EU Inc. & The 28th Regime

A Digital Front Door to a Physical Labyrinth

In early 2026, the European Commission signaled a bold new era for entrepreneurship. Termed "EU Inc." or the 28th Regime, this initiative promises to be the "Delaware of Europe." The pitch is seductive: register a company in 48 hours for just €1 and operate as a "European National" rather than a fragmented collection of 27 different national entities.

For a continent that produces more startups than the US but 80% fewer scale-ups, this is a long-overdue "first step." However, as any founder who has tried to scale from Berlin to Madrid knows, the incorporation is rarely the hard part. The true friction lies in the localization trap.

The Promise: The 48-Hour Legal Shell

The 28th Regime creates an optional, pan-European legal framework that sits alongside the existing 27 national systems. Its primary goal is to lower the "hassle costs" of cross-border expansion.

• Digital-First Registration: No more physical notaries or paper-heavy bureaucracy. Under the new centralized registry, incorporation is fully digital and real-time.
• Uniform Governance: A single set of rules for management boards and shareholder rights, providing a "brand name" that global VCs can finally understand and trust.
• Capital Efficiency: By removing high minimum capital requirements (like the traditional €25,000 for a German GmbH), the EU is finally opening the door for lean, innovative startups.
  

The Reality: The "Localization" Wall

While the 28th Regime fixes the Legal Shell, it currently stops short of fixing the Operational Engine. Unlike a company in Delaware, an "EU Inc." entity does not benefit from a federalized tax or labor system.

1. The Fiscal Sovereignty Problem

Incorporating as an EU National does not grant you a "Federal Tax Rate."

• Fragmented Rates: You will still pay 12.5% in Ireland and up to 25% in other Member States based on where your "Permanent Establishment" sits.
• The Deductibility Maze: There is no common definition for what constitutes a business expense. A "deductible" R&D cost in France might be rejected by tax authorities in Poland.
• The Accountant Tax: Instead of one central tax return, you still need 27 different local accountants to handle VAT, corporate tax filings, and transfer pricing.

2. The Payroll & Labor Law Trap

The most significant "hidden cost" of the 28th Regime is hiring. The EU has harmonized the company registration, but it hasn't harmonized the human.

• Local Labor Codes: If your EU Inc. hires a developer in Spain, you are 100% bound by Spanish labor law - from mandatory 13th-month salaries to strict local dismissal rules.
• Social Security Fragmentation: There is no "EU Social Security." You must register as an employer in every single country where you have staff, paying into different pension and healthcare pots with zero interoperability.
  

The Operational Checklist: Before You Opt-In

If you are considering the 28th Regime for your next venture, you must account for the localization costs that the €1 registration fee hides:

• [ ] Permanent Establishment (PE) Risk: Have you mapped out where your "effective management" is to avoid being double-taxed?
• [ ] Local Payroll Infrastructure: Do you have a "Global Employer of Record" or local payroll providers for every country you plan to hire in?
• [ ] Transfer Pricing Documentation: Are you prepared to prove to local tax offices that your branches are paying the "head office" a fair market rate?
• [ ] ESOP Taxation: Even if your "EU Inc." uses a standard Employee Stock Option Plan, the taxation of those options remains a local nightmare for your employees.

Closing Argument: We Built the Bridge, Now Pave the Road

The 28th Regime is a brilliant piece of corporate law, but it is a work-in-progress for fiscal policy. It effectively removes the "front door" barriers to the European market, but it leaves the internal walls of the house fully intact.

To make EU Inc. a true competitor to the US model, the Union must now move toward a Common Consolidated Corporate Tax Base (CCCTB) and a unified Social Security Portal. Until then, the 28th Regime remains a digital passport with no visa - a great first step, but a long way from a finished product.

Need Help Navigating the Maze?

The "28th Regime" may simplify your paperwork, but it doesn't eliminate the need for expert local guidance. Whether you are setting up your first "EU Inc." branch or scaling an existing operation, you don't have to do it alone.

If you have questions about the complexities we’ve discussed—from tax localization to cross-border hiring - reach out to the Network Valencia community. Our members are local experts and entrepreneurs who specialize in the exact areas where the "EU Inc." framework falls short:

• Legal & Compliance: Navigating the shift from national to EU-level incorporation.
• Marketing: Tailoring your brand to resonate across diverse European markets.
• Real Estate: Finding the right physical footprint for your European headquarters.
• IT & Cybersecurity: Ensuring your digital infrastructure is secure and GDPR-compliant across borders.
• Coaching & Consultancy: Strategic guidance to help founders scale through the "Localization Trap."

Connect with us today. Our network is built on the belief that while the law may be complex, your support system shouldn't be.

Contact Network Valencia: info@networkvalencia.com

Join the Conversation: Visit https://www.linkedin.com/company/network-valencia to meet our members and join our next monthly meetup.