I. Overview and background: a long road to a common framework
On 26 March 2026,…
As highlighted in the Draghi report, nearly 30% of Europe’s unicorns have relocated to the US since 2008. Why? Because for many startups, breaking into the US market is simpler than scaling across Europe itself. Such dynamics have prompted the need for decisive action at the European level.
When European Commission President Ursula von der Leyen introduced the concept of a new European company form — referred to as an ‘EU Inc.’ — at this year’s World Economic Forum in Davos, it was likely unfamiliar to many in the audience. The underlying idea, however — namely, the creation of a private company form operating under a uniform set of rules across all EU Member States—is not new. Earlier initiatives have faltered due to a lack of political support, but there are now reasons to believe that momentum may be building.
Last week, the European Commission presented its proposal for an EU Inc. In the following, we outline the key elements of the current initiative and consider how the proposed legal framework may take shape from both legal and tax perspectives.
Against the backdrop of corporate structures that have existed for decades, the concept of a European legal form — an EU Inc. — has emerged. While Europe constitutes one of the world’s largest internal markets in economic terms, it remains a regulatory patchwork. This presents particular challenges for innovative companies that depend on access to venture capital, pan-European mobility, scalability, a highly skilled workforce and long-term investment. To date, businesses operating — or seeking to operate — across borders have been required to invest significant time and resources in navigating divergent national regulatory regimes. In fact, these involve 27 national legal systems and more than 60 distinct corporate legal forms. Such complexity may delay the incorporation of a company by several weeks or even months, thereby hindering growth, increasing costs, and discouraging expansion.
The existing European legal form available to companies, the Societas Europaea (SE), introduced in 2001, does not adequately address these challenges. As a result, it has not become the standard vehicle for start-ups. It is widely regarded as overly complex. In addition, it requires a minimum capital of €120,000 and leaves key governance matters to be determined by national laws.
After years of limited political traction, the idea of a European company form has regained momentum, driven in part by initiatives from European technology companies, investors and start-up associations.
The EU Inc. is envisaged as a uniform company form operating across Europe within a legal framework designed as a “28th regime”, existing alongside the national regimes of the 27 Member States. It is intended to be incorporated entirely digitally, with a minimum share capital of just €1, and could be established within as little as 48 hours. Start-up costs are expected to be capped at approximately €100.
The EU Inc. will be introduced in the form of an EU Regulation and will provide a single, harmonised set of corporate rules which businesses may elect to apply and be subject to, rather than navigating multiple national regimes.
The Draghi Report dated 9 September 2024 indeed highlighted the urgent need to focus on enhancing the EU’s competitiveness, including by facilitating the expansion of innovative enterprises within Europe. Announced in the Commission’s political guidelines for the 2024–2029 period and in President von der Leyen’s State of the Union address, the EU Inc. proposal aims to reduce fragmentation, strengthen the EU’s competitiveness, and address the needs of innovative businesses.
Companies would therefore be able to operate under uniform capital requirements, supported by a central EU register, standardised investment documentation and a harmonised employee share ownership scheme across Europe.
If realised, the EU Inc. would offer clear economic advantages for both entrepreneurs and investors. Scaling businesses would become more straightforward, and investment processes could be accelerated — for example, through potentially shorter and more streamlined due diligence procedures.
Among the key advantages of the proposed framework, the following merit particular attention.
Simplified and fully digital procedures: EU Inc. companies will be required to submit corporate information only once, via an EU-level interface connecting the national business registers. Business processes — including incorporation, financing operations, share transfers and liquidation — will be digital by default throughout the entire lifecycle of the company. Tax identification and VAT numbers will be obtained without the need to resubmit paper documentation.
Enhanced conditions for attracting investment and talent: The proposal will simplify the transfer of shares and eliminate mandatory intermediary involvement. EU Inc. companies will have the ability to create different classes of shares with varying economic or voting rights, and to establish EU-wide employee stock option plans, with stock options taxed solely at the time of sale.
Full access to the internal market with strong safeguards: EU Inc. companies will be free to choose the Member State in which to incorporate and will be treated on an equal footing with any other national company. National labour and social laws — including rules relating to codetermination — will continue to apply in full.
The intended simplicity and speed of incorporation should not be undermined by additional registration and onboarding requirements imposed by public authorities. In practice, obtaining a company registration number from the authorities, opening a business bank account and securing a tax registration number have proved particularly time-consuming. A meaningful reduction in administrative burdens would therefore be highly desirable.
