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In December 2021 the EU Commission proposed the ATAD 3 directive, which aims to combat EU entities that are low on substance. Under such proposal, as from Jan 1, 2024, relevant EU entities that are low on substance must report themselves to their local tax authorities and may see some of their tax benefits denied.
Unanimity among EU Member States is required to adopt the proposed ATAD 3 directive. It is currently unclear whether such unanimity can be reached without amendments. More news is expected before year-end. By then it may become clear whether the proposed directive will remain in its current form or will be relaxed (specifically whether the adverse tax consequences as initially proposed may be fully or partially omitted) and whether the Jan 1, 2024 effective date may be postponed.
European asset holding vehicles controlled by investment funds and European holding companies of MNEs should have the proposed ATAD 3 directive high on their agenda. Considering the above, they may get some extra time to develop potential contingency plans.
Want to know more about the ATAD 3 directive and how the market anticipates? Reach out to our experts from our NYC team.
