, and EU tax measures need unanimity among all 27 member states, a far higher bar. A separate, parallel track in the European Parliament is exploring a "28th tax regime", but that is a different process from the company-law regulation covered here.

Why EU Inc is not a tax loophole

It is a common assumption that a "single EU company" must be a way to lower your tax bill. It is not, and it is not designed to be. An EU Inc would sit inside the same anti-avoidance framework as every other EU company:

• Tax residence rules still decide where you are taxed, usually based on the place of effective management.
• Permanent establishment rules still create a tax presence wherever you really operate.
• Transfer pricing and the EU anti-tax-avoidance directive (ATAD) still apply to cross-border arrangements.

In other words, EU Inc removes legal friction, not tax obligations. What it saves you is the cost and complexity of company law across borders, not the tax you owe.

Where an EU Inc would pay tax

An EU Inc would be taxed where it is tax-resident and wherever it has a taxable presence. For most founders that means corporate tax in the country where the business is genuinely run and managed, plus any country where it has a permanent establishment. The EU-wide legal status does not change that analysis; it simply means you keep one entity while the normal residence and presence tests do their work.

National corporate tax rates still apply

Because the rate is set nationally, the country you operate from still matters. The figures below are current national rates that already apply today and would continue to apply to an EU Inc. They are illustrative, rates change, so confirm the current figure before relying on it.

This is exactly why founders still compare jurisdictions today. If your decision is partly about tax, compare jurisdictions side by side before you incorporate.

What about VAT?

VAT is also unchanged. An EU Inc would register for VAT and charge it under the same EU rules as any company, including the cross-border schemes such as the One Stop Shop (OSS) for selling to consumers across member states. EU Inc does not create a VAT shortcut or exemption.

The one tax-related rule: stock options

There is a single place where the 28th Regime touches tax, and it is narrow. The EU-wide employee stock option scheme (EU-ESO) harmonises the timing of tax on options: no tax at grant, at vesting or at exercise, with tax falling due only when you actually sell the shares (subject to a minimum 24-month vesting period). That fixes a real pain point, where some countries tax paper gains long before there is any cash.

Even here, only the timing is harmonised. The rate, and how the gain is classified, stay national, and the rule cannot be less favourable than a country's existing stock-option treatment. So it is a simplification, not a discount.

What EU Inc does simplify

The real savings are legal, not fiscal. With one EU-wide entity you would avoid:

• Re-incorporating, or setting up subsidiaries, just to operate in another member state.
• 27 different sets of company-law filings and formation rules.
• Fragmented, country-by-country treatment of employee stock options, which the regime aims to put under one framework (though the tax treatment of options remains national).

That is a meaningful reduction in legal cost and friction. It is just a different thing from a tax cut.