EU Inc. Explained: The EU’s 28th Regime for Company Law, VAT & Corporate Tax Implications

Background

EU Inc. is the European Commission’s proposed optional company law regime under the broader “28th regime” concept. The idea is to give companies a single harmonised EU corporate form that can be registered digitally, quickly, and cheaply in one Member State, with legal effect across the EU.

The Commission describes the proposal as a way for innovative companies, start-ups, scale-ups, and other businesses to operate under one harmonised EU-wide corporate framework while existing national company forms remain available.

The concept has strong support from the Commission, European Parliament, European Council, start-up organisations, business associations, and digital industry groups. However, it also faces serious concerns from labour organisations, some commentators, and stakeholders worried about forum shopping, weaker labour protections, letterbox companies, divergent national court interpretation, and potential abuse of national tax differences. 

The tax question is especially important: EU Inc. could simplify company law, but it would not automatically harmonise VAT, corporate income tax, permanent establishment rules, transfer pricing, payroll tax, or local registration obligations.

What Is EU Inc.?

EU Inc. is a proposed new EU corporate legal form under the Commission’s 28th regime initiative. The Commission says the objective is to let innovative companies operate under a single harmonised set of EU-wide rules covering relevant aspects of corporate, insolvency, labour, and tax law. 

It also stresses that the framework is designed particularly for innovative companies and start-ups, but would be available to any founder who considers it suitable.

The core design features are:

• A company can register as an EU Inc. in a Member State.
• Registration should be fully digital.
• The registration should be completed within 48 hours.
• The registration cost should be capped at EUR 100.
• The company should benefit from simplified digital procedures throughout its life cycle.

The framework would include easier digital share transfers, capital operations, employee stock option treatment, and simplified liquidation or insolvency procedures.

The proposal does not replace national company law. It creates an optional EU layer alongside national company forms.

EU Incorporated Policy Aim

The stated goal is to reduce fragmentation in EU company law and make it easier for businesses to start, scale, finance, operate, and close across the Single Market.

The Commission and Parliament identify several problems:

• Start-ups must currently choose one national corporate form even if their market is pan-European
• Investors face different legal systems, share structures, corporate governance rules, and insolvency procedures
• Employee stock option plans and equity incentives are fragmented
• Cross-border company formation and subsidiary creation are slow and administratively costly. 

Legal uncertainty reduces the EU’s attractiveness compared with jurisdictions such as Delaware in the United States.

Current Policy Status

The policy has evolved from an ambitious “single business code” concept into a more targeted corporate law proposal.

The proposal still leaves many matters to national law where the regulation does not cover them. EPRS explains that EU Inc. would be governed by the regulation and by the law of the Member State for matters not covered by the regulation.

This is one of the key tensions: supporters wanted a strong “virtual 28th jurisdiction,” but the actual proposal still depends heavily on Member State registries, Member State law, and national courts.

The Commission’s March 2026 proposal is narrower. It focuses mainly on a harmonised company form, digital registration, company life cycle procedures, share transfers, capital operations, simplified insolvency aspects, and employee stock option treatment. 

The proposal is under the ordinary legislative procedure, reference 2026/0074(COD). The responsible Parliament committee is JURI, with René Repasi as rapporteur. The Commission and European Council have pushed for political agreement by the end of 2026.

Main Supporters

European Commission

The Commission is the main institutional sponsor. It presents EU Inc. as part of the EU’s competitiveness agenda and a way to make company registration faster, cheaper, and fully digital.

European Parliament

Parliament supported the general approach in its January 2026 resolution, although it proposed some differences, including the name S.EU, EUR 1 minimum capital, 48-hour formation, safeguards for labour law, and a unified digital identity.

European Council

The European Council’s March 2026 conclusions placed the 28th regime for company law as a high-priority measure under the “one Europe, one market” agenda. The conclusions called for the optional harmonised regime to be agreed by the co-legislators by the end of 2026.

Business and Start-up Organisations

BusinessEurope considers the proposal a positive development for competitiveness and supports using a regulation and making the form open to all companies, while preferring to exclude labour, insolvency, and tax matters from the regime.

DigitalEurope supports a fast digital incorporation model and argues against eligibility criteria or capital requirements. It also favours standardised model documents, flexible ownership structures, English-language dispute resolution options, and aligned insolvency procedures.

How EU Inc. Registration Would Work

Based on the Commission and Parliament materials, the intended process would likely work as follows:

1. A founder or existing limited liability company chooses to opt into the EU Inc. regime.
2. The company registers in a Member State through a fully digital process.
3. The registration uses the EU central interface and BRIS, the EU business registers interconnection system.
4. The registration should be completed within 48 hours.
5. The registration cost should not exceed EUR 100.
6. The EU Inc. should receive legal personality and be automatically recognised across the EU.

The company data would be transmitted to relevant authorities under the once-only principle, meaning companies should not have to resubmit the same documents repeatedly in different Member States.

The company would benefit from simplified digital life cycle procedures, including share transfers, capital operations, termination of solvent companies, and specific insolvency procedures for qualifying start-ups.

EU Inc. is designed to reduce administrative fragmentation, but it would not make compliance disappear.

Could EU Inc. Create VAT and CIT Avoidance Risks?

VAT Risk

EU Inc. should not, by itself, allow companies to dodge VAT. VAT obligations are driven by EU VAT law, place of supply rules, fixed establishments, taxable transactions, local registrations, OSS and IOSS use, and customer location. A company’s legal form does not remove those duties.

However, EU Inc. could create practical enforcement risks if:

• Companies register in one Member State but trade extensively across the EU without understanding local VAT triggers
• Founders mistakenly assume EU Inc. means “one EU tax registration”
• Digital businesses use EU Inc. status to market themselves as EU-wide while failing to manage place of supply rules
• Companies create multiple entities or branches to obscure real economic activity

CIT Risk

Corporate income tax risk is more complex. EU Inc. does not automatically harmonise corporate tax residence, permanent establishment rules, transfer pricing, withholding tax, or profit allocation. These remain largely national and treaty-driven.

Possible CIT risk areas include:

• Choosing the Member State of registration for favourable corporate law or tax-adjacent treatment
• Creating letterbox EU Inc. entities with little substance
• Misaligning place of effective management and registered office
• Using EU Inc. structures to centralise IP, financing, or employee stock option arrangements in a favourable jurisdiction
• Creating uncertainty over where profits should be taxed when management, development, sales, and users are spread across several Member States

Final Remarks

EU Inc. is a serious and strategically important proposal. It responds to a real problem: Europe’s fragmented company law environment makes it harder for start-ups and scale-ups to raise capital, attract talent, expand cross-border, and remain in the EU.

EU Inc. is not a tax regime. It is a proposed optional EU corporate legal form. If adopted and implemented well, it could become a useful tool for start-ups, scale-ups, and cross-border businesses. But it will only succeed if the EU solves three problems: legal certainty, administrative simplicity, and anti-abuse safeguards.

From a VAT and CIT perspective, EU Inc. should be treated as a company law simplification tool, not as a substitute for tax compliance. Any EU Inc. company would still need a proper VAT, CIT, payroll, transfer pricing, and substance analysis in each country where it operates, sells, employs people, stores goods, or creates taxable presence.

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