EBF TAX POLICY PAPER

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Modernising the tax framework for financial institutions and financial services

Brussels, 29 May 2026 – The European Banking Federation (EBF) has published its Tax Policy Paper: Modernising the Tax Framework for Financial Institutions and Financial Services.

The paper calls for decisive action to simplify and modernise the EU tax framework applicable to financial institutions in order to strengthen Europe’s competitiveness, growth capacity, and strategic autonomy. It highlights that Europe’s banking sector plays a central role in financing key policy priorities, including the green and digital transitions, defence investment, innovation, cross-border investment, and the deepening of the Capital Markets Union.

In particular, the paper identifies five key areas where reform is needed:

1. Corporate income taxation: The interaction between Pillar Two and existing EU tax frameworks, including the Anti-Tax Avoidance Directive (ATAD), should be streamlined through the 2026 Tax Omnibus, to reduce duplication and compliance complexity. There is a clear need to simplify and streamline corporate income tax rules to ensure global competitiveness of EU banks and avoid disproportionate administrative burdens.
2. Automatic Exchange of Information (AEOI): After more than a decade of AEOI implementation, the recast of the Directive on Administrative Cooperation (DAC) should be aimed at recalibrating the framework to ensure proportionality, clarity, and operational efficiency. Obligations should remain focused on the reporting of available factual data, while avoiding duplicative requirements, unnecessary complexity, and gold-plating at national level.
3. Withholding tax procedures / FASTER Directive: In parallel with these initiatives, the FASTER Directive should also be reassessed to ensure that its simplification objectives are fully achieved in practice. Current provisions risk introducing significant compliance burdens for Certified Financial Intermediaries and legal uncertainties. This may undermine the Directive’s stated objective of making withholding tax procedures in the EU more efficient, secure, and predictable for investors, financial intermediaries, and national tax administrations.
4. VAT on financial services: Ahead of the publication of the Commission’s report on a modernised tax framework for financial services, the EBF stresses the need for a fundamental review of the VAT exemption regime for financial services to restore neutrality, legal certainty, and competitiveness.
5. Financial sector-specific taxes: However, this reform should not be used to introduce new taxes and levies on financial institutions, financial activities and capital markets, such as Financial Activities Tax (FAT) or windfall taxes, which risk distorting the level playing field and undermining the capacity of banks and markets to provide capital.

The EBF calls on EU institutions and Member States to use the upcoming policy cycle, including the 2026 Tax Omnibus and the DAC recast, to embed these principles into the design of the EU tax framework and ensure that taxation policy actively supports Europe’s competitiveness agenda.

The full report is available below.

For more information:

Roger Kaiser, Head of Tax and Compliance – r.kaiser@ebf.eu

About the EBF:

The European Banking Federation is the voice of the European banking sector, bringing together national banking associations from across Europe. The federation is committed to a thriving European economy that is underpinned by a stable, secure, and inclusive financial ecosystem, and to a flourishing society where financing is available to fund the dreams of citizens, businesses and innovators everywhere.