EU’s 28th Regime: A Turning Point for Startup Expansion Across Europe?

The Regulatory Hurdles Facing Europe’s Scaling Companies

European startups with ambitions to expand beyond their home markets currently face a daunting challenge: navigating 27 different sets of national regulations. Despite the existence of the single market, companies must comply with varying incorporation procedures, tax systems, employment laws, and investment regulations in each member state. This fragmented landscape creates significant barriers to growth that don’t exist for American startups scaling across state lines.

According to Vidya Peters, CEO of Dutch audit automation firm DataSnipper, this regulatory maze forces companies to essentially start from scratch with each new market entry. “Today, scaling across Europe means adapting to 27 different sets of corporate tax and employment law,” she explains. “Each country brings its own paperwork, timelines and translation rules.” The structural differences make European expansion much slower and more resource-intensive than it should be.

The Promise of the 28th Regime

Early next year, the European Commission is expected to propose a harmonized legal framework—dubbed the “28th Regime”—aimed at simplifying cross-border operations for startups and scale-ups. This initiative, driven by the EU Inc campaign led by founders and venture capitalists, represents the most significant potential shift in European startup regulation in decades., according to additional coverage

Tomas Okmanas, co-founder of Nord Security and Nexos AI, emphasizes the importance of this reform for Europe’s global competitiveness. “If we want to produce tech champions at a global scale, we need simpler rules that reward risk-taking and innovation,” he states. “Europe doesn’t operate at the scale of Europe, and much of the talent is locked in national silos.”

What Business Leaders Want to See

The startup community has clear expectations for the upcoming proposals. Peters advocates for “a single structure that would streamline compliance, facilitate fundraising and encourage expansion.” She envisions a system where startups could establish one legal entity operating seamlessly across member states, eliminating months of duplication and cost while increasing investor confidence through predictable cross-border tax and legal treatment., according to market developments

Okmanas focuses on practical improvements that would remove friction from daily operations. He suggests creating a regime that allows founders to “start companies anywhere in Europe online and hire teams across the continent without needing to worry about stock option rules.” Such changes wouldn’t just lower compliance costs but would signal that Europe is serious about tech leadership.

Potential Roadblocks and Concerns

Despite widespread support from the startup ecosystem, significant challenges remain. Tom Henriksson, a general partner at VC firm OpenOcean, expresses concern that the 28th Regime could paradoxically create more bureaucracy rather than less. “My worst fear is that the regime becomes a 29th layer of bureaucracy—with individual Member States free to ignore it or slow adoption in favor of local legal precedent,” he warns., according to according to reports

National interests and differing perceptions among member states could also hinder progress. While founders and investors are pushing for rapid change, national governments may prioritize protecting their existing regulatory frameworks and legal traditions., as earlier coverage, according to industry reports

A Phased Approach: Estonia’s Perspective

Liina Vahtras, Managing Director of Estonia’s e-Residency program, suggests a pragmatic, incremental approach. Drawing from Estonia’s experience in creating fully digital government services, she recommends starting with achievable goals rather than attempting comprehensive reform immediately.

“If we can’t get a full solution right away, we maybe start with half of the solution,” Vahtras proposes. “I would leave tax to one side—it’s too complicated. I would start with easier things, such as share options and company registrations.” She specifically advocates for an integrated business registry as an initial step, using Estonia’s digital systems as a benchmark for what’s possible.

Vahtras emphasizes the importance of maintaining momentum, hoping that the European Commission “will move quickly and that they won’t slow everything down with meetings and fine tuning.”

The Path Forward

The success of the 28th Regime will depend on finding common ground among diverse member states while ensuring the final framework genuinely reduces bureaucracy rather than adding to it. The challenge lies not only in agreeing on a broad framework but in pinning down implementation details and schedules that all countries can accept.

As European startups continue to compete globally against well-funded American and Asian counterparts, the urgency for regulatory harmonization has never been greater. The coming year will reveal whether European institutions can deliver the streamlined framework needed to unlock the continent’s full entrepreneurial potential.

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