24 March 2026 European Commission publishes proposal on the 28th Regime (EU Inc.)
On 18 March 2026, the European Commission (the Commission) released the proposal for a Regulation on the 28th Regime Corporate Legal Framework — "EU Inc." (the proposal), as part of a several initiatives to enhance the competitiveness of the economy of the European Union (EU). The Commission also published an annex including the minimum content of the articles of association of an EU Inc. company, a communication, a fact sheet and an impact assessment (divided and published in three parts). The proposal primarily establishes a harmonized corporate legal framework, introducing a new legal form, the EU Inc. limited liability company, in the national legal orders of all Member States. With the proposal, the Commission aims to remove structural legal fragmentation in the single market and strengthen the EU's competitiveness, referring in particular to startups and scaleups. Although the Commission initially envisaged the introduction of a harmonized 28th Corporate Income Tax regime for EU Inc. companies, the proposal does not include such provisions. However, specific provisions aim at enabling EU Inc. companies to apply the EU common scheme for employee stock options (ESOs), with the aim of attracting and retaining talent. The proposal harmonizes the timing of taxation of income derived from warrants by deferring taxation until the shares acquired upon exercise are disposed of. The proposal is aimed at enhancing the competitiveness of the EU, in particular by helping to remove structural barriers preventing startups and scaleups from expanding across borders, an urgent need according to the Letta Report, which called for the creation of a "Simplified European Company." The Draghi Report further underlined how differences in laws and regulations across Member States limit companies' ability to operate seamlessly across the EU Single Market and called for the adoption of a new EU-wide legal statute for innovative startups (the Innovative European Company). The Commission announced the 28th Regime initiative in "A Competitiveness Compass for the EU," published in January 2025, and later in the "Commission work programme 2026." In the original announcements, this initiative was to cover company law, labor law, insolvency law and (corporate) tax law. A public consultation and call for evidence was open until 20 September 2025, with more than 870 stakeholders providing feedback. On 20 January 2026, the European Parliament adopted recommendations on the 28th regime initiative, which could indicate the Parliament's likely positioning in the negotiations that will follow the Commission proposal. The proposal aims to address the obstacles faced by companies across the EU's single market resulting from divergent national corporate rules and procedures. It establishes a harmonized corporate legal framework comprising:
EU Inc. companies are structured as limited liability entities and are not subject to minimum capital requirements. They may be formed either through an EU-level central online interface based on the Business Registers Interconnection System (BRIS), enabling a fast-track formation within 48 hours at a maximum cost of €100, or through a fully online formation process carried out directly with the national business register. Legal personality is acquired upon registration with the business register in the Member State where their registered office is located, subsequently receiving recognition from all other Member States. Founders retain full discretion regarding the selection of the incorporation location within the EU and a public authority may request physical-presence information only in exceptional circumstances to prevent identity misuse or ensure compliance with legal capacity, as all company law procedures applying to an EU Inc. during its life cycle are designed to be carried out fully online. The articles of association at the time EU Inc. companies are formed are subject to preventive administrative, judicial or notarial control, including a legality check, to ensure reliability and facilitate their use, particularly in cross-border situations. This preventive control covers formal conditions, such as name and object and legal capacity authority to represent the EU Inc. company, and is intended to prevent abusive or fraudulent letter-box companies linked to tax evasion or money laundering, while also helping to streamline formalities. The proposal also seeks to limit administrative burdens and simplify rules for EU Inc. companies through increased digitalization, the application of the "once-only" principle for information exchange between tax authorities, social security authorities and beneficial ownership register, and simplified, fully digital liquidation procedures. The proposal introduces a "once-only" submission of information by EU Inc. companies followed by the digital transmission of company information from business registers to other authorities (e.g., tax authorities, social security authorities and beneficial ownership registers). The objective is to automatically reuse and exchange information, avoiding the need for resubmission. The proposal harmonizes the key information and documents related to an EU Inc. company that the business register needs to make publicly available. The exchange of information on EU Inc. companies is expected to contribute to the automated identification of taxpayers under Directive 2011/16/EU and the beneficial ownership registers under the EU Anti-Money Laundering framework. The proposal establishes a primary digital corporate framework for EU Inc. companies, including full online registration via an EU central interface, digital tools for company governance and fully digital procedures to facilitate investment throughout the company lifecycle, including in case of a liquidation of solvent EU Inc. companies and as regards insolvency proceedings. The proposal focuses on company law aspects and does not introduce a separate, pan-EU tax regime to which the EU Inc. companies would be subject. In fact, tax provisions are limited to Article 79, which prescribes the tax treatment of warrants under the EU-ESOs, a measure introduced to attract and retain talent. Under the EU-ESO regime, warrants may be granted to eligible persons, such as employees and board members of the EU Inc. company and its subsidiaries, but not to persons holding, or having held in the 24 months preceding the issuance of shares, more than 25% of the company's voting rights or rights to proceeds. Warrants are nontransferable, should be issued for consideration and may be exercised only against full cash payment for the newly issued shares. Taxation of income derived from warrants is deferred until the shares acquired by exercising the warrants are disposed of — this is the moment when the income should be deemed to arise. By excluding taxation at grant, vesting or exercise, which is currently the case in some Member States, the measure aims to ensure that income is taxed only once and avoids cash-flow disadvantages, complexity and the taxation of unrealized income, particularly in cross-border situations. While Member States retain autonomy over tax characterization and applicable rates, a harmonized tax base, calculated as the difference between the fair market value of the shares at the date of disposal and their acquisition price, aims to prevent double taxation and disputes. The measure builds on existing national ESO regimes. Member States must ensure that EU-ESO warrants and the shares obtained from them receive tax treatment at least as favorable as comparable ESOs (or similar instruments) under national law, as long as all legal conditions are met. Additionally, the proposal gives the tax authority of the Member State of registration 30 days to issue a tax clearance or object to fast-track liquidation to help ensure the EU Inc. company undergoing the fast-track liquidation procedure has no outstanding tax debts or unresolved tax compliance issues. The Commission has put forward the proposal under Article 114 of the Treaty of Functioning of the EU (TFEU); therefore, the submission follows the ordinary legislative procedure. As a result, the proposal will be subject to negotiation and approval by both the European Parliament and the Council of the EU, to be followed by adoption in Member States by qualified majority voting and direct application across the EU as a Regulation. This approach contrasts with the adoption procedure for direct tax measures, which are typically based on Article 115 TFEU and require unanimous agreement among Member States. Although the Commission aims for adoption by year-end, resistance from Member States can be expected, including in relation to the tax provisions of Article 79 of the proposal. The Commission will support Member States through guidance and close cooperation, including on the further development of the BRIS, and will monitor implementation by assessing the uptake and use of the EU Inc. legal form, including registrations via the EU central interface using harmonized templates. The proposal may be helpful for startups, scaleups and their investors as a means of enhancing the EU's attractiveness for capital and talent. At the same time, the scope of the proposal is more limited than that set out in the Letta report, meaning that EU Inc. companies would still face significant barriers, particularly with respect to tax and labor law issues. Additionally, it remains uncertain whether the proposal will ultimately be adopted. Given the limited scope of the proposal's tax provisions, EU Inc. companies would continue to be subject to the existing 27 corporate income tax systems across Member States. Nevertheless, the proposed EU-ESO tax treatment, would introduce significant changes for many Member States compared with current treatment of ESOs. Member States are likely to resist the tax provisions, based on both the proposed changes and concerns that EU tax coordination might undermine national tax sovereignty or circumvent direct taxation procedures based on the unanimity requirement.
Document ID: 2026-0715 | ||||||