However, as the proposed 28th regime is primarily focused on company law, no immediate simplifications in tax rights and obligations are expected. According to statements by the European Commission, certain areas of tax law may also be subject to future harmonisation, although the precise scope remains unclear. Any such measures would, in any event, likely require the unanimous consent of the Member States. Nevertheless, it would make sense to:
Yet, the EU’s tax policy to date makes one point unmistakably clear: the harmonisation of cross-border taxation among Member States remains highly contentious.
Taxation lies at the heart of national sovereignty, as it constitutes the primary source of public revenue. Against this backdrop, the national tax regimes of the Member States will continue to apply within the framework of an EU Inc. Member States will retain full control over tax rates, assessment and enforcement. In practice, an EU Inc. would be treated in the same way as a German private limited liability company (GmbH) and, as a legal entity subject to unlimited tax liability, would be liable to corporate income tax and trade tax where it has its registered office or place of effective management in Germany, as well as to value added tax (VAT) to the extent that it supplies goods or services within Germany.
Given the extensive harmonisation of VAT rules under the VAT Directive — Member States differ primarily in their rates, which range from approximately 16% to 25% — tax competition in the area of direct taxation will remain largely unaffected and may even intensify as a result of the EU Inc. As the EU Inc. is intended to simplify company formation and expansion (with incorporation possible within 48 hours, a minimum capital requirement of €1 and no need for notarial involvement), businesses will find it significantly easier to relocate their formal seat to any Member State. This is likely to increase competition between jurisdictions for corporate establishments.
As a result, the choice of seat may increasingly be driven by tax considerations, as other factors — such as legal form, administrative burden and costs — become less decisive. Member States will therefore need to offer more attractive tax frameworks to attract new businesses. In this respect, the EU Inc. would strengthen tax competition within the EU without harmonising substantive tax law. A greater alignment of the corporate tax base across Member States — similar to what has already been achieved in VAT — would enhance transparency in tax competition.
From a German policy perspective, the gradual reduction of the overall corporate tax burden to an internationally competitive level of no more than 25% by 2032 represents a key measure in maintaining the attractiveness of Germany as a business location.
In the Italian context, a reduction of the current corporate tax burden, presently around 28%, would likewise be desirable to achieve the same level of competitiveness.
As far as France is concerned, the new regime will have no impact in this regard, since France had already lowered its corporate tax rate to 25% as of 2022.
In any case, the Commission has proposed a Head Office Taxation (HOT) system, which would allow small and medium-sized enterprises (SMEs) to apply the tax rules of their country of origin. Furthermore, the “Business in Europe: Framework for Income Taxation” (BEFIT) initiative aims to establish a single legislative framework for corporate taxation within the EU.
With its proposal for an EU Inc., the European Commission has sent a clear signal: the European Union intends to significantly simplify company formation and further strengthen the freedoms of establishment and movement of capital. The aim is to enable businesses to operate and raise capital across Europe as seamlessly as they do in jurisdictions such as the United States or China.
In Italy, the Chair of Confindustria Giovani1, Maria Anghileri, also underscored the significance of the initiative. It constitutes, in fact, an opportunity to operate across multiple Member States through a single corporate structure. At the same time, the high degree of flexibility envisaged will require further scrutiny. While, on the one hand, such modularity allows the instrument to be tailored to diverse needs, on the other it risks undermining comparability among undertakings — an element that is crucial for attracting investment and operating effectively on a European scale. The success of the project will therefore depend on the ability to strike an appropriate balance between simplification, flexibility, and legal certainty. Such a balance will need to be pursued during negotiations at the European level in order to fully realise the value of a measure that has the potential to reshape the business ecosystem in the coming years. Further aspects requiring clarification include the impact of the initiative on directors’ liability and on the functioning of companies’ supervisory bodies. To date, the chambers of commerce — and Unioncamere in particular — have maintained a quite neutral stance with respect to the proposed initiative.
However, for all its potential, the transition to a new European corporate framework will be complex. Key considerations — including legal structuring decisions, auditing layers, directors' liability, employment law implications and integration into existing organisational models — are areas in respect of which there exists, at least in Italy, a complex stratification of legislation, regulatory interventions and judicial as well as scholarly interpretation. These matters will require careful planning and thorough preparation.
Filippo Federici
Paolo Gallarati
Marie Hindré
Markus Linnartz
Dr Christian Osbahr
Fabien Pouchot
