Substance & Tax Law
In recent years tax authorities have placed more emphasis on combatting the use of abusive and aggressive tax structures by companies operating across borders, to ensure fair taxation. The EU and OECD have provided tax authorities with various instruments such as the Anti-Tax Avoidance Directive (ATAD) and the Multilateral Instrument. The judgements handed down by the CJEU on the Danish cases have also set an important precedent.
However, since entities with no minimal substance and economic activity are supposedly still used for improper tax purposes, the European Commission recently issued a new proposal (ATAD 3). It is highly recommended that taxpayers already assess the possible impact of the proposal and consider opportunities for strengthening their local footprint and/or restructuring.
ATAD 3
On 22 December 2021, the European Commission published a proposal for a Directive laying down rules to prevent the misuse of shell entities for tax purposes. With this proposal, the European Commission intends to counter situations where taxpayers evade or avoid taxes by misusing entities that have no minimal substance and do not perform any actual economic activity (so-called “shell entities”). To meet this objective, the proposal contains a common set of rules, including minimum substance indicators, for the identification of shell entities and their tax treatment. A reporting obligation and an automatic exchange of information must furthermore ensure that Member States have information readily available on the substance level of companies in scope that meet certain criteria. Feedback on the proposal to the European Commission was open until 6 April 2022. A separate EU Directive dealing with a shell entity in a third country is expected in the course of 2022.
Will the Unshell Proposal affect your structure?
The Unshell proposal is one of the initiatives that aims to improve the current tax system by focusing on fair and efficient taxation. If adopted, the Unshell proposal could have a significant impact on cross-border structures.
Read our brochure on the subject to know more.
News
Tax Developments Seminar
During the Virtual 7th Annual International Tax Developments Seminar, several Loyens & Loeff tax experts updated the participants on the latest international tax developments. One of the topics that was discussed were some withholding tax disputes after the Danish cases.
Webinars ATAD3
We hosted webinars about ATAD3. Please contact one of our team members mentioned in below Q&A, if you would like to receive the slides of the webinars. Since various questions were raised during these webinars, we prepared the top 10 questions and answers.