On 11 January 2023, the Committee on Economic and Monetary Affairs published a number of amendments to the European Commission’s draft directive for preventing the misuse of shell entities for tax purposes (“ATAD 3”, also known as the “Unshell Directive”). The published amendments can be found here.
In summary, ATAD 3, which is intended to come into effect from 1 January 2024, is a proposal to set standards within the EU for common minimum substance requirements, for the improvement of exchange of information between national tax administrations and for the dissuasion of the use of shell entities promoted by certain intermediaries. The broad aim is to tackle the misuse of undertakings with no or minimal substance for tax purposes by introducing a common set of rules across the EU for determining what should be considered as insufficient substance for tax purposes.
The European Parliament will vote on the amended ATAD 3 today (17 January 2023). If approved, the European Parliament’s position will go before the Council of the EU, which must vote unanimously before the directive can be adopted at a European level. As with the EU’s anti-tax avoidance directives I and II (ATAD 1 and ATAD 2), the directive will then need to be transposed into the national law of EU Member States.
Amongst other things, the Committee on Economic and Monetary Affairs’ amendments to the draft ATAD 3 adjust the thresholds imposed under the gateway tests, amend the carve-outs from ATAD 3 and alter the penalties that may apply to entities that infringe the national provisions adopted pursuant to ATAD 3. More detail on the key amendments to ATAD 3 proposed by the Committee on Economic and Monetary Affairs will follow.